Saturday, May 14, 2005

UK Property Sales Slowing

In Newbury, England, the slowdown has started. "Click Newbury estimates that the total commissions earned by the town's estate agents slumped by 44% compared with the first quarter of 2004. The number of properties sold in the RG14 postcode was 117, with a total value of £26.8m. Whereas, in the first three months of 2004, 228 properties were sold, with a total value of £47.3m."

Like many other markets, the mania persists even as the psychology breaks down. "This slump in commissions is entirely due to a drop in the volume of transactions. The average price of those properties sold has actually risen from £207,352 in the first three months of 2004 to £229,746 in the first quarter of 2005."

4 Comments:

At 12:35 PM, Anonymous Anonymous said...

when the dot.com bubble started to burst, basically every mutual fund investor fled with their money into cisco and juniper and the other "blue chip" tech stocks..

the reasoning being that those quality companies could never actually see a drop in their share prices.

so while the entire market was sinking, those few stocks were actually RISING. and since they were so heavily weighted, it made the market appear to not be as bad.

and then, of course, once everyone was in those three stocks, the bottom fell out.

this is how the housing market is. the number of sales is drying up, but the prices for a few remaining sales keeps going up. everyone is squeezing into fewer and fewer transactions.

eventually the bottom will fall out.

 
At 2:12 PM, Anonymous Frank said...

Ben,

The Economist has two housing interesting articles in yesterday's edition concerning the UK market. They are for subscribers only so can't be logged to the web.

One is about Nottingham and how the redevelopment of formerly blighted inner cities could be the start of the property crash.

"Lace Market Properties, which has created about 1,000 flats in Nottingham, can hardly build new ones quickly enough to meet the demand. But few are selling to the young professionals and divorcees who were expected to be clamouring for them. Instead, the boom has been sustained by property syndicates and investors, many of whom reside in Ireland and South Africa. They now buy more than seven out of every ten new properties—up from perhaps two in ten in the late 1990s, according to Tony Pinks, the company's sales director."

The second article concerns the slowdown in the UK retail sector:

"Still, some shops will do better than others. Observers had wondered whether the historic link between house prices and retail spending had been broken. A recent survey from Experian, a forecasting group, suggests that the link is as strong as ever. It showed that shops in the north of England, where house prices are still rising, were doing much better than their southern counterparts, where prices are flat."

 
At 2:19 PM, Anonymous Anonymous said...

"the number of sales is drying up, but the prices for a few remaining sales keeps going up. everyone is squeezing into fewer and fewer transactions."

This is a good observation. My take on it is that sellers are very slow to come to the realization of the new (and much lower) price point, although buyers recognize it right away. Therefore, sellers will simply sit on their properties if they can't get what they think is a "fair" price. This results in lower sales volume overall, but higher prices for the few remaining transactions as you have pointed out. It's mostly psychology at work.

Another angle is that sellers may believe that they can't get what they "need" in order to trade up or change houses in a bloated market and therefore decide not to sell, thus lowering inventory. We've been seeing this in Sacramento for the last few years.

In any event, lower sales volume invariably leads to lower prices and if I'm interpreting the latest numbers correctly, it looks like a serious volume slowdown is already in the works for the Bay Area:

http://www.dqnews.com/ZIPSJMN.shtm

 
At 2:44 PM, Anonymous Ghostwriter said...

This story sounds familiar to those of us who reside in San Diego ...

http://www.signonsandiego.com/
news/business/
20050513-9999-1b13housing.html#

If you can't read the link, google

County housing market decelerates

My guess is that recent San Diego home buyers will soon be feeling the pinch.

 

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