UK House Prices, interest from overseas buyers Growing

The Government released its latest figures on UK house prices yesterday, and it was far from containing any surprises.

According to the index, which is compiled by the Department for Communities and Local Government based on mortgage approvals, UK house prices were an average 0.5% higher in August than July. However last August prices were still over 5% higher.
The tri-monthly measure, widely regarded as the less volatile and therefore more accurate recorded a rise of 2.7%, compared to a fall of 1.7% in the three months ending May.

However the tri-monthly measure also recorded growth in the three months ending June and the three months ending July, of 2.6% and 2.1% respectively. For the sake of completeness the monthly rises for June and July were 1.6% and 1.4% respectively.

According to the dealing manager of Moneycorp's private division David Kerns, "housing data is currently showing that UK housing is certainly past its worst," after 5 months of growth, he told Write About Property in an interview. This is just one of the factors that will eventually get behind a recovery in Sterling's value.

As it is at the moment, Sterling's weakness could be a factor in the current house prices rises, because it makes British property very appealing to overseas investors.

Overseas buyers have been very active in the UK market over the past few months, because adding the price drops to the falling price of Sterling has made prime properties up to 50% cheaper than at peak. However, because foreign buyers are tending to buy in cash, then they are not influencing the indices of Halifax,Nationwide or DCLG, all of which are based on mortgage data.

Looks Like I Was Wrong on Second Dip - Or Was I?

Some pretty important things have happened in the microcosmic world of UK house prices since my last post. Well, they aren't actually important in the traditional sense of the world but they are important to this blog's stream.

Two indices have come out for a start, both Halifax and Financial Times both said that UK house prices had risen in September; Halifax by 1.6% on the month, and FT by 0.6%. This creates the impression that the Land Registry fall in August was a blip, that UK house prices are continuing to rise and that this will be shown by the Land Registry index again in September.

It is easy for me to argue with the Halifax index; they have commercial interests, benefit from positive sentiment and their index is based on mortgage approvals, not sale prices. I can't however argue with the FT index; it is compiled by the impartial Acadametrics, and based on sales registered at the Land Registry, which are collected and compiled almost in real time.

However, still nothing has changed; transactions are still shockingly low and it is only the fact that supply is lower keeping up prices. Whether it is next month or next year, there will be a second dip in UK house prices - mark my words.

UK House Prices: The Second Dip Begins

Well, the second dip that UK housing market bears (pessimists, people who believe we are in a bear market amid a downturn), including the writers on this blog, have been warning about is here.

The month of August left the bulls (those who believe we are in a bull market, heading upwards, optimists) with nothing to cling to; both the indicators that had turned positive and stirred optimism turned back negative in August.

The Land Registy index -- the most trusted index of house prices in England and Wales -- said that the average UK house price fell by 0.1% in August. Not much of a fall, but coupled with a fall in mortgage approvals in the same month it is a clear sign that the dead cat has stopped bouncing as far as I'm concerned.

The Bank of England revealed that mortgage approvals fell from 52,404 in July, to 52,317 in August. Again, not much of a fall but the BOE itself acknowledged that the current level of mortgage approvals is "well below a level consistent with rising house prices".

To be fair, when prices first started rising after months of falls I said it was an anomaly, a one-off inexplicable rise because of the shortage of data available, so I suppose I should say that this could be a one-off fall in the same vain.

However, when I said that about the rises it was because the other data didn't support house price rises, so now, because the data still indicates a market where prices are falling, and because prices never stopped falling in most of the country, I believe that this fall represents the first of many.

Government Figures on UK House Prices for July Interesting in Places

Well, the government (Department for Communities and local Government) released its figures on UK house prices for July yesterday, and unsurprisingly they show price rises across the board, except for on the annual measure, for which the rate of decline continued to slow.

What was surprising however, was the fact that the DCLG index now has the rate of annual decline at slower than the Halifax, though it is still faster than that of Nationwide.

According to the DCLG index for July, UK house prices rose 1.4% on the month (Halifax 1.1%, Nationwide 1.3%).

The DCLG's tri-monthly measure turned positive for the first time, with a growth of 2.1% in the three months ending July, compared to a fall of 2.8% in the previous quarter. Both Halifax and Nationwide recorded tri-monthly growth in the three months ending July (see links above). The tri-monthly measure is widely recognised as the more accurate indicator of short term trends because it is less volatile.

Now, annual measurements: in July 2009 UK house prices were 8.3% lower than in July 2008 according to the DCLG, 12.1% lower according to the Halifax and 6.2% lower according to the Nationwide.

