Thursday, 13 March 2008

UK housing market is one big negative

Every month, the Royal Institute of Chartered Surveyors issues a press release. I have reproduced the headlines from each press release since January 2006.

Tracking the headline of each press release reveals something about how market sentiment has changed in the last two or so years. Back in January 2006, the RICS were jumping up and down in excitement. House prices were climbing. Their enthusiasm continued right through the year until December, when the first negative headline arrives; "Heat taken out of housing market".

Thereafter, the mood sinks; slowly at first, and then more quickly. In fact, three of the last four press release headlines have used the word "negative". That just about sums up the UK housing market today - it is negative.

January: House prices climbing
February: Sealed bids are back as London hots up
March: Agents predict post-Easter spring
April: House prices rise as larger properties lead the way
May: House prices show strongest rise in two years
June: Mini-house price boom underway in London and south east England
July: Interest rate rise will not dampen the market
August: House prices accelerate despite interest rate hike
September: Economic strength swells national house price ripple
October: House prices rise as buyers shrug off rate hike
November: Housing demand resilient despite interest rate hikes
December: Heat taken out of housing market

January: Demand cooling but lack of properties still pushing prices up
February: House prices slow as affordability worsens
March: House price inflation picks up
April: House prices rise despite HIPs-related supply increase
May: Housing market slows but buyer enquiries hold up
June: House price inflation more than halves
July: New buyer enquiries decline as interest rate rises start to bite
August: Price growth turned negative in August as demand slowed sharply
September: Demand weakens further but supply remains constrained
October: Slowdown continues but market is cushioned by strong economy
November: Net price balance most negative since May 2005
December: Price balance drops further into negative territory

January: Price balance slips further into negative territory
February: Stocks rise as sentiment drops


Anonymous said...

Its interesting that the big VI's such as RICS try and confuse the issues by twisting their previous arguments to suit the current situation. For years we've been told that the market is being driven by the fundamentals of supply and demand implying a market without a downturn. Now we entering the crash we're told in RICS' February article;

"This weak trend in demand is still having a visible impact despite the lack of supply"

Sorry? Do people not need homes anymore then? Have we seen mass exodus of the population or a war killing off millions of Britons? I don't think so.

If there were a GENUINE shortage of homes then prices would rise as we've seen with commodities such as oil and gold.

If there's weak demand conversely it means that there's an OVERSUPPLY and this despite the slow growth in the population.


Alice Cook said...

Thanks Chefdave for the comment. Coherence and consistency always goes out the window when there is a strong vested interest.

The RICS and their members were major beneficiaries of the bubble. Now that it is all evaporating, there is a desperate and forlorn attempt to push the BoE into interest rate cuts in order to keep house prices up.

Nothing can save the UK housing market from a correction.


traderboy said...

Nothing can save the UK housing market from a correction.

I hope so. I had a look on Rightmove the other day for the first time in a while for my area (London), expecting prices to look a little better (ie. lower), but not at all, they are as crazy as ever. Ex-council flats for £400k+, a "pleasantly arranged 550 square foot" place also well over £400k. Crazy. Prices could drop 50% and wouldn't look particularly reasonable.

Shame really, as I feel like I'm years away from owning a place still. Especially given how cheap renting is relative to owning (and I emphasise RELATIVE!).

Anonymous said...

Deluded sellers, trader boy, deluded sellers.

That's why the volume of sales is down 50% over the year - sellers still want fantasy prices but buyers won't pay (or even if they would, the banks won't let them).

Volume drops, then prices drop.