Market Commentary House Prices March 2009

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Property price reports are currently revealing conflicting news that prices are rising and falling - all in the same month! Nationwide are reporting prices are up by 2%, while Halifax are reporting prices down by a similar amount.

The first thing to realise is that this isn't unusual when the property market is in a state of flux. It also shows a lack of robustness on behalf of property prices. Why? Well the most reported property price indices are typically Halifax and Nationwide. They are mortgage lenders and the number of mortgages they are selling are down by at least half and Halifax probably even more. So as far as robust reporting we don't think that these are really good indicators of what's happening in the market at the moment.

So what can we turn to understand what is happening with property prices? The most important indicator at this moment is what the estate agent's say and specifically whether there an independent source of data such as For Sale Sign Analysis (FSSA) can report an increase in the percentage of properties sold versus those for sale.

Currently, reports from agents are good. Some offices have reported sales going up from 5 per month to 15 - a great increase. This isn't happening nationwide yet, but areas with short supply and good demand will always start the recovery. FSSA information shows that sold versus for sale signs are up to 19.5% nationally, with some areas such as Romsey, Tottenham/Wood Green and Cambridge, sold to for sale boards are at pre-crash levels of 40% already.

London agents are reporting good increases in activity especially where properties are typically bought by international clients - for them prices have dropped twice, firstly a general fall, secondly a favourable exchange rate.

A must read on housing market recovery is the latest Savills Report which explains the four stages of market recovery and concludes that we are about to enter the first stage.

Could anything mean that property prices seem to recover and then fall again - or as many economist forecast that there is still along way to fall. Looking at economist forecasts though, one claims that 2008 would have been a period of 'denial' that house prices were falling. This didn't happen, in actual fact the opposite happened, people completely accepted prices were falling, didn't buy for the first part of the year and then didn't put their properties up for sale. As a result, rather than a predicted 'panic' for 2009, supply had dried up and demand increased, so prices have started to stabilise. This in our mind proves that many economists really don't understand how the property market works at all.

What do we need to have happen for property prices to continue to recover?
Three things need to happen for property prices to at least stabilise, which they need to do before they can recover. These are:-

1. Supply and demand needs to continue to match. However there is a danger that talk of the 'market recovering' may result in more sellers putting their properties onto the market, tipping us back into supply

2. The rise in unemployment needs to slowdown, and the threat of unemployment in particular, subside. This will help people to be more confident about the economy and especially that it's 'safe' to purchase a property.

3. Reasonable lending rates for first time buyers at 90-95% needs to come back in. HSBC are already leading the way with this, with some decent rates, but high fees, whereas most other lenders continue to put a premium interest rate and fees on mortgages aimed at first time buyers.

So with all this information - what should you be doing?

First time buyers
If you are looking to buy and live in the same property for five plus years, then now is a good time to look, don't rush into any properties, but if you find one your really like, make sure you value it correctly and bargain hard.   

Trading up
Now is one of the best times for you to sell quickly and get in a position to buy the property you really want as good properties in good locations are not likely to drop much more. Just make sure you take care to buy at a fair price.

Trading Down
It's still not a great time to sell, but if you are likely to be buying into a retirement property or other new property, then you will probably get a better deal on that purchase, so if you really want to move and can get a reasonable price, then it's worth considering.

Property Investors
You should be buying! Securing repossessions/desperate sellers either by leafleting and/or by going to auctions such as the EI GROUP. However avoid offers of 'no money down deals', NEVER buy a property from any company that says you can't see it before you buy and beware of spending lots of money on investment clubs, make sure you contact us with any deals to us and we will check them out for you free.

For more market commentary on a national or local level:-
Contact Kate Faulkner on 07974 750562 or 0845 838 1763. To read more about Kate, please visit ABOUT US, see Kate on video and for media appearances, contact:

Sylvia Tidy-Harris
STH Management                    
Tel  +44 (0) 1530 263221
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