The Royal Institution of Chartered Surveyors (RICS) this week confirms that recent increases in house values have been kept up by a dearth of properties being offered for sale. Concurrently the Centre for Economics and Business Research calculate that house prices will fall a further 3% this year before recovering by 2% next year.
These predictions follow closely on the Nationwide and Halifax Bank reports of small price rises in recent months, and the prediction by the Nationwide that prices could end 2009 higher than they started 2009.
Evidence and predictions in the last few months have all shown small changes, in either direction, for the property market. It now would appear certain that there will be no further remarkable falls. The recent falls have basically driven vendors out of the market as previous ambitions to Sell Property Fast have been abandoned by many potential sellers. At present price levels many vendors are basically staying where they are in the hope of a price revival. In the current climate I would certainly not try to Sell my Home fast.
There is also a very practical reason why there is a floor under house values, and this is the level of mortgage lending used on many properties. Sellers are often faced with no sale option if values decline to a point where equity is too low, or even non existent. Such vendors may want or need to Sell House Fast, but are prevented from doing so by the simple economics of the sale transaction. They will remain out of the market whether they like it or not. Many calculations of house prices have concentrated on the demand side of the equation, a dearth of buyers and of mortgages will suppress demand and force down values. What is plain is that the supply side is also having a big effect in supporting values.
Vendor shortage means that buyers are tracking fewer properties so the simple law of supply and demand is causing prices to remain firm, or rise slightly. And until prices rise further then numerous vendors will continue to stay out of the market. It could be said that the value correction has gone too far and this may be the basis of the Nationwide prediction of further increases during the rest of this year. Nevertheless, if vendors do start to return in bigger numbers then this frail recent growth could disappear and further falls might well be on the cards. Fortunately we now appear to be in market conditions where alterations, either way, will be quite small. If there are further falls they are likely to be modest and similarly any recovery likely to be fragile and slow.
Taken in general a scene of flat property values over the next six to twelve months, and little likelihood of achieving a Quick Property Sale at an decent price for the vendor should surprise no one.
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