Whether you are a property buyer or a property seller it is confusing to hear the plethora of reports telling us what is happening to property prices. Some of those publishing reports have a vested interest, for example those who represent banks and estate agencies. To understand what is happening with property prices you need to be aware of some underlying factors to help interpret the reports published.
1 – The data set used. Some examples are; the property valuations collated by new mortgage lending; the asking prices and agreed prices via estate agents; the land registry actual sold prices. Each set of data will often provide a conflicting picture of what is happening with property prices.
2 – Timing of reports. Data is often collated for the previous month, but in some cases it takes a longer period before historic data can be reported with any accuracy. For example land registry updates after a purchase has completed, this can be weeks to many months. Such delays make the accuracy of reporting on the “previous month” less accurate, it is only after a longer period has elapsed that more accurate reports can be produced.
3 – Sample size, e.g. how many sales are being completed. With smaller volumes of transactions the accuracy of reports will reduce. For example if 100 sales were completed across UK in September, then 200 in October, someone could report a 100% increase in house sales for October. At the same time if the average sold price of the 100 properties in September was £150,000, then in October the average was £165,000, then someone could report prices had increased 10% in October! These are clearly small numbers for the example, but they put the point across, until we reach a “normal” levels of sales activity the data will be less accurate.
To sum all of this up…
We will continue to see conflicting reports, some saying prices are increasing, others saying prices are falling. The fact is that no one knows precisely what is happening with property prices. Until market uncertainty reduces and banks provide a more “normal” level of lending there will continue to be a higher level of uncertainty about property prices.
The best guess anyone can make is we are probably near the bottom of the market for residential properties, prices may fall a little further, especially in areas of the UK with poor local economies, but the worst is behind us.
If you are itnerested you can read more about what we think lies ahead for UK property prices in our blog here …. http://www.repaymortgage.co.uk/blog/2009/08/16/uk-house-price-predictions/