Of course the Nationwide and Halifax have now both released their figures for August, and both showed prices continuing to rise on the monthly and tri-monthly basis, and the annual rate of decline continuing to slow. Interestingly the Halifax figures still show the annual decline at faster than the DCLG, at 10.1%, though they show a £112 increase for 2009 so far. According to Nationwide house prices were down just over 2% on an annual basis in August.

Outlook on UK House Prices Depends on Who You Listen To

There are many conflicting reports on the future of UK house prices at the moment.

This week Halifax issued their August figures showing a 1% monthly rise, and Knight Frank put the UK property market in position 13 in its quarterly league table, with prices having risen 1.1% in the second quarter. According to Knight Frank global house prices (including the UK) have started to stabilise, and there are to be very few price falls from here on out.

Yet in the same week estate agency Jones Lang La Salle inc issued a research report on how UK house prices are likely to fall 7% next year, as rising unemployment, combines with curbed lending and a struggling economy to reverse the "unsustainable and unjustified" gains of this year.

What's the truth here? Well, I'm afraid I am with Jones Lang La Salle.

I have said it before and I'll say it again: without normalised lending we can't have the kind of transaction volumes that we need to help house prices find a true and solid bottom, and without a better employment outlook it is unlikely there will be sufficient numbers of people even looking for mortgages to do so.

As my regular readers will know: I believe the market will bottom in mid-2011 when the international economic recovery is well under way allowing the banks to de-restrict lending somewhat.

The difference perhaps between the vastly varied outlooks is that Knight Frank is a UK based estate agency, and La Salle is a US based agency.

Positive News on Housing Market Continues, I'm Still Not Budging

So, UK house prices have bottomed. I know it's sudden but we can't argue with a panel of 30 economists from banks and investment consultancies now can we?

That's right, yesterday Reuters revealed the results of surveying one such panel, and the consensus was that the UK housing market has bottomed, that house prices will end this year not much lower than they started it, before rising .5% next year and 2.5% the following year.

And then today, the Halifax finally revealed its figures on UK house prices for August, showing a 0.8% rise, the second monthly rise in a row. The quarterly growth, regarded as the more accurate short-term indicator now stands at 1.7%.
There is a lot of positivity in the housing market at the moment, but there are also a lot of people who are saying that this is the calm before the storm, that a second fall is inevitable.

I unfortunately am in the latter camp. Rising unemployment and restrictions in the mortgage market will keep a lid on transaction volumes for the foreseeable future, and without increased transactions it will always be the supply shortages falsely propping up prices.

Of course the low interest rate and unemployment are like a guillotine above us, if interest rates go up, it could leave more people unable to pay their mortgages as does unemployment, and more repossession properties flooding onto the market would almost certainly tip the supply balance and send prices back into freefall.

In short: I think it is far too early to think we have seen the last of this house price correction. But it doesn't matter, I read an article yesterday that pointed out the obvious: house prices are falling across the property spectrum, so whether trading up or downsizing, by the time you save on the next property what you lose on the current one (or there abouts) you're in roughly the same boat.

Predicting the Future of the UK Housing Market

I just read a great article on the Zungalow blog. Liam Bailey a prolific commentator on the UK housing market gave his prediction on exactly when the market will bottom.

According to Bailey, of all the obstacles to a housing market recovery, namely: economic recession and unemployment, restrictive mortgage lending, and unrealistic vendors, a recovery in the global economy holds the key to a UK housing market recovery.

Bailey said that: once the banks start making money from the increased consumer spending, deposits, profitable stock markets and investment in a global recovery, this will in turn lead to derestricted mortgage lending, and that in turn will generate enough buyer activity for sellers to realise that their price the key to their sale.

It makes a lot of sense if you think about it. Bailey said that the global recovery should be well under way, with UK unemployment falling again by Q3 of 2010, and that this will filter through to increased lending and demand for housing by Q2 of 2011. Thus, Bailey says the UK housing market will bottom between Q2 and Q3 of 2011, and house prices will grow briskly in the coming years.

I think it is all a little too simple. I mean I know it is just a forecast and Bailey is as entitled to his opinion as anyone, and to be honest my own prediction wouldn't be too far away from that if you put me on the spot.

The trouble is, with the world's economies all so inter-linked and dependent on each other, there are far too many variables involved for anyone to predict the path of this recession and housing market crash with any certainty. Hats off to Bailey for being brave enough to put it out there I suppose.

Nationwide UK House Price Index for August Hardly Surprising: More Rises = Bad News for Housing Market

The Nationwide building society, one of the UK's largest mortgage lenders has released its August data on UK house prices -- strange that they released it before the end of the month, usually its a few days after but there we go.

