UK Housing Hints?

Earlier this week the UK Royal Institution of Chartered Surveyors, better known as RICS, released their monthly poll of residential property surveyors, which shows the proportion of surveyors reporting a rise in price minus those reporting a fall.

A positive number means more respondents saw values increase rather than decline and for May the price index increased to a three year high, at 5 against the 1 seen in April.

Analysts suggest that Government credit initiatives, such as the, “Funding for Lending Scheme,” are the reason for the improvement, albeit that the tax-payer funded scheme was supposed to assist the wider economy, particularly small businesses, rather than just mortgages and propping up bank balance sheets.

weekly_blog_130613_1

 

Either way, a peek at the longer term chart of the RICS survey shows that a falling trend has been in place since the late 1980s and looking at the lower “relative strength index,” shown in blue, one shouldn’t expect a new all-time high anytime soon.

Another UK housing statistic due out next week is the UK National average house “asking price” from Rightmove, the nation’s largest consolidator of real estate agents activity. This monthly survey is very useful for gauging “sentiment,” as opposed to any guidance as to where prices are going, particularly as it tends to “lag” the average house price index rather than “lead” it, as can be seen within the second chart, which compares the Halifax average house price index against the Rightmove asking price index.

weekly_blog_130613_2

 

Last month’s reading showed an all time high for the “asking price,” at £250,000, versus the most recent average house price, based on properties actually purchased (with a mortgage of some amount,) at £167,000 and the gap between the two is getting wider.

So what to make of it?

Well, we do not like “consensus,” as consensus tends to be more wrong than right and you only have to look at the bulk of economists forecasts to prove that fact. The RICS survey is a consensus, whilst as stated above, the Rightmove survey is sentiment driven. You can ask, but you may not get.

It’s also interesting to note that whilst the trends of the asking price and actual price were in lock-step before the bubble burst, the trend continued through 2007-early 2009 but not to the same degree, before they subsequently diverged. Hope versus reality may be a fair description of events since.

With mortgage rates having been so low, not to mention the £375BN of tax-payer based stimulus, the lacklustre recovery for house prices since the 2009 low is telling.

The interest cycle has turned, which is the first hint to where house prices may be heading. Factor in the aforementioned consensus and sentiment readings and the hints get stronger.

Advertisements

One response to this post.

  1. […] “UK Housing Hints,” penned just over a year ago, highlighted the yawning gap between the Rightmove asking price and […]

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: