House Prices

[LGBirmingham]

House prices still seem to be rising? Does anyone else think this?

You are right, there has been.

They have used the wrong word. The average TRANSACTION amount has increased. Far fewer, cheaper first time buyer properties are being sold, whilst lots of people who are already two or three steps up the ladder are selling. So if more expensive houses are selling and cheaper homes are selling in fewer numbers, it pushes the average transaction number, not average house price value up.

Also, ‘seasonally adjusted’ means ‘we used a really complex algorithm to fiddle with the numbers.’ Those algorithms aren’t programmed to work well in turbulent markets and become unreliable. The non seasonally adjusted year on year (raw data) still shows house price falls.

Look at the raw data Alex Groundwater crunched from the latest land registry release (a sample of about 6k transactions because land registry are slow AF).

thanks, will peer at
but I thought it was the more expensive houses which were having problems selling due to effect of interest rate rises. and that folk still buying had a preference for cheaper properties - maybe "pre downsizing" from previous plans to buy something bigger/more expensive.
But you think more expensive houses are selling OK?

(declaration - may have a fairly expensive London house to sell in future)

They are having problems selling at what they and the EA think they are currently worth. Which, as a general rule, seems to be what Zoopla told them their house was worth at the top of the peak in summer 22.

Those drastically cutting prices and undercutting neighbours are still selling. Remember, 50% of homeowners in the country have no mortgage. But if you are a cash buyer, you can now demand really good value for money, and that is what is happening - they are buying at good value. I.e. not prices post Covid house increase spikes (possibly less applicable in London? The rest of the country saw 15-22% up over two years).

I’ve been looking… looking for a 2-3 bed house in the south east and there really is a shortage of properties out there! There isn’t much available at all.

Three bed semis are currently the most sought after and the ones falling in price the least - that is why. A lot of folks are downsizing from detached to semi.

May already have been said, but reported this morning that average UK house prices rose by 0.9 % last month. Suspect it will continue until spring.

Ah, interesting. That makes total sense to be honest. I’m trying to think out of the box and consider a 2 bed semi and build a garden office. I might be going against the grain here, but I think more needs to be built. There are a number of housing developments, but building seems to have slowed down. Especially in my area. I think less so in the north from my searches…

See above. They really aren't increasing.

House prices are not increasing. The average sale value is, because people are downsizing for various reasons, causing the lower end of the market to appear higher.
House prices are decreasing and will continue to do so until at least 2025.

Were you spouting this nonsense when this index showed a fall?

It’s not nonsense it is skewed and does not represent the reality that the overall market is declining and will continue.
Look at the data.

i can’t see house prices dropping by much due to the lack of supply. When you look back on the 2020 to 2030 period it will show growth even if there are some slight wobbles in the middle

That’s just not true.
There is no supply of affordable money. Prices will have to reduce, rates will have to come down, and wages will have to increase dramatically.
We shall see but doesn’t look good

Maybe or maybe it'll be the 90s all over again

In 1988 many people didn't believe that house prices would ever drop, apparently prices would only ever go up.

The average house price peaked at £62,782 in 1989, prices then dropped for 4 years until they hit the bottom in 1993 at £50,128 and then took another 5 years for the average to get back up to £62,903 in 1998

That's much more likely what the next 10 years will look like.

Highly doubt it will be the 1990s all over again. The mortgage market is far more regulated now. That period saw a record number of repossessions because lenders didn’t used to do many checks on affordability the way they do now.

Every year there are some repossessions so I’m not saying there won’t be any, but nowhere near as many as back then. People coming off fixed rate mortgages in 2023/24/25 will have been stress tested to make sure they could afford higher amounts if rates rose.

I agree. Even taking the 90s into account house prices have rocketed past affordability consistently for such a long time. Many of my old bosses bought in the 90s and did very well out of it. The credit crunch at the start of this century was worse for mortgage availability than it is now and many stayed put and are fine now. Supply of housing itself does matter when everyone needs somewhere to live. I think it is so unrelalistic to suggest we are going to see massive house price drops as rents go up. There will be stagnation, hardship and some reductions as sales will be slow but desirable reasonably priced homes will go quickly. There won't be much for sale for many who would like to buy and the same for renting. I don't think it is a good thing for society but instead of significant price falls it is much more likely that owning a home becomes impossible for many. With the state of our rental sector that is very concerning. Not everyone will agree with me I know but that is my genuine opinion with no adgenda as I have 0 intention of trying to sell for decades

Any of us may be right with our predictions. The only thing to do now is to sit and wait for the March/April 2024 Land Registry data. This will provide our first real glimpse of the prices on property transactions competed in December 2023. Then we'll have a more accurate picture of the overall falls, or otherwise, sustained in 2023.

Well if you are right that would probably be better for society than my position of property being a leading asset class globally and just because ordinary people can't afford it doesn't mean market forces will make it more affordable as supply goes no where near meeting demand, population grows constantly, increasing flood risk and rental reform further restricts supply and also everyone needs somewhere to live. All those factors are bigger than mortgage rates. I am not saying they are not causing issues but even if house prices dropped mortgage availbility would drop off a cliff again and the cash rich, who absolutely exist, would bolster themselves, yet again.

I think it takes more like 6 months to appear on the LR HPI on average.

Having said that, according to this that was posted by @KievLoverTwo above, average prices have already fallen, between Sept 22 and Sept 23 based on LR raw data, by an average of 12.6%. This is data downloaded directed from the LR. See alexgroundwater on twitter.

https://ugc-assets.mumsnet.com/images/202311/large-n6UFIEmZoQXhGyJTL4tkmFBvcSuI26skijHGn9lN.png

I do agree with @CountryCob his/her suggestion that the population will gradually become poorer.
I do think we will also see, and are seeing, (see above), significant falls in asset prices in the relative short term (few years) and lots of other hardship accompanying this.

@XVGN so Alex explained the data further last night.

The monthly sample the land registry release represents about 10% of transactions.

In statistical analysis, a 10% sample size gives you 95% accuracy within - or + 1.5%.

So, if we want to know where house prices got to by the end of December, the sample size release from land registry on 1st February should be enough to know what the deal was (+ or - 1.5%) with reasonably high certainty - 95%.

The additions of the other 90% over time won't change the data enough to make it significant.

Yes, that's right @KievLoverTwo , but I think that I'm getting myself tied up in knots a bit!

The stuff completing in December, and first reported in Feb 24, will be deals done typically in July/Aug 2023. Does this reflect 2023 price falls, or should we really wait until deals done in December 2023, completing around May 2024, and first reported in July 2024? This was where I first started talking about waiting until July 2024 a few days back.

What do you think?

Almost right. So to know how much Jan to Dec 23 drops were: sales agreed in Dec will generally complete in April because conveyancing is now an average of four months instead of five. Then you need two more months for the sample size to come through. So, the 1st June ish release.

'So, if we want to know where house prices got to by the end of December, the sample size release from land registry on 1st February should be enough to know what the deal was (+ or - 1.5%) with reasonably high certainty - 95%.'

The December completions would represent deals agreed several months earlier, so maybe July-September 2023.

I think we had the annual 'Spring bounce' from around February-April 2023, although it was v small this year so the figures 6/7 months later, ie about now might reflect this. Having said that, Alex's rata data figures actually show significant annual falls already Sept 22-23.

We agree, I think!

@XVGN

Yes Rain. However, there will be quicker indicators of the way things are/have headed, such as these folk who gather info from conveyancing forms:

https://propertyindustryeye.com/sharp-fall-in-house-prices-predicted-for-q4-2023/