06/08/2009: House prices to rise by the end of the year?

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The RiCS has stoked the housing market by spraying petrol onto it providing a prediction that prices may end the year up on where they were in January.

Their monthly report reflects an about turn on their expectations of falls of between 10 and 15% and reports in their survey last month that more surveyors saw prices falling than rising.

In their forecast at Christmas, the RiCS predicted that transaction volumes would pick up in 2009 (they’ve fallen so far) and that the peak to trough price decline would be 25% (it's down 20% so far according to Halifax).

Their change of heart is all the more confusing when one considers that just last week the Nationwide confirmed prices were down year on year (-6.2%)and on the same day that Lloyds announced it’s £4bn loss, their Halifax subsidiary announced a -12% fall and the Land Registry recorded -14%.

Frankly, talk of a rises in confidence from Chartered Surveyors tries to match the expectations of the glorious summer weather we were promised but like the revised forecast from the Met Office, the evidence of an end to the property crash may be something that the forecasters got wrong?

Gap between asking price and sale price widens

But why do I say this? The first thing to consider is the increasing gap between asking prices and sale prices. Since January 2003 this gap has bumped along at around £28k but in the last 12 months it has risen to a yawning £70,000.

Since the homes that sell are a subset of all the homes marketed, this might be explained if more cheaper homes were selling relative to more expensive ones but there is no evidence for this - in fact quite the reverse.

However, of more importance are the tiny volumes of properties coming onto the market verses the number selling every day. What is interesting to note is that the gap between the two is closing but even more dramatic are that volumes of both have plunged.
If there were just one home on the market and two buyers in the whole country then estate agents and mortgage brokers would no doubt jump up and down and point excitedly to the excess of buyers and predict a rise in prices as a result.

Nevertheless, there are still only two buyers and just one lucky seller. Can we really base the health of the nations housing stock on this?

Number of transactions make a nonsense of statistics

The numbers of transactions and the volume of new properties coming onto the market makes it almost impossible to draw any positive conclusions about house prices.