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Are house prices still falling?

Are House Prices Still Falling?

With its unpredictable ebbs and flows, the property market has long fascinated and frustrated investors, homeowners, and analysts alike. One of the most challenging aspects of navigating this dynamic market is the near-impossibility of accurately predicting its peaks and troughs.

In this blog, we will delve into the complex factors that contribute to the volatility of property prices, making the task of forecasting highs and lows an elusive endeavour.

With The Times reporting that house prices will rise 5% in 2024 The Telegraph reporting ‘House prices bounce back’, and The Express headline “UK economy steering towards house price boom instead of price crash this year”, you could be excused for thinking that, in property terms at least, we’ve hit the bottom of the market and asking “Are house prices still falling?”

Rightmove even reported, “Record number of sellers come to market on Boxing Day”. But what does this all mean? – Are house prices still falling?

Are house prices still falling

Current pricing

Geography

Let’s start with some basics. Prices differ around the country, and their changes aren’t as simple as saying that they have fallen by 5% in one area and 7% in another. For a start, these figures are averages for a location, so whilst prices below £500,000 may have risen, prices over £5,000,000 may have fallen.

Property markets are not homogeneous. Different regions, cities, and counties can exhibit unique trends influenced by local economic conditions, demographics, and development projects. Predicting the simultaneous behaviour of diverse markets is a formidable challenge.

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Supply and Demand

Prices are also affected by the basic economics of supply and demand. In many areas of the UK, sellers stopped selling. They did this for many reasons, but one of them was, without support from a buying agent, they couldn’t find an alternative house to buy.

There were, in fact, many people looking to move, but these buyers and sellers didn’t know where to look, and they were asking, “Are house prices still falling?’

Around 30% of the market moves because it has to and not because it wants to. Relocation, births, marriage, death in the family, illness, and mortgage rate increases are just a few reasons why there is always a market.

But this tends to be at the middle to lower end of the market, where people have multiple options to choose from and when the question “Are house prices still falling?” isn’t relevant.

At the other end of the market, the large country estate or expensive detached houses on prestigious private estates, there are far fewer choices. Therefore, it stands to reason that those house moves are far less frequent and as a result are less affected by price fluctuations.

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Out-of-touch data

For those of you waiting for the bottom of the market before you buy and asking, “Are house prices still falling?” I wish you the best of luck. You can’t know that you’re buying at the bottom of the market. It’s simply impossible.

You can’t know when the property price bubble will burst, either. Any move based on this is merely a guess; it’s gambling, and very few get it right, and those who do, struck lucky.

Even the estate agents and lawyers at the coal face can’t tell you. Sure, they can predict, but not with certainty. And that’s because the data is slow to come out. So, if you were to ask them, “Are house prices still falling?” they would be guessing.

Property data comes, in the main, from 2 sources. Banks/Building Societies reporting their mortgage uptake and The Land Registry. Sure, Rightmove can say that there was a larger than normal number of properties put on the market on Boxing Day, but it could be that agents held 50% of them back in December as they believe that after Christmas is a better marketing period (and it is!).

Mortgage uptakes are measured from when a property completes, from when the purchaser’s solicitor requests the mortgage, and when the bank releases their funds.

If you consider from when a buyer starts to look, then offer, then their lawyer processes the legal requirements, it’s probably been between three and four months to perhaps six.

Best and final offers - sealed bids - closed bids
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Land Registry (LR) data is even slower. The LR will usually publish its data within the next quarter year from the completion date. Based on the above timeline, this could be as much as nine months out of date.

We can conclude, therefore, that when house prices have fallen and the bottom of the market has been and gone, prices have started to rise again. So “Are house prices still falling?” simply put, you won’t know until it’s too late.

And assuming, and it’s a big assumption, that they rise at the same pace that they fall, there is an 18-month window ( 2 x nine months) on either side of the bottom of the market, where it doesn’t matter. Therefore, you might as well have bought a property nine months before the actual bottom of the market, as once the bottom date is revealed, prices may have returned to the same point.

Other factors that influence the property market are as follows.

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Economic Variables

The property market is intricately linked to broader economic conditions. Factors such as interest rates, employment rates, inflation, and overall economic health play significant roles in influencing property prices. However, the interplay of these variables is incredibly complex, making it difficult to pinpoint specific triggers for market movements.

Psychology and Speculation

Human Behaviour

Unlike financial markets, human emotions and sentiments deeply influence the property market. Market participants often make decisions based on personal circumstances, aspirations, and societal expectations. Fear, optimism, and speculation can drive irrational behaviour, causing unexpected surges or downturns and asking, “Are house prices still falling?”

The media plays a massive part in this, with many outlets thriving on news that influences their readers. Without the press, I suspect the market would be far more robust. It is, in reality, the press themselves that ask, “Are house prices still falling?” more often than anyone else.

Speculative Investments

Property markets are susceptible to speculative bubbles, where prices rise rapidly due to excessive optimism and investment. These bubbles can burst unexpectedly, leading to sharp declines. Identifying when a market is in the midst of a speculative bubble is notoriously challenging.

External Influences

Government Policies

Government interventions, such as changes in taxation, housing policies, or interest rates, can profoundly impact property markets. These policy shifts are often responses to broader economic conditions, making them difficult to predict accurately.

Global Events

The interconnected nature of the global economy means that events on the other side of the world can reverberate through property markets. Geopolitical tensions, natural disasters, or economic crises can create unforeseen ripples in property prices.

Historical Context

While historical data can offer valuable insights, it rarely provides a clear roadmap for future market movements. The property market’s response to economic events is influenced by a myriad of factors, making it challenging to identify consistent patterns that can reliably predict future outcomes.

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The Reality

As a buying agent, our job is to source and secure the best house at the best price for our clients. Many of these houses never make it to the open market; instead, they are sold discreetly at a price that both the seller and our client are happy with.

However, even with houses that are on the market, most sellers in the price range that we typically deal with are unlikely to publicly reduce their published prices for fear that that might send off the wrong signal or hinder their negotiations later on.

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The truth is that as a buying agent with over three decades in the industry, we’ve seen and worked in many market ups and downturns.

We know what a property is worth, and most importantly, we know that most sellers will consider an offer, irrespective of their asking price.

Properties are available to move to in any market; you’ve just got to know where to look and how much to pay.

Are house prices still falling?

In the labyrinth of the property market, the quest to predict its peaks and troughs remains an enigma. The intricate web of economic variables, the inherent variability across regions, the sway of human psychology, and the influence of external factors create an environment where precision forecasting is nearly impossible.

Investors and homeowners must approach the property market with an awareness of its inherent unpredictability, relying on sound financial principles, risk management, and a long-term perspective to navigate its ever-changing landscape.

If you are asking yourself the question, “Are house prices still falling?” and reaching for the very bottom of the market, in most markets, it is not simply unimportant; it will hinder your ability to move on. An 18-month window is a very long time, and I bet prices will have risen significantly between now and the summer of 2025.

To wrap up, with the general election coming up, a change in government is possible. Traditionally, this results in a temporary pause in the open property market. However, off-market properties will still be there if you know where to find them!