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New figures released by Land Registry confirm that the property market took a significant dive last year with nearly 23% fewer houses sold in England and Wales.
The latest batch of data that I have seen includes 104,590 properties for December to be added to the 885,075 that had been recorded up until the end of November. This makes a total of 989,665 for the year compared to 1,283,459 in 2006.
It was clear earlier in the year that the market was slowing significantly with the volume of sales down by between 25% and 30% as early as May. Homes had become unaffordable and when other factors such as the introduction of the Home Information Pack were added, it became clear that buyers were starting to melt away.
The problems of Northern Rock and the removal of over 40% of mortgage products in the Autumn signaled the end of the bull market and we have started the year with asking prices down by an average of 5% as a result.
As we have discussed before, it is only the lack of supply that has stopped house prices from falling faster. What these figures are telling us is that demand is slowing which starts to cancel out the impact of fewer homes for sale. In other words we are seeing fewer buyers looking at fewer homes and market forces are starting to drive down prices.
IG Index is betting that average house prices across the UK will be down 3.5% from ¯¿½197,244 by June. Spreadfair has the drop at 13.5% by December next year. What these figures tell us is that the market is still trying to find the bottom.
There are still deals being done of course, by people who need to live in a home and who sensibly take a 10 year view but the speculators, including our old friends the buy-to-let brigade who last year accounted for about 10% of mortgages have by and large withdrawn. It's not hard to see why when even these evangelical property enthusiasts are concerned that what they might buy today could be cheaper tomorrow.
Perhaps the most important lesson that many people are at long last learning is that the value of a property isn't always what the seller says it is. In recent years, owner-occupiers as well as investors have bought from developers and so-called Property Investment Clubs at what they were told were discounts.
The problem all to often was that the discount was to the original price that had been dreamed up by the developer after a night out with the boys! As many buyers have now discovered to their cost, even at the 'discounted' price they were still not always getting the property cheap!
I expect to see the number of homes put on the market to be down on last year which saw a record 2.9 million properties offered for sale. Sadly, repossessions will make up a bigger percentage with a worrying 27,100 keys being taken back last year.
Although the Council of Mortgage Lenders are predicting that this figure may double, if supply doesn't pick up then these distressed sales could account for more than 1 in 10 sales.
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