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Jason

Will A London Boom Save The Uk Property Market?

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The UK property market's booming again.

Asking prices for UK homes rose 6.4% in the year to June – the strongest growth in over a year, says property website Rightmove.

Apparently "the mini-boom in prices continues to be led by the south of the country" where the average annual rise has now reached 9.4%.

Sounds impressive, eh? Well, perhaps - until you look under the bonnet...

Property website Rightmove purports to measure average asking prices for UK property. But it doesn't really. At best it measures how optimistic – or unrealistic - sellers and estate agents are feeling.

The latest reading covers properties placed on the Rightmove website by estate agents between May 7th and June 10th. The group claims to have measured 178,158 asking prices, which it reckons is around about 70% of the new properties put on the market.

But the problem with the Rightmove survey is that it only includes the prices of houses and flats that have been put on the market that month. The survey doesn't include properties that have previously been put on the site, and are still sitting there unsold – even if the asking price has been dropped.

We all know that the price a vendor hopes for and the price the buyer eventually pays are two very different things, particularly in today's uncertain market. So Rightmove is probably the most optimistic house price measure you can possibly get.

But even upbeat Rightmove has bad news for anyone living outside of London and the South East. The average annual rise in asking prices in the north and middle of England was just 2.7%. With inflation at 2.2%, that means prices have barely changed in real terms on last year. Wales has actually seen asking prices fall by 0.8%.

And a new house price index, also focusing on asking prices, paints an even bleaker picture than the Rightmove survey.

According to property website home.co.uk, average asking prices in England and Wales have fallen by 1.9% over the past year. The North East has suffered the worst, with asking prices down a full 4.6% on 2005.

That sounds much weaker than many of the other surveys – but home.co.uk claims to have the best statistical toolbox of all the house price indices. The company takes into account the asking prices of around 670,000 UK property prices – more than any other house price survey. It also excludes properties valued at over £1m, and those valued at under £20,000, to avoid skewing the data.

Interestingly, the people at home.co.uk say that the results of their index were very similar to Rightmove's up until December 2004. After that, the two started to diverge, with home.co.uk recording lower prices.

This makes sense. The housing market slowdown began in earnest in around about mid-2004. So by December, all those people who'd been hoping for a quick summer sale would have started to realise that their homes weren't going to shift without some movement on the price.

So 2005 saw a great deal of asking price-cutting, which would have been reflected in the home.co.uk report, but not in Rightmove's. And judging by the fact that the two reports still show very different results, it would seem that people are still having to cut asking prices to get their houses sold.

It's also interesting to see that both surveys show that the property slowdown is now taking hold in the rest of the UK. When we did an informal survey of the property market in Money Morning in the middle of last year, we found that readers in the north of England were generally still bullish on property, even while those in the south were talking about price falls of up to 20%. But it seems now that the massive oversupply of 'luxury' city centre bachelor pads might finally be starting to take its toll in the boom towns of the north.

But that's OK - after all, there's a 'mini-boom' in the south of England now, as Rightmove puts it. And where London goes, the rest of the property market follows, right?

Well, that's usually the case. But the home.co.uk survey also puts the 'London-led recovery' scenario that most pundits have been proclaiming into doubt. The company reckons prices in Greater London are actually down 0.9% on the year, and separate figures show that while prices in Central London have ticked up, fuelled mainly by wealthy foreign investors (for more on this, see: What's propping up UK property markets? (http://www.moneyweek.com/file/13257/whats-propping-up-uk-property-markets.html)), Greater London has been largely unaffected.

If you're interested in the arcane ways in which house price statistics are calculated (and why wouldn't you be?), home.co.uk has an excellent section on its website explaining the differences between all the different types of house price statistic, from Nationwide to the Office of the Deputy Prime Minister – take a look at it here: A guide to house price indices (http://www.home.co.uk/guides/house_prices_indices/toc.htm)

The home.co.uk report also has this rather pithy quote on the front, which all those considering overstretching themselves to buy a house should bear in mind: "House prices are a matter of opinion whereas debt is real."

Which high-profile property bear said this? None other than Bank of England Governor Mervyn King.

Another excellent piece!

Edited by Jason

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The home.co.uk report also has this rather pithy quote on the front, which all those considering overstretching themselves to buy a house should bear in mind: "
House prices are a matter of opinion whereas debt is real
."

Can't argue with those exact words of Mervyn King <_<

Has someone been monitoring HPC.co?

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That's the first article I've read recently which really accords exactly with what I see in the areas I'm monitoring: increasing asking prices this year vs last (South East, not North West where I see little change), reduced actual prices achieved since last year, few sales, countless properties on the market for years (three years, in some cases, in Blackpool specifically), and lots of "stuck" property which came onto the market a year or more ago which is obviously overpriced vs what you could buy with the same money, those prices might have been achieved in 2003/4, but all that "temporary equity" in the moments of madness vanished long ago, the vendors just haven't accepted it yet - not least because the VI spin will continue to reassure them that the lack of viewings is solely the fault of the estate agent.

Edited by DTMark

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The home.co.uk report also has this rather pithy quote on the front, which all those considering overstretching themselves to buy a house should bear in mind: "
House prices are a matter of opinion whereas debt is real
."

Can't argue with those exact words of Mervyn King <_<

Has someone been monitoring HPC.co?

I have to say the first thing that came to mind when I read this article:

Realistbear = John Stepek ??? :ph34r: ???

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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