Slight rise in house prices

Don Frame

January 19, 2009

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HOUSE prices in Manchester have risen slightly over the past month and the New Year has seen a surge in interest from buyers.

But property website Rightmove cautions that while there is some evidence of an improvement, restricted lending and continuing economic woes mean that a `bump along the bottom' will continue into 2010.

Commercial director Miles Shipside warns that policy makers need to stimulate the market by increasing mortgage lending quickly.

The number of new properties appearing on the market has more than halved from 89,110 in January last year, to 43,416 this year and the situation is being made worse by a crisis in the building industry, with 1,000 fewer new developments being marketed.

Mr Shipside said: "The speed with which prices have declined has been worrying, but it does mean we are potentially reaching the bottom sooner. The reticence of discretionary sellers to come to market, and the relatively low number of forced sellers, have seen new listing numbers plummet. Would-be buyers are hoping that 2009 could be the year of the property deal."

He said Rightmove has seen double the number of inquiries sent to estate agents compared with the same period last year.

Rightmove's house price index shows that average prices in Greater Manchester have dropped by 8.4 per cent from £164,303 last January to their current level of £150, 525.

Some areas fared far worse than others. In Altrincham, the average house price dropped by 8pc in 12 months from £354,576-£326,330, and in Manchester prices dropped by 9pc from an average £156,344-£142,314. Oldham saw the worst fall - an 18.3pc drop from £142,616-£116,544 and in Bolton the figure dropped by 14.6pc from £148,426-£126,813. Prices in Salford dropped by 12.9pc over the year from £140,293-£122,228; in Wigan by 12pc from £137.675-£121,096; in Bury by 8.2pc from £172,282-£158,143, and in Stockport by 5.8pc from £213,882-£201,463.

But over the past month the average property price in Greater Manchester has risen by 1.3 pc and in Manchester itself by 2.7pc. Prices in Cheshire dropped by 10.2pc over the 12 months, from £206,113-£185,022, and in Lancashire by 10.8pc from £162,756-£145,171.

Across the north west, property prices dropped by 11.4pc over the year, from £174,958-£155,086, and across the country as a whole they dropped by 7.3pc from £230,428-£213,570.

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Voice of Sanity (19/01/2009 at 06:33)

Until they remove the requirement for HIPS house prices will not recover.

Jay B, oldham (19/01/2009 at 11:03)

this is just a blip.

estate agaents have been slowy rising the prices to get the maximum amount of commision of their sales.

the banks would lend silly amounts of money so people could afford these silly over inflated prices!

and now the money has dried up!
its gone! its all tied up in houses!
where in this mess because of the banks and estate agents! its their fault.

now they're going bust because of their greed!

i have no sympathy for them!

Black Flag (19/01/2009 at 12:44)

Jay B: "estate agaents have been slowy rising the prices to get the maximum amount of commision of their sales."

No, the prices were going up because the people selling houses wanted to get the highest price they could.

Estate agents aren't in a position to force people to pay more than they are prepared to.

NorthernGeezer, Manchester (19/01/2009 at 13:23)

News from the frontline..............it aint happening!!!!. 3 bedroom house for sale on the outskirts of Manchester for £115K, no offers. Yet again i've had to reduce my asking price to garner some interest, thats a 20% reduction in 4 months. The lack of interest is staggering. Just where do these guys get there figures from??

Jay B, oldham (19/01/2009 at 15:25)

ah black flag you return to try and argue this case!

you're always a million miles off with it though.

the estate agents values the property! you can get as many values as possible.

then its up to the vendor which price he goes with.

but who came up with the value in the first place??

it wasnt the vendor was it??

Black Flag (19/01/2009 at 15:39)

Jay B, I'll try to explain this in as simple a way as I can for you.

The estate agent values the property based on what he thinks somebody will pay for it. The estate agent can't force a buyer to pay more than they are willing to.

For example, an estate agent could value a two bed terrace in Manchester at £15million pounds, but it would be meaningless, as nobody would pay that amount. Valuations are based on what market evidence says people are prepared to pay.

An estate agent is exactly that - an agent. He works on behalf of the vendor to find potential buyers who are prepared to pay a price that the vendor is happy with. The price is a matter for agreement between buyer and seller. The estate agent is just a go between.

I hope that's easy enough for you to understand.

andanotherthing, Mcr (19/01/2009 at 16:11)

House prices were going up by 10 and 20% within months. Houses are still massively over valued as a result. Those that bought just for profit and those that bought to keep ahead of the Jones are just going to have to face it.
The market is falling, you are going to either take a loss or stay put.

Jay B, oldham (20/01/2009 at 08:47)

sorry black flag my reply oesnt seem to have been posted again!

yes you say its the vendors fault but who puts the idea in their head of how much its worth?

the estate agents who come round and value the place.

if you had three separate valuations put infront of you thats someone influencing your decision!

yes ultimatly the vendor can choose which one to go for but the idea of it being worth more is the person valuing the property! namely the estate agent.

then the banks are at fault for upping the amount they would lend people to make up these constant increases that have been happening.

well i dont care anyway! what goes up must come down!!

Black Flag (20/01/2009 at 10:44)

Jay B: "yes you say its the vendors fault but who puts the idea in their head of how much its worth? the estate agents who come round and value the place."

And who puts the idea of how much its worth into the estate agents head? Buyers who have bought similar houses in similar areas. The valuation that the estate agent comes up with is broadly irrelevant - the only thing that matters is what a buyer is prepared to pay. There's no point in an estate agent giving a massively over the top valuation, because nobody will pay it, so there would be no sale and no commission.

