Spot the Difference? UK House Prices.

Our “UK Housing Hints,” penned just over a year ago, highlighted the yawning gap between the Rightmove asking price and the average UK house price, stating that the monthly Rightmove 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, when compared to the Halifax average house price index. At the time the gap stood at 33%, as shown below.

17 July Blog 1

We also noted that the correlation between the asking price and actual price were in lock-step before the bubble burst, which continued through the 2007-early 2009 rout, albeit not quite to the same degree, before they subsequently diverged, describing the gap as Hope versus Reality.

Fast forward one year and a heck of a lot of tax-payer assistance and what do we now see:

17 July Blog 2

Both prices have moved higher but the gap remains wide, at 32%, so no great difference between hope and reality.

A final chart compares net mortgage lending, which jumped to £2BN in May versus the £1.7BN witnessed for April against average UK house prices, this time courtesy of the nationwide.

17 July Blog 3

We see another yawning gap here, which poses the question, “spot the difference post 2007?” Either house buyers are finding other sources of funding or Johnny foreigner really is buying up with cash, but in downtown Bradford as well as prime London.

Whatever the reason, a chart like this suggests there will be a reversion to the norm. Either mortgage lending is about to rocket higher, after the stringent lending controls recently enforced, OR, hope will really meet with reality via a collapse in house prices that will make 2007/09 look like a tea-party.

Place your bets ladies and gentlemen.

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2 responses to this post.

  1. […] our July 2014 “Spot the Difference” blog on UK house prices failed to reach many of our readers, so we send it once again, together […]

    Reply

  2. […] House Prices: July’s “Spot the Difference” observed the yawning gap between the Rightmove asking price and the average UK actual house […]

    Reply

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