Henry Pryor on Property

Search: Latest house price figures

April 1st brought us the monthly Land Registry figures which report the prices recorded by the agency when sales complete, usually a couple of months after the sale was agreed.

They gave us transaction numbers for December and prices for February, although we will have to wait another two months to learn about just how few deals were done in that month.

As expected, the trend for prices was downwards although the figures for the number of actual sales was nearer to the vertical. About 40% few homes sold in December compared to the year before!

In the West Midlands, the Land Registry reported a small rise in prices in February of 1.3% but a week later, the Halifax brought out it's own index based on mortgage offers made perhaps four or five weeks after sales were agreed which suggested that prices in March had fallen by 2.3% nationwide but by a whopping 5% in the West Midlands. A 6.3% swing!

Indices from lenders and from the Land Registry are helpful for identifying trends and it's often useful to see with hindsight what happened two or three months ago. They are also helpful in a stable market but they are pretty unhelpful in a volatile market. You wouldn't want a back copy of the FT from January if you wanted to check your share portfolio today let alone your mortgage rate.

Collapse in mortgage offers hits market

The market since last summer has been on a downward curve. A slow fall as has been confirmed by the various historic indices has become a black run of a slope now exacerbated by the reduction in mortgages from around 15,000 this time last year to around 6,000 today. Back then, one-in-five mortgages was advanced by our newly acquired nationalised bank, Northern Rock. Many of those loans were 90% plus loan-to-value.

My own figures and anecdotal evidence from colleagues in the market actually suggests the market has fallen by around 10-15% since the peak of last year. My own figures plus anecdotal evidence from colleagues in the market actually suggests the market has fallen by around 10-15% since the peak of last year.

The deals that are being done this week are smaller in number (just about 20% of what was done last year) and illustrate that buyers are making offers rather than asking price bids, so despite having dropped their asking price, vendors are finding that buyers are knocking their price even further. The only comfort is that unlike those who haven't dropped their expectations from 12 months ago, they have at least got a buyer!

Where could this end? Well, in those areas where we have seen significant price rises in the last two years, like Cambridge, Swansea and London, if the market fell by 20% you would still have a home worth what it was just 18 months ago. In the wider country, if you bought 5 years ago then again, I think that a 25% fall would mean that you home was still worth more than you paid for it. It's why the percentage fall is not as dramatic as it may sound.

But the value of a house today is not what someone will pay for it. It's what someone can borrow. At the top end of the market, people spending over £2m are not usually highly geared but at the lower end, where gearing is much more significant, a change in lending criteria from say a 10% deposit to 20% means that buyers will need to save another £20,000 out of taxed income. It will probably keep them out of the market for three years.

So, demand is going to shrink. Supply will balloon slightly as a larger percentage of forced sellers come to the market which in turn means that the Halifax index could tumble further. In fact spread betting sites are already quoting that the UK Index, currently at £191,556 will be down at £171,000 at Christmas. A 10% fall from where we are today.

If I were a betting man, I think I'd have some of that. It will be a long time before lenders gather enough strength to offer 6 times earnings and 90%+ loan-to-vale mortgages again, and possibly longer before house buyers will want them.

If so, prices could drop by nearer 20% by the end of the year in some areas. With only about 1 in 5 homes actually selling today, the problem is not so much what your house is worth but whether you can actually sell it!

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