Assetz® News - Buyers market showing early signs of ending

Buyers market showing early signs of ending

21st January 2008 |

One of the key house price indices to keep an eye on is the Rightmove index - not because it's more accurate than others but because it reflects asking prices rather than mortgage offers made or land registry transactions recorded. The reason this is important is that it is the most reflective indices of sentiment of both buyers and sellers.

The Rightmove index is a leading indicator (for those technical analysts amongst you) and we use it as part of our overall charting of the market in our House Price Watch analysis released to the press each month in order to show the likely direction of house prices in the future in the other indices.

We saw asking prices, via the Rightmove index, get carried away earlier this year with growth greater than the other indices. This is eventually slowed and we then saw the rate of growth of the Rightmove index decline sharply as the overenthusiastic asking prices of lenders got modified. We also saw artificial data in these asking prices coming from the introduction of HIPs.

As HIPs came in on the big houses we saw vendors rushing to the market with a greater proportion of these type of properties and with rather aspirational price expectations which caused, we believe, the spike upwards in the Rightmove index in the middle of the year. Recently we saw the introduction of HIPs onto two-bedroom properties and we saw an unusual number of these properties coming to the market just before the deadline and we think this contributed to an artificial reduction in Rightmove prices at the end of the year.

We've just seen data announced for January that shows a very slight reduction in house prices again of 0.8% for the month, however important information is contained within the comments made by Miles Shipside in analysing data not actually released with the overall monthly house price percentage change. Miles commented that the market appears to be showing its usual upturn part way through the month following the New Year, after a few months of slight decline. We would expect this to continue into the Spring and the fact it is now happening would indicate that the other indices will bottom out in the Spring as they show actual sales transactions taking place.

Our view remains that the buyer's market where low bids are accepted by some vendors will reach an end in all likelihood by the summer and perhaps this comment from Rightmove indicates that the best days for silly bids being accepted have already passed as more buyers step into the market. Indeed press comment becomes less and less negative on the property market and we are seeing more and more reports of vulture funds being set up by professional property investors to take advantage of the artificially low prices in the grade A commercial property market, for example, as well as some funds now visible in the residential sector looking to buy up repossessions. Even Northern Rock was buying its own repossessions rather than sell them at auction.

The devil is in the detail in this market and we are probably closer than most. Let's see if the data continues to back our view and act quickly to take advantage of the wonderful prices on offer at present from forced sellers.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.