Here comes the next phase of the UK housing bust
The housing market in Britain seems to be invulnerable. Even the worst post-war recession seen in Britain – with a 6.4% peak-to-trough fall in GDP, even worse than the original estimate of 6.2% – couldn't keep prices down for long. According to The Times, house prices in the UK fell by around 20% from peak (October 2007) to trough (February 2009). Since then, the average price has risen by 15%. That means they've already retraced slightly more than half of the original slump. You can't go wrong with bricks and mortar, as the old saying goes.
Well, we'd reserve judgement on that one. Because it looks like the housing market is having another wobble…
Sellers are returning to the market in droves
We've already seen Halifax report that house prices have fallen for three months in a row. This morning, the latest survey from the Royal Institution of Chartered Surveyors (Rics) is in. And the data for June suggests the price falls will continue. For a start, sellers are coming back to the market in droves. Property prices have been helped over the past year by a slump in the number of people putting their homes on the market. The recent return of sellers is to a great extent down to the scrapping of the Home Information Pack (Hip). But the scrapping of the Hip has put paid to that.
This might seem odd – after all, the cost of a Hip is hardly significant in the grand scheme of property transaction costs. But in fact, it makes perfect sense. The prospect of shelling out several hundred pounds to attempt to sell your home may not have been a big deal when the market was buoyant.
But when you've no idea whether anyone will make an offer you're happy to accept, that few hundred pounds suddenly becomes quite a large hurdle. Particularly as the Hip is only valid for a few months before needing to be done all over again.
Now that people can put their properties back out there to 'test' the market at no cost, they are jumping at the chance. According to Rics, the number of sellers is rising at its fastest rate since May 2007. But the number of buyers is drying up
Meanwhile, the number of queries from buyers fell, for only the…