The Nationwide figures for August are largely unsurprising; UK house prices are up 1.6% on the month -- the fourth consecutive monthly increase -- up 3.3% on a tri-monthly basis, and now down just 2.7% on an annual basis.

What is surprising as you may have already seen Richard McKay point out on the Zungalow blog or his comments on Write About Property, is that the Nationwide report put the rising prices down to low interest rates.

As Richard said, yes low interest rates will almost certainly have been partially responsible for the minor increases we have seen in transaction levels this year. But said increased transactions would not have been enough to trigger the price increases of the last few months, were it not for the drastically low supply levels we are currently seeing in the UK housing market.

On a historical basis, as far back as 1993, if transaction volumes are this low, house prices are falling. The fact that they are rising is actually bad news for the housing market's future and here's why:

A: Vendors are still predominantly unrealistic about what their home will sell for. House prices rising is stopping this from being rectified, and the correction will not end until the gap between what the majority of vendors are willing to sell for, and what buyers are willing to pay closes. In short prices rising now, when vendors are still unrealistic is simply perpetuating the crash.

B: Homes still aren't affordable to the average first time buyer. The long-term average is house prices under 4 times the average salary. They are currently between 5 and 7 depending on who you listen to. Major crashes like this in house prices usually cause prices to go well below the long-term average, and it is unlikely that this crash will be any different. So again, house prices rising while homes are not affordable is perpetuating the crisis, and making another correction necessary.

Mouseprice.com Gets the Grand Prize for Stating the Obvious on UK House Prices

I have just read an article and felt I must put pen to paper to award it with the grand prize for stating the obvious.

The article in first-rung now surrounded a report by mouseprice.com stating that UK house prices may yet be affected by unemployment.

Firstly it said that unemployment will be the economic indicator that takes longest to turn around. That is not the bone of contention, because though it is obvious to me that businesses have wound themselves into a ball, with their knees under their chin to protect themselves from the recession, and it will take them quite a while before they feel confident enough to come back out to normal, let along consider expanding to the point where new staff become necessary. This is not obvious to everyone.

The bone of contention is the fact that is said unemployment could yet affect house prices. The fact is that unemployment has and is already affecting house prices. Transactions are still at record lows, and unemployment is at least in part to blame for that. Does everyone not know that it is only the fact that supply is at all time lows (and of the UK properties for sale most being unrealistically priced) that has halted the freefall of house prices.

So of course unemployment could still have a further impact on house prices, and it almost certainly will be one of the factors driving prices down if supply increases.

75% of Homeowners think UK House Price Falls Over in 2009 - But Are They?

75% of homeowners do not think house prices will fall any further in 2009 according to a survey ran by Rightmove. Miles Shipside said that this optimism is down to "a general feeling" that the housing market has bottomed.

I think it is more down to the type of website that Rightmove is. Yes, Rightmove has a massive share of the UK property sales market, and most properties sold throughout the UK, will be advertised on Rightmove.

But we must not forget that Rightmove it is a property sales site, so the people who have taken the Rightmove survey are the people who have decided to sell their house, and therefore the people who have a certain degree of faith in the housing market and house prices. I think that is what has been reflected in the results of the survey.

Another factor I can't ignore is the fact that Rightmove does not allow private sellers to advertise their properties on the site, it is 100% estate agent. So you have to consider that any survey conducted by Rightmove may be influenced by estate agents who wish to create a positive market.

UK Housing Market Stares into the Abyss

Mortgages for house purchases were 23% higher in June than in May, the Council for Mortgage Lenders has revealed. This comes after all the major indices have shown several monthly price increases this year, bringing the annual fall to 12.1% with around a 1% fall in prices so far this year.

Currently, the upward pressure on house prices is caused by a slight increase in activity -- as low interest rates, and positive economic data bring a bit of confidence back into the market -- combined with a drastic shortage of saleable (realistically priced) housing stock.

Because the mortgage market is still on its knees and unemployment rising, activity is unlikely to reach the levels we see during a balanced housing market, and so we are left vulnerable to supply increasing quicker than activity and sending prices back into freefall.

None the less the positive news is enough to make some people believe that house prices will grow over 2009, that is to say house prices will be higher in January 2009 than they were in January 2008, and some people (including the Centre for Economics and Business Research) believe this will be the bottom of the market.

This is a logical thesis, during a correction like this one the rate of annual decline accelerates by the month, before beginning to slow as activity increases. When annually prices start to grow again then this is usually the bottom of the market.
However, there is nothing normal about this correction, because it has been triggered by the almost complete collapse of the developed world's banking system.

Mark my words, there will be a second fall in UK house prices, how long prices grow for, and whether there is a growth overall in 2009 merely determines how severe the second correction will be.