What's happening to house prices?

By Staff Writer Ruth Jackson Sep 17, 2010

Ruth Jackson

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Our national obsession with property prices has resulted in umpteen house price indices springing up. Much of the time all of them point in broadly the same direction. At the moment they don't. Of the seven major ones, four claim house prices are on the up and three say prices are dropping. It's all rather confusing. So what's really happening to prices?

The latest index update was produced by Nationwide. It reported that prices dropped by 0.9% in August. That may seem like a small dip, but it adds to signs that the recovery in house prices has stalled. Nationwide's index is based on the value of properties that people applying to them for mortgages want to buy. Supporting this index is the Rightmove House Price Index, which reported a dip of 1.7% in sellers' asking prices in August.

In contrast, the Halifax House Price Index reported a rise of 0.2% in August. It too bases its index on the valuation of properties that its customers want mortgages for. But it has a much larger market presence in the North of England. Between them the two rival building societies service a large chunk of the mortgage market.Those indices aside, some of the other traditional housing market indicators are reporting truly glum findings. The Council of Mortgage Lenders (CML) has announced that 56,000 home loans were made in July for a total of £8.4bn. That's a low number for a traditionally strong month – in July 2007 the total value of new mortgages for the month was £34.4bn.

But perhaps most worrying of all for property bulls is that even estate agents are starting to realise house prices need to come down. The latest survey by the Royal Institution of Chartered Surveyors (RICS) found that 32% more estate agents reported a fall, rather than a rise, in prices in August. Many feel further falls are needed. "Vendors of property are required to be more realistic in their sale price expectations," says Stuart Allan, a RICS member from Bishop Auckland. "There appear to be a lot of overpriced houses on the market," adds Tom Goodley, another RICS member from Norfolk.

It can't be a great time to be an estate agent. After a bounce at the start of the year, helped by record low interest rates and money printing, asking prices now need to fall. "Something fairly horrible is happening out there, and estate agents, like rifle-toting teenage volunteers in 1914, are right in the frontline," says Barney Ronay in The Guardian. In short, buyers are now back in the driving seat.

• To get an idea of where house prices are headed, take a look at our comprehensive collection of UK house price indicators

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Published in Personal finance | More articles by Ruth Jackson

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  • 1. RC

    (17 September 2010, 10:31AM)  Complain about this comment

    The land registry figures are of course the most accurate (actual sale prices), but due to completion times the index always lags 3 months.... With this rounding a hill YoY it certainly seems to back up that its all heading down from here.

    The question is can the government interventi0n engineer a second bounce? How long will this be drawn out for?

  • 2. The Truth

    (17 September 2010, 10:37AM)  Complain about this comment

    What are the four major indices that say house pric are rising? The only ones I know of are Halifax (a miserly 0.2% up this month) and Land Registry (3-4 months out of date and still limping upwards.

    Other than those two we have Nationwide (down 0.9%) DCLG (down 0.3%), Rightmove (down for two consecutive months, can't remember th numbers), RICS (down two straight months, no price data).....

    Fact is, virtually all indices are now ointing down or out of date. Not sure what's going on with Halifax, but they rarely stay out of step with Nationwide for more than a couple of months. few months ago there was ambigty about where prices were headed. Not now.

  • 3. Bilbo Biggins

    (17 September 2010, 10:41AM)  Complain about this comment

    @ RC

    Can they engineer another bounce?

    I doubt it; the gun's jammed, the clip's empty, and the ravenous hordes are rounding the hill.

    Suffice it to say, I don't actually think the coalition want another bounce - that was Labour's last roll of the dice to cling on for another term. Once Mervyn and his mob see sense the floodgates will open.

  • 4. Don

    (17 September 2010, 11:04AM)  Complain about this comment

    @ RC

    The Academetrics figures are probably the most accurate. The Land Registry figures are based on a small sample size of sales transactions in a given month, whilst (I think) Academetrics also uses data for all transactions registered at the Land Registry, but only when they become available a few months later. Their figures are therefore subject to a few revisions as new data is released, but this gives the most reliable picture of what places have actually sold for.

