British Home Values on a Plateau
Wednesday, August 26th, 2009 Subscribe To Our Feed
The Royal Institution of Chartered Surveyors (RICS) this month reports that recent increases in house prices have been kept up by a lack of properties being put up for sale. Concurrently the Centre for Economics and Business Research forsee that house prices will reduce by a further 3% this year before increasing by 2% next year.
These forecasts follow closely on the Nationwide and Halifax Bank reports of small price rises in recent months, and the calculation by the Nationwide that prices could end 2009 higher than they started 2009.
Evidence and predictions in the last few months have all indicated small changes, in either direction, for the property market. It now would appear certain that there will be no other spectacular falls. The recent falls have merely driven vendors out of the market as previous ambitions to Sell Property Fast have been discarded by many potential sellers. At the current price levels many vendors are clearly sitting tight in the hope of a price recovery. In the current climate I would certainly not try to Sell my Home fast.
There is also a very sensible reason why there is a floor under house values, and this is the level of mortgage lending provided on many properties. Sellers are often faced with no sale opportunity if values decline to a point where equity is too low, or even non existent. Such vendors may want or need to Sell House Fast, but are stopped from doing so by the simple economics of the sale transaction. They will remain out of the market whether they like it or not. Many calculations of house prices have focussed on the demand side of the equation, a lack of buyers and of mortgages will suppress demand and force down values. What is plain is that the supply side is also having a big effect in shoring up values.
Vendor shortage means that buyers are chasing fewer properties so the simple law of supply and demand is causing prices to remain firm, or rise slightly. And until prices rise further then countless vendors will continue to stay out of the market. It could be stated that the value modification has gone too far and this may be the source of the Nationwide prediction of further increases during the rest of this year. Still, if vendors do start to return in greater numbers then this flimsy recent growth could vanish and further falls might well be on the cards. Fortunately we now appear to be in market conditions where adjustments, either way, will be quite small. If there are further falls they are likely to be reserved and similarly any recovery likely to be weak and slow.
Taken overall a scenario of flat property values over the next 6 to 12 months, and little probability of achieving a Quick House Sale at an decent price for the vendor should astonish no one.
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