Housing Market News And Views The Housing Market: An Update

Date Published:

20/05/2009

So are these 'green shoots' a red herring? What's really happening?

Why Are The Reports Showing Recovery?

So, if we are not in a ‘recovery’ why are reports showing an increase in activity? There are two reasons for this. The first is that a lot of people who would normally have bought, such as first time buyers, people who are getting married or families that need more space, waited until this year to see whether property prices would fall further and what would happen following the banking problems. The second is that sellers who would normally have put their property on the market have held off doing so due to all the ‘doom and gloom’ spread by the media.

These two factors have resulted in buyers realising that no more properties have come onto the market and that the properties they were interested in have come down to a price that they can afford. They are also are frustrated with not having their own home or not having enough space, so have decided to ‘take the plunge’ whatever the ‘doom and gloom’ reports say.

This has increased the number of buyers making offers in some areas. It’s not enough to push purchases/sales and property prices back up to their previous high levels, but it is enough to start turning ‘for sale’ boards into ‘sold boards’. As soon as buyers see properties they were interested in being sold, they are then more likely to make offers.

And, as this happens, this feeds through into the ‘early’ statistics of more buyers registering for properties and more mortgages being offered. This good news and lack of new properties coming onto the market then increases the confidence of other buyers who are thinking about buying to register and make offers, so the market slowly starts to show ‘green shoots’.

The media then reports on these ‘green shoots’ and people’s confidence continues to increase, so more buyers come into the market and more offers are made and accepted.

So why won’t this lead to a ‘recovery’? Well, unfortunately, the increased activity is from a very low base. If we sell one property one month and two properties the next month it’s a 100% increase. Sounds great, but it’s only actually one more sale.

According to Land Registry figures, the number of sales from October 2008 to January 2009 averaged 35,480 per month versus the previous year where we sold 85,610, that is 141% MORE than this year. So even if we saw a ‘massive’ 10% increase in sales, it would still mean we were only selling half as many homes as last year, good news, but hardly a ‘recovery’…

All the property market can do for now is stabilise or slow down the rate property prices fall. We can’t and won’t see a full recovery for at least six months as property prices can’t start increasing again until we see the volume of buying and selling reaching previous market levels. And this can’t happen until we see at least 90% mortgages becoming ‘the norm’.

So, in summary, we are seeing ‘green shoots’ and ‘increased activity’ on a national level but this is more of a ‘slowdown’ of the falls we have seen and a full recovery which will cause prices to rise nationally can’t happen until the volume of sales goes up dramatically. However in your area, prices may rise for some property types in some roads where there is high competition, and for others where buyers are still scarce and there is still an oversupply, prices may continue to fall, albeit at a reduced rate.

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