-Housing market is now finally responding to higher borrowing costs as sellers recognise that price rises are becoming unsustainable
-This interim report is compiled from asking prices of actual properties put on sale through estate agents who advertise on the Rightmove property website from 10th to 31st July 2004 (3 weeks) – a sample of approximately half the market
INTERIM DATA on asking prices of properties coming onto the market released prior to the MPC meeting today provides incontrovertible evidence that the housing market has turned.
Measuring more properties than any other monthly indicator and based on actual data rather than survey results, Rightmove’s Index clearly shows prices are starting to decrease across the country, refuting recent data from Nationwide suggesting that the market was continuing to boom.
Over the three weeks to 31st July, average house prices in estate agents’ windows have dropped by 0.5% or £892, from £196,198 to £195,306. The first week of the period saw a £673 dip, followed by further falls of just over £100 in each of the next two weeks.
These declines in prices follow a much smaller rise in asking prices (of 1.2%) reported in Rightmove’s July house price index and contrast starkly with rises of around 2.5% in each of the previous two months. Asking prices rose by a total of 9% over the 3 months up to July 2004.
Annual house price inflation has fallen slightly, from 18.0% in early July, to 17.6% now.
Miles Shipside, Rightmove’s commercial director, says: “This is excellent news for the British consumer and the economy overall. The strength of the housing market was becoming a source of growing concern to many economic commentators, not least to Mervyn King and the other members of the Monetary Policy Committee. Consumer borrowing was starting to respond to the rate increases, but the housing market had proved remarkably resilient. Last week’s announcement that household debt in the UK had surged through the trillion pound mark, followed by perhaps surprisingly strong figures from Nationwide based on their sample of mortgage lending, did nothing to reassure the powers that be.”
“Now, at last, we are getting incontrovertible evidence that prices are coming off their peaks, and that higher borrowing costs are starting to act as a cold shower to douse the flames of the red hot market. I’d say it’s just what Mr King ordered. The homeowner is beginning to see that ever higher prices simply won’t stick and that greater realism will be the order of the day over the next few months. The number of properties available for sale continues to grow, so the astute buyer is well placed to strike a good deal on a home purchase.”
“We’ll find out on Thursday whether the MPC feels the economy is responding sufficiently to the four rate rises over the past 9 months to warrant keeping interest rates on hold, but it must be a positive signal that the upward spiral of house prices is coming to an end, with no hint of a crash.”
Six out of ten regions have seen falling or static asking prices over the three week period, with the northern regions (North, Yorkshire & Humberside, and North West) still seeing rises.
Region Change
since
10 July 2004 Change
over month
(since end June 2004) Change
over year
(since end July 2003)
East Anglia -0.2% 0.2% 14.9%
East Midlands -1.9% -1.4% 22.2%
Greater London -1.3% -0.2% 10.7%
North 1.9% 3.4% 29.2%
North West 0.5% 0.8% 23.3%
South East 0.6% 1.4% 16.3%
South West -0.9% -1.8% 15.1%
Wales -0.8% 1.5% 31.9%
West Midlands 0.0% -0.5% 15.9%
Yorkshire & Humberside 2.1% 2.9% 28.5%
“The north of the country continues to defy gravity, but I think we’re seeing the sure signs of slowdown spreading to all parts of the country,” concludes Miles Shipside.