If you were to look at the way estate agents are operating at the minute, I expect you'll see the opposite of what you suggest. They will generally be encouraging vendors to reduce their asking prices in order to increase the chances of a sale.

Jay B, oldham (20/01/2009 at 16:06)

3 estate agents shut down near me that didnt change their ideas is a prime example of who's to blame!
i even know one of them and they admit they where greedy and that the bubble burst!

they didnt move with the times. they are the ones who the vendors look to for advice on how much its worth!

you ideas on economics and business are all based on textbook and not real life!

citycentre, manchester (20/01/2009 at 16:24)

An estate agent is being paid by a seller to find a buyer for their house; if they failed to gain the best price the market would offer, within the time period a seller is prepared to wait, they would probably be negligent.

i would think estate agents closing is moreto do with low volume of sales rather than falling prices; after all they are still at levels that supported the agents a couple of years ago

Black Flag (20/01/2009 at 16:41)

Jay B: "you ideas on economics and business are all based on textbook and not real life"

No, they are based on looking at the evidence and using intelligence and reason to assess it, rather than jumping to a conclusion based on a knee-jerk reaction, picking out the best scapegoat and then blaming them no matter how nonsensical the argument that is need to do it.

Look at your statement about estate agents closing because they were setting prices too high. That seems to show that they don't have the power to force up prices to whatever level they feel like, so you've completely disproved your own theory!

Jay B, oldham (21/01/2009 at 08:56)

no if you look at it again you will also see that they didnt move with the times!

they where constantly hiking the prices up.

when the markets changed they didnt.

they fell foul of their greed!

another fine example of how well off the estate agents had been doing is look at what most of them drive!

you dont see them in your normal everyday sort of car. always seems to be a little flash really!

Black Flag (21/01/2009 at 09:25)

Jay B: "when the markets changed they didnt."

So now you are acknowledging that prices are determined by the market, which is correct. Estate agents don't control prices, they just respond to what the market is saying. That is at odds with your first statement:

"estate agaents have been slowy rising the prices to get the maximum amount of commision of their sales."

Do you see the contradiction? On one hand you are saying that estate agents control the market and are able to increase prices, but on the other hand, your are saying that estate agents are at the mercy of the market and have to respond to it.

Jay B, oldham (21/01/2009 at 11:08)

the big thing here is the money ran out! thats what caused the change in the market!

so if estate agents dont influence the vendors to hike up the prices then what on earth do they do?

stop making excuses for them!

Black Flag (21/01/2009 at 11:37)

Jay B: "the big thing here is the money ran out! thats what caused the change in the market!"

Exactly! It is the availability of credit and the willingness of buyers to take on debt that determines house prices, not estate agents.

"so if estate agents dont influence the vendors to hike up the prices then what on earth do they do?"

In the real world, vendors don't need any encouragement to increase prices. If I were selling a house, I'd want to get as much as I could for it.

The job of an estate agent is to give me an idea of how much buyers are prepared to pay and then go out and find the buyer who is prepared to give me the best deal. Estate agents can't magically produce buyers out of thin air. It is buyers who decide how much a house is worth to them. The estate agent is a go-between.

If anything, once you've got a house on the market, the estate agent has an incentive to encourage you to accept a lower price, because the benefit of getting a quick, easy sale outweighs the benefit of getting a slightly higher commission.

Jay B, oldham (21/01/2009 at 15:53)

but ultimately if its started from scratch the person setting the value of the property is the estate agent.

for example new build properties. they dont have anything to go off other than the area.

Black Flag (21/01/2009 at 16:48)

Jay B: "but ultimately if its started from scratch the person setting the value of the property is the estate agent. for example new build properties. they dont have anything to go off other than the area."

They go off what other houses in the area are selling for and the premium that a new house might attract. They can put them on the market at whatever price they like, but if they put a 2 bed semi in Manchester on the market for £5million, do you think they would sell it? Of course they wouldn't! You seem to have the impression that estate agents can pick a price out of thin air and then force somebody to pay it. It doesn't work that way.

In any case, a lot of the time, estate agents don't sell new houses, the developer sells them directly.

Jay B, oldham (22/01/2009 at 14:25)

now you're just being silly!

these increases in prices are gradual not massive jumps.

but then how do you explain a house which was on the market 5 years ago for £50000 which today is worth £180000 and yet no work has been done to it at all? who influenced the markets to make that happen?

Black Flag (22/01/2009 at 15:48)

Jay B: "but then how do you explain a house which was on the market 5 years ago for £50000 which today is worth £180000 and yet no work has been done to it at all? who influenced the markets to make that happen?"

It would take pages to go into the full detail, but it is the land under the house (and the planning permission on it) that increases in value, not the house itself. Houses actually decrease in value over time.

Land is in fixed supply, so where the laws of supply and demand would normally say that an increase in demand will create an increase in supply, increasing demand for housing will just drive up land prices. As incomes increased, people who were looking to buy houses had more money available to do it with, so prices increased.

That upward spiral made land (under houses) look like a safe bet, so people started increasingly putting their money into houses, especially buy-to-let, which just pushed prices up further.

The banks saw the increase in prices and decided that it made higher levels of mortgage lending a reasonable move, as increasing house prices would provide sufficient security in the event of a repossession. The extra credit available for house buying pushed prices up even further.

First time buyers, seeing the opportunity to get a foot on ladder disappearing, started taking on large levels of debt to avoid missing out. That extra money flooding into the market pushed prices up even further.

The government, seeing that some people were unable to buy a home, started offering assistance, such as shared equity, which just pushed the prices up even more.

The problem with that kind of debt driven bubble is that it's like a pyramid scheme. People can't keep taking on extra debt indefinitely to keep the price increases going, so at some point the scheme collapses, which is where we are now.

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