Building Holmes

By total coincidence I sat opposite a Director of one of the best known internet property portal sites on the train yesterday, and overheard him being interviewed by someone from one of the national newspapers. He reported that whilst property search hits on their site went off a cliff in Sept 08, when the banking system all but collapsed, and continued to decline (as seasonally expected) through to December, this January, activity has increased massively and more than they would seasonally be expected.

He was not willing to say that the property market is about to recover, or that interest automatically translates into sales, but he did state that there are no sales without interest. He also commented that estate agent members are noticing the return of the first time buyer, and that they can still get mortgages.

This bit of news came just a few days after The Bank of England announced a modest increase in mortgage lending for January – the key lifeblood that will prevent the market from flat-lining. This may only represent people remortgaging to take advantage of rate cuts, but it is still an important turning point. Also yesterday, Halifax reported a 1.9% increase in property prices in January, and the Bank of England cut interest rates yet again to a historic low of 1%.

There is a slow but steady tide of good news. The RICS reports increasing confidence from surveyors and estate agents who are reporting growing levels of interest from potential buyers. There is also evidence that the proportion of lots being sold at property auctions – where the market collapsed first back in August 1997, just before the wider markets peak of Autumn 1997, and long before wider activity ground to a halt - is increasing.

I am not suggesting the market is about to recover, but all of the evidence that is coming out now, does, seem to point towards a leveling off in the rate of house price decline. It’s still too early to call, but if you look at the curve tracking the decline in house prices over the past fifteen months, it is flattening out and looks like it will bottom out at –24% (more like 28-29% when adjusted for inflation and this is in line with many of the projections made by economists and other market pundits).

If this turns out to be the case, it will have been a remarkably short and exaggerated property price crash. It took six years for the last crash to bottom out from its peak in 1989 to the low point of July 1995, having fallen 13.2% according to Halifax and 21% according to Nationwide. Prices then rose pretty consistently for twelve years.