House prices – up or down – the truth

Another week another set of contradictory headlines about house prices in the UK market. So who’s it this week and what does it mean – if anything?

The real headline should be that Asking Prices for houses have increased in July – now, as we’ve said before, there is a big difference between asking for something and receiving it. So we suspect that as usual this is part of the very volatile turning point on the market. At the same time we squarely blame sensational journalists for blatently playing on peoples fears, simply to create headlines and sell their rags.

At the moment the number of houses being sold in the UK are slowing down, especially as we move into the traditionally quite months of early summer. So that means we have a large number of estate agents (realtors) chasing a small number of houses. The best way to win clients is to ‘flatter’ them into thinking that their houses are worth more than the market suggests and imply that you, the estate agent, could sell their house for a premium – in this case its likely that the greedy seller will jump at the chance and go for the agent who suggests the highest price.

It’s only a few weeks later, once you’ve already signed that exclusivity contract, that it becomes obvious that the cheaper house down the road is the one that will sell first and leave you with no option but to reduce your price.

This is such a common practice in the estate agency market and means that the so called Asking Price figures promoted by the likes of Rightmove are nothing more than a fatuous ‘wish’. So the number is really an indication of what agents need to convince sellers of in order to get the business – not an indication of the actual selling price.

So having said that let’s hear from Rightmove – oh by the way let’s remember that Rightmove is jointly owned by the Halifax, Countrywide Assured, Royal & Sun Alliance, Connells – and a larger list of smaller estate agent investors, so we can be assured of truly impartial news! – Property website Rightmove said asking prices rose 10.6 percent in the period compared with a year earlier, up from a 6.4 percent increase in the preceding 30-day period, pushing into double-digits for the first time in 16 months. Asking prices were up 2.9 percent on the month, following a 0.8 percent gain in May/June survey, taking the average asking price for a residential property to 217,580 pounds.

Remarkably, Rightmove’s commercial director Miles Shipside goes on record as saying that the figures they have for asking prices are higher because of lower demand (as in our theory), but then makes a massive jump in assertion to say that actual prices are going up just as fast – though not giving any link to figures linking the two together

We think that prices are volatile and fluctuating because they are at the top of the market and that this is giving us the typical erroneous direction data that happens at this point in any market – however, let’s remember that this is housing, not stocks, so this market will move at a Glacial pace, not that of a tidal surge – so there will be uncertainty, there will be people – estate agents, lenders etc – with powerful voices trying to push a little extra from the market – But ‘common sense’ should prevail, there is no way a market with earnings to home cost ratio’s of over eight times can be sustained.

Clearly, we’re in a bubble market – in a normal regulated business the misleading rubbish uttered by those involved in the housing market would be illegal and they would be subject to at least fines or more likely prison. We caution common sense above all, check your local market and ask the estate agent if he’s so confident would he be prepared to under-right half the difference between his quote and the REAL selling price? See how fast he runs!