November 22, 2005 | posted by Michael Baxter in Uncategorized |

There’s been a fall in the number of unsold properties on estate agent books. From a peak of 73 in May, to a mere 69 this month. And that, says Rightmove, is part of the “most unusual turnaround of the property market in the last 12 months.”

Rightmove says, “Volumes of sales plummeted in the latter part of 2004, leading to the lowest volumes of completed transactions at the start of this year since 1996. This has forced painful realism upon sellers and their estate agents, causing the flat trend in asking prices over the last 7 months. With the economic fundamentals being markedly different from the last crash, buyers and sellers have responded remarkably well to this pricing stability. The result has been the best September month in terms of completed transactions in 17 years. This is not a return to a boom market, but the arrival of the long-awaited ‘‘soft landing’. It is also a reflection of the unseasonably high sales reported by estate agents during the summer months working through to completion.”

In all Rightmove had asking prices rising by 0.8% in November, from a 0.5% rise in October.

As readers of this newsletter will realize by now, we don’t get this ’soft landing’ theory. For decades house prices were carried upwards by their own momentum. The long-term implications of a market which witnesses minimal change for a sustained period of time are completely unknown. Rightmove says the economic fundamentals are markedly different from the last crash. Only time will tell whether the environment of low inflation, low growth, likely rises in tax, and energy prices under pressure, is a good or bad thing for house prices.

In the Sunday Times this weekend, much was made of the fact the UK rate of interest is likely to be lower than the US rate soon, and that the ECB rate too, is likely to move upwards. It was suggested this could lead to a severe crash in the pound. A possibility we have warned of many times. If this was to occur, then it seems likely the Bank of England would be forced into upping rates again - and house prices would be the casualty.

We are not saying house prices will crash - merely that they are vulnerable to changes. And change is a fact of economic life. How anyone can be so confident of a soft landing lasting many years is beyond us.