  • 5. rantnrave

    (17 September 2010, 11:07AM)  Complain about this comment

    'but it adds to signs that the recovery in house prices has stalled'

    put alternatively:

    'but it adds to signs that the much overdue correction in house prices has finally begun'

    Lets move away from describing the misery that ever rising house prices cause as being 'a good thing'.

  • 6. Liam D

    (17 September 2010, 12:30PM)  Complain about this comment

    4. Don

    Why would the land registry use a small sample when they are sitting on all the data?

    One thing I did hear is that they don't include prices for repo sales (nor do they publish these as sold prices).

    So I suspect the real average is slightly lower than published.

  • 7. Roberto Birquet

    (17 September 2010, 01:19PM)  Complain about this comment

    RC
    can government interventi0n engineer a second bounce? How long will this be drawn out for?
    -------------
    I have always thought that the new government would like to get the worst of the medicine out of the way early in the Parliament. The real reason - I believe - that they are going for large expenditure cuts immediately. That would help with the message that is all the ex-government's fault, and if the medicine works by the time of the next election, the electorate may be grateful and even reward "courage" of the government.

    That (no more stimuli) along with truly awful affordability for FTBs, public sector workers heading to the dole queues and banks no longer willing to offer 100% mortgages (the main driver of previous growth in prices) all point one way. Prices to fall.

  • 8. fingerbob69

    (17 September 2010, 01:38PM)  Complain about this comment

    The only bounces coming are in interest rates ...up, unemployment ...up and as a consequence the number houses on the market, forced or overwise ...also up!

    As an estate, out here in suffolk I would say the market been pretty dead since May. And I don't know any agent who doesn't think prices are gonna fall and desparately wants them to!

  • 9. Timm

    (17 September 2010, 06:17PM)  Complain about this comment

    "What are the four major indices that say house pric are rising? The only ones I know of are Halifax (a miserly 0.2% up this month) and Land Registry (3-4 months out of date and still limping upwards."
    Acadametrics, and if the story was written before the 14th of this month, DCLG.

    "Why would the land registry use a small sample when they are sitting on all the data?"
    Because they only use houses that have sold twice since they started compiling the data in this way. That way they are comparing apples with apples. (Unless the house has beenextended ect between the times it sold).


  • 10. Bertha Vanation

    (17 September 2010, 07:45PM)  Complain about this comment

    Judging from comments reported today from Adam Posen of the MPC, I wouldn't rule out another QE type intervention to prop up the housing ponzi.

    I've no doubt that behind the scenes, the government doesn't want a full scale housing rout at this juncture. They'll have their hands full enough with austerity medicine without thet 'feel dreadful' factor that will accompany a house price crash.

  • 11. Mark Moore

    (18 September 2010, 06:01PM)  Complain about this comment

    House prices should not be a speculative asset, they should be considered infrastructure for its residents. The Danes and Swiss amongst others recognise this point. Read this post: http://posthumousblog.blogspot.com

  • 12. Chris O'Reilly

    (22 September 2010, 09:55AM)  Complain about this comment

    I would like to banish a phrase from the English language - a phrase so relentlessly spouted, whether it be from the mouths of house builders, estate agents, newspapers, 'property' commentators et al, -

    'HOUSE PRICE RECOVERY'

    Pray, I ask - recovery from WHAT?

    Oh yes, silly me - er, recovery from 10 years of exploding prices that have all but polarised society
    The erradication of the species known as 'first time buyers' (always the cornerstone of a healthy market) and replaced by the unregulated buy to let brigade.
    The pricing out of key workers from all cities.
    Property as an investment tool, driving prices through the roof and killing the dream of many who want to own their own home.

    I fear though, politicians, through fear and expediency, will not allow the market to normalise.

    Oh yes, and one final thing while I'm on this bloody box - who ever gave the Bank of England a mandate to be supreme moral cowards in bailing out debtors while screwing everyone else?

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