Despite talk about housing market recovery, with a pick-up in both prices and sales, turnover has fallen so low that it is a real threat to estate agency, the mortgage industry and conveyancers, and to local economies.
Property website Home says today’s market of restricted supply and rising prices does not translate into a real recovery.
The search engine, which takes properties from virtually every source in the UK including agents’ own websites, has come up with a measurement it calls the Home Market Turnover Indicator.
This combines monthly data on overall stock levels and average marketing times from 2005 to the present day.
During the boom times of 2007, the Indicator stood at 10,000 properties a day. The flow of properties fell drastically as the financial crisis hit, but recovered to 4,000 per day in 2010.
However, over the last three years, the Indicator has shown a downward trend, with stock levels falling faster than marketing times.
Currently, the Indicator stands at 2,761 properties a day – a turnover 14% lower than in June 2012.
While there has been a seasonal upturn, Doug Shephard, director at Home, said he questioned whether current price rises really are a sign of recovery in the sales market.
He said the Indicator is at an all-time low for the time of year, indicating that the market in England and Wales has downsized by around 75% since the peak in 2007.
He estimates that on current average prices, at the current low rate of turnover, there is £656m of property value flowing through the market per day. This compares to July 2007 when close to £2.5bn moved through the market on a daily basis.
Shephard said: “Rising property values are less significant if sales activity is stagnant or falling. Hence, it is vital not to overlook the pulse of the sales market.
“Translating the daily rates of turnover into money flows helps gain a genuine perspective on the health and wealth of the marketplace. To consider that the flow of wealth at the pre-crisis peak was 277% more than today’s rates is very sobering news for any party involved in the buying and selling of residential property.
“It is not just about cash flows between financial institutions. Lower transaction rates have a very negative impact on local economies.
“Vendors spend money preparing their homes, buyers spend money post-purchase and both sides hire professional services. A U.S. study looking at how much money is injected directly into the economy puts the figure at around 17% of the property value.
“Looking ahead, the real test for each local market is: when will vendors begin to return in significant volume? The answer very much depends on the fortunes of the wider UK economy.”