Henry Pryor Blog

Having confidently predicted the peak of the market at Christmas in 2006, I accept that some humility must be shown for my erroneous suggestions that 2010 would show a ‘double dip’.
 
Whilst I see many examples of deals being done at way below asking price, the market indices do not show the anticipated falls of 20% or more, and therefore it is with some trepidation that I prognosticate on 2011. 

I see little evidence to suggest that the falls I had expected to turn up this year will not show up eventually.

Sale volumes are wafer-thin, the gap between average asking prices and average sale prices is close to record highs (over £70k) and the deals being done – especially outside the gated community of inside the M25 – suggest that those people who have to sell are considering much less than their asking prices suggest. 

Remember the market stats I send you each month. These are the raw numbers:

* There are nearly 1 million homes for sale today.
* 8 million people are looking to buy a new home (some clearly more eagerly than others!)

* New stock is coming on to the market at the rate of 3,445 a day but only 2,355 are selling.

Put your house on the market today and you have just an 8% chance of selling by Christmas. At these rates, if you put it on for the whole of next year you still only have a 35% chance of selling it!

Much as the score in a football game doesn’t always reflect the true course of the entire 90 minutes, we all accept that there is no one ‘average house’.
 
I still regard the monthly reports from Land Registry, Halifax, Nationwide and Rightmove as the easiest ways to measure and to illustrate the health of the market, although I can sympathise with those who would like to hive off parts like ‘Prime Central London’, for example.

But whilst banker bonuses should keep the prices up in SW3, there are 23 million homes in the UK and most are not in Chelsea.

If you want to know how over-priced Central London is, then consider that yields here are now around 4% gross. Just 4% for an asset that is illiquid, costly to trade and that will get even more so when stamp duty rates for homes over £1m rise next spring to 5%!
There is no evidence of lenders lending rather than hoarding – in fact the latest numbers from CML and British Bankers Association suggest that lending is still declining.

Government cuts are yet to really bleed, as those who have over-stretched themselves are hanging on only because of record low interest rates.

Down the track when those cuts really bite, we can expect thousands more students, for example, to be repaying their student loans once they are earning £21k rather than saving up a deposit for a house. The average age of a first-time buyer is already 34. Just how long can the purchase of a home be put off?

Opportunities will of course appear, and with my buying agent hat on, I expect to be even more of a carnivore in 2011 than I have been this year.

However, it will only be those who already have money who will be able to take advantage of the deals that come along next year.

If you need to borrow, then you need to get saving, and that will typically require £35k out of taxed income. Average pay will fall from the £24,000 today, making this a very tough ask. You can see why renting may be the new black.

A classic example of what I think we can expect to see more of through the next 12 months was received by email from Knight Frank last week, although I have had similar from any number of other agents. It reads: ‘In respect of the following instruction, we have been informed by the Receivers that they would look to accept offers over £2,700,000 (subject to contract). This is a reduction from £3,200,000 and is to prompt a quick sale of the property.’ 


We are demonstrably chasing prices down, and as I have said before: “It’s like skydiving at night – hard to know how fast we’re falling or where the bottom is!”

In summary, my predictions of next year are:

Main indices down 10%-plus by end of 2011.

 
Volume of sales down from 890k to around 700k by end of 2011.