We Ain't Seen Nothing Yet

Nationwide claims we've seen the biggest fall in house prices since 1991. But actually, house prices haven't crashed - yet.

We've all seen those Looney Tunes cartoons where Roadrunner, Bugs Bunny or whoever goes charging off the edge of a cliff, then stops, looks down, looks back despairingly, stares at the viewer, defies gravity for a moment, then crashes to earth.

It reminds me the housing market. We've charged recklessly over the edge, stopped, realised what we've done, stared wide-eyed at how far we have to fall, and are now waiting for gravity to do its worst.

But it hasn't yet. If you look at the figures, the panic about falling house prices concerns what is to come, rather than what has happened. Most indices suggest house price falls have so far been surprisingly slight.

Just the facts

Nationally, the average house fell a modest -4.6% in the 12 months to August, according to Land Registry figures. In London, the figure was just -3.2%. In Windsor and Maidenhead, prices actually rose 2.4%. In Hartlepool, they were up 4.8%.

An average drop of -4.6% is a shock after all the years of dramatic growth, but it isn't the end of the world.

If you're in the mood for even more soothing news, Department for Communities and Local Government (CLG) figures show prices falling by just -0.3% in the year to July. The FT house price index puts the annual fall at just -2.2% to August. So what's everybody moaning about?

Well, this for starters. The most dramatic numbers come courtesy of Nationwide, which this week reported 12.4% drop in prices over the past year, leading to headlines like: "Worst Ever House Price Fall Since 1991!" Now that's what I call a housing crash.

Similarly, latest figures from the Royal Institute of Chartered Surveyors figures show the average house going for 10% below its asking price.

Chin up

But wait a minute. Every time Halifax and Nationwide publish their latest scare 'em to death figures I get an e-mail from property firm Assetz, reminding me that those two lenders base their data solely on their own mortgage transactions, which can be misleading.

Assetz says both lenders "have significantly raised their mortgage rates recently to boost their profits while transactions fall, which has resulted in purchasers haggling down property prices by a few per cent to compensate for their increased costs."

It claims this is why Halifax and Nationwide figures are notably more dramatic than other indices, such as the FT and CLG, which use Land Registry data, or Rightmove, which looks at asking prices (and recorded a modest -3.3% fall in the 12 months to September).

Assetz claims Rightmove figures can also be misleading, because there is evidence of sellers putting up asking prices, in anticipation of later negotiation by the purchaser.

Property company Assetz clearly has an axe to grind, but it does offer a more sober reading of the figures than most newspaper headlines.

The problem I - and I suspect many buyers and sellers - have is that I don't feel I can rely on any of these figures. Things feel much worse.

My friend Ben

So what about the anecdotal evidence? I think of my friend Ben, who recently sold his house three-bedroom terrace in Hither Green, south-east London. It went on the market for £435,000 last November. In May, after months of fear, loathing and gazundering, he pocketed £375,000, 13.8% below the original asking price. I don't think he's complaining about that now (it was overvalued anyway, sorry Ben).

Housebuilder Barratt is reported to be slashing 43% off the price of some new homes although only for people buying five properties or more in its Yorkshire East division.

Plus there are plenty of reports of new-build city centre flats being auctioned off for 40% or 50% below their original asking price, as buy-to-let investors abandon the market on fears of oversupply.

And then there is the frankly astonishing news that the value of mortgages fell 95% between July and August, from £2.99 billion to a threadbare £143 million.

Deep freeze

This final figure confirms to me that rather than falling, the property market is frozen. Buyers ain't buying, sellers ain't selling - unless they really have to (like housebuilders, or buy-to-let investors who jumped on the bandwagon too late and got their sums wrong).

Plenty of people still predict prices will fall 30% from their peak, and I suspect they might be right. When I trawl through property websites, I see humdrum houses for sale at unsustainably high prices, and can't imagine anyone paying those prices now.

The odds are still that we are heading for a serious correction, but I'll repeat, it hasn't happened yet.

We are all stuck in mid-air, like comedy cartoon figures, waiting for gravity to do its worst.

More: I Want A House Price Crash!