London house prices start to dive?
Ask any estate agent (realtor) in London how the housing market is going and you’ll probably be spun some statistic that shows how the market in your particular area is defying gravity and soaring ahead, with plenty more growth potential. The problem with buying a house today, whether its London, San Francisco or Sydney – is that we’ve become obsessed with it’s potential as a growth investment. So the pressure is on to convince us at all times, that the market still has potential.
But what’s really going on?
In the Sunday Times Merryn Somerset Webb writes about the disparity between what the housing industry is saying and what the apparent, and obvious, reality is. The figures and statistics that are sited by the estate agents most often are asking price, very few houses for sale in London today actually go for the asking price, with most going for between 5% to 20% less and in many cases houses would go for even less but sellers loose faith and pull properties off the market rather than make a perceived ‘loss’ from what the estate agent has told them they could get.
Merryn goes on to explain that rightmove.com has just announced growth rate of 11.4% per annum in London – but, according to home.co.uk prices in London have actually fallen by 4.1% – so who is right? Well we suspect that home.co.uk is more likely to have the correct answer because it measures the whole spectrum of houses on sale regardless of when they first went on sale – it also excludes the million pound plus houses which totally distort the housing market (the upper £10 m market is supposedly soaring due to the influx of ‘oligarchy’ money). The problem is that the real figures of actual sales, from the land registry trail by some months, so accurate figures are hard to track. Adding to this it’s not possible to correlate the figures either, as the housing industry often changes its methodology for measurement (did we say cynically!) so that year on year comparisons are difficult to make and often contradictory.
The best and most honest way to represent the market would be to quote only the selling prices and band these prices together on a like-for-like basis. It’s not in the interest of the housing sector to fund such figures as ‘fear, uncertainty and doubt’ are the main motivators in the housing market – we’ll continue to treat figures with the disdain they warrant.
We suspect that ‘the truth is out there somewhere’, but that the growing reality of rising unemployment, rising inflation and the certainty of higher interest rates will force the hand of the market in the near
Source
Merryn on Money Sunday Times