From the man down the pub/on Twitter to major lenders and think-tanks, homebuyers and sellers can barely move for so-called experts dishing out advice on the property market.
Rising interest rates and increased mortgage costs have prompted fears of a house price slump, with Capital Economics predicting a 5 per cent drop over the next two years. Credit Suisse is forecasting that prices could fall by as much as 15 per cent if interest rates hit 6 per cent – making it more of crash than slowdown.
Buyers don’t want to make a major purchase at the top of the market, and sellers may be hesitant to list if they aren’t going to get what they feel is the best price. But while downturns are obvious in hindsight, it’s not always so clear when they’re actually happening. So how do you know if you’re in one?
It is easy enough for investors to spot a stock market slump. They can tell if they are in a down or bear market if an index or stocks in a particular sector drop by 20 per cent or more over a sustained period. But there is no bear market equivalent for property. Instead, homebuyers and sellers are left relying on opinions of relatives and friends and a mishmash of official data.
Digging into data
Part of the problem is that much of the data on the housing market is historic. You can get average figures on prices and growth from Halifax, Nationwide and the Land Registry indexes, but each have drawbacks – lender data is based on their own activity, while the Land Registry has a lag of around two months depending on when conveyancers register transactions.
‘The nature of house buying adds a huge lag to the figures… by the time a completion is registered, it’s already reflecting sentiment three months earlier’
HMRC releases property transaction figures based on stamp duty reports, but again these reflect sales agreed two to three months before. Rightmove has a House Price Index of average asking prices that provides an indication of seller confidence, but it doesn’t tell you what homes are actually going for.
Another source is UK Finance or Bank of England mortgage approvals data, which may show lending appetite, but there is no guarantee when the finance will be accessed or information about the buyer location or circumstances. It also reports national repossessions data, but this may be different to what is happening regionally.
The Royal Institution of Chartered Surveyors has a regular Residential Market Survey based on activity of estate agents and property professionals a month earlier. Its sample size is usually around a few hundred, but it is seen as a reliable indicator of what is going on at the coalface.
‘The nature of house buying adds a huge lag to the figures, whichever set you use,’ says Sarah Coles, personal finance analyst for Hargreaves Lansdown. ‘There tends to be around 12 weeks between agreeing a sale and that sale going through, so by the time a completion is registered, it’s already reflecting sentiment three months earlier.’
Whichever report you look at, all are showing a slowdown in price growth – but another problem is that no one lives in the ‘average’ property. The UK isn’t just one property market, but different areas with varying degrees of supply and demand. People also buy and sell for a variety of reasons that an index can’t capture.
But while a downturn may mean different things to different people (and in different places), there are ways you can determine the health of your local property market.
Talk to an estate agent
The job of an estate agent is to sell property for their vendor. They may not be the most objective source, but London estate agent Jeremy Leaf says firms will be found out if they aren’t being honest, especially when it comes to the survey valuation.
‘It’s about finding the right level,’ he says. ‘We had sellers asking Mickey Mouse prices for a long time, which wasn’t helpful. I don’t expect a crash due to levels of demand and people will always need to move for death, debt and divorce.
‘I can see much more realism between buyers and sellers now. A lot of people will pause if they can’t afford to move due to the increased cost of finance, but there are those taking advantage of mortgage offers at competitive rates and before they go higher.’
Paula Higgins, founder of campaign group the HomeOwners Alliance, adds that while an agent works for the property seller, it is worth keeping them onside if you’re a buyer. ‘Become best friends with your local estate agent as if a house comes back on quickly, they will want to get a buyer in to complete a chain,’ she says. ‘Get as much information as you can from an estate agent as well as doing your own research.’
Track local listings
Users can register for alerts with Rightmove, Zoopla and OnTheMarket to receive new listings in a postcode area or to be told when a listed price changes. Homes being reduced or coming back on to the market at lower prices may indicate a local slowdown.
You can also check the Land Registry for sold prices, so you can track a home from listing to sale and see what properties are really changing hands for. Higgins says this can provide context to counter or support what an agent may be telling you and help you decide if you are comfortable to buy or sell and at what price.
There is a Chrome extension called Property Log that will show you a Rightmove listing’s pricing history. Lots of price cuts may mean a property was overvalued or not receiving adequate offers and there may be a wider trend if the same thing is repeatedly happening locally.
Property website TheAdvisory also has a PropCast tool where users can enter their postcode to see if they are in a buyers’ or sellers’ market based on the number of ‘sold subject to contract’ and ‘under offer’ properties as a percentage of total stock for sale.
Taken together, all of these tools can help you take the temperature of your local market and spot a crash – months before the official figures catch up.
Comments