A house price crash is notoriously difficult to predict. At the time, we all merrily carry on buying and selling, oblivious to the fact that disaster is lurking just around the corner. It's only after the fact that we can see the glaring signs that change was coming.
The signs are there, however, if you look closely, and should be ringing alarm bells for us all.
1. Prices are massively inflated
House prices have reached a record of 7.6 times earnings, which has pushed them out of reach of a huge number of buyers. In some parts of the country, they have hit more than ten times average earnings, and there comes a time when there's nobody left who can afford to buy.
2. Sellers are cutting their asking prices
A third of properties on the market at the moment are discounted by an average of £25,000. This is an indication of two things - neither of them good. Either sellers were too optimistic and prices are not rising as fast or as far as they expected. Alternatively, they were fairly priced, and the market price of a home is dropping through the floor.
3. Prices are actually falling
Prices have fallen over the past month, and the past three months. There's an argument that things always slow up before a general election, but it's hardly a great sign.
In the pricier parts of London, the falls are even more marked. Prices here peaked some time ago, and in many cases have dropped significantly since.
4. People are avoiding putting their home on the market
The property market is driven by sentiment: when people are confident and enthusiastic about future price rises they will buy and sell - and when they are worried and uncertain they stay well away. Typically each surveyor tends to see 60 properties on sale per month - last month it was less than 44. With fewer and fewer properties for sale, there's a risk the market will stagnate.
5. Buyers are drying up
The number of buyers registering with estate agents is falling too. In March, the number of buyers per branch dropped to 397 - down from 425 in February. It means that despite the fact that there are very few homes for sale - sellers are still struggling.
6. Homes are spending longer on the market
In London in particular, homes are struggling to sell. A detached home in London will spend an average of 196 days on the market before it sells - that's 37 days more than in February of last year. There are still some corners of the country where properties are selling faster, but there's a risk that as buyers dry up, the market could stagnate nationwide.
7. Sentiment has got worse
We are naturally inclined to feel confident in the value of our own home, but our confidence in property values has taken a big hit in the past couple of years. Currently 58% expect the average property price to rise in the next 12 months - compared to 72% who were anticipating rises this time two years ago. Among those expecting rises, there has also been a marked increase in those expecting rises to be modest.
Of course, the housing market is not a simple thing to predict: it's more of an art than a science. The signs are worrying, and we could see lack of affordability and declining sentiment push the market down. However, on the flip side, we could see it protected by lack of supply and low interest rates.
But what do you think? Are you braced for falls, or do you have full confidence the market can come out of this unscathed? Let us know in the comments.
10 things that add value to homes in an area
10 things that add value to homes in an area
A view out over the park isn’t just a nice bonus, it’s a valuable asset. A study by Marsh & Parsons has found that a park view can add up to 10% to a property's asking price.
It carried out its research in London, where it found that a view over Warwick Square in Pimlico added £75,000 to the asking price of a one-bedroom apartment.
Understandably, this is largely a London phenomenon, where the vast majority of train-based commuting takes place in the UK.
The Nationwide Building Society found that being 500m from a station would add 10.5% to the value of a property in London. In Manchester it fetched a 4.6% premium and in Glasgow 6%.
The researchers found that the closer the property was, the higher the premium would be - until the proximity of the station started having an impact on the area itself.
Having a Tesco, Sainsburys, Waitrose, Marks and Spencer or the Co-operative within striking difference, will add value to your property. In fact, a survey by Lloyds claimed that it would add 7% - or just over £15,000.
However, apparently what we all really want is a Waitrose, because the same study found that having a branch nearby added almost £39,000 - or 12% to the value of the property.
The way the survey was carried out, however, doesn't make it clear whether this is a reflection of the attraction of the supermarket itself, or whether the supermarkets tend to target affluent areas with expensive houses.
People will pay 12% more to live in a market town than they will for the same property in the surrounding countryside. The findings come from Lloyds Bank, which claimed the towns offered a balance between country life and community spirit that proved irresistible to buyers.
It added that in some market towns the mark-up was even larger, with Beaconsfield in the South East attracting a 156% premium over the surrounding area.
A study by the London School of Economics found that living in a conservation area adds 23% to the value of your home. Given that this was an academic study, the researchers went even further and adjusted the results based on the kinds of properties in the area, and other aspects of the location (which none of the other studies took into consideration), and it still found an uplift of 9%.
Being near a good school will add 28% to the value of your home - according to Savills - with parents calculating that it’s cheaper to move into the catchment area of a good school and pay anything up to £100,000 more for their property than fork out for years of extortionate private education.
A study a few years ago by Zoopla discovered that living on a road with ‘Hill’ or ‘Lane’ in its name meant your property was likely to be 50% more valuable than the national average.
Those with ‘Mews’, ‘Park’ and 'Green’ in their names were also more valuable.
It’s unlikely that there’s any element of cause and effect here: instead they are by-products of the same thing. Expensive houses have always been built in the more exclusive parts of town, including the hills and the quiet ‘lanes’ around those hills.
A survey by Primelocation claimed that being near a top golf course would add 56% to the value of your property. It added that prices were also rising faster near golf courses than elsewhere in the country.
Of course, there’s a chance that the results were impacted by the fact that many of the courses are in leafy and exclusive areas, where people pay a premium to live regardless of the course.
You’d have thought the threat of flooding would make people take to the hills, but it appears we’re still happy to pay a premium to be beside the sea.
The Knight Frank Waterfront Index found that overlooking an estuary adds an average of 85% to the price of a property, a harbour adds 83%, while the coastline in general adds 56% to the value of the property. If you have a mooring, that’s even better, as it adds 104% to the value of your home.
Despite all the bad press surrounding flood plains and rivers breaking their banks, being near a river is actually more valuable than being by the sea.
The Knight Frank Waterside Index claims it adds 57% to the value of your property - making it the most valuable asset to have in the neighbourhood.