June 24, 2008 | posted by Michael Baxter in House prices |

Donald Trump says it won’t happen.  Lakshmi Mittal may not care.  But the latest figures from Rightmove suggest house prices have got a long way to fall yet.

You know the story of the UK housing market has come down to which will fall the most, demand or supply.

Demand is falling over the edge of a cliff.  But so is supply, which was in any case pretty low anyway.  So which will win out?

Donald Trump is in the UK at the moment.  He is, of course, the United State’s answer to Sir Alan Sugar – he is the one who does the hiring and firing on the US Apprentice programme.  He has said the UK wil not experience a US-style house price crash because of a shortage of supply in the UK.

He reckons the credit crunch will come to an end in about a year’s time, and then buoyancy will return to the UK market.

Meanwhile, Lakshmi Mittal, who is worth even more billions than Trump, has bought himself his third property in one street.  And the money he forked out?  Well, reports suggest he parted with £70 million. Mind you, the street is called Kensington Palace Gardens, and the normal laws of supply and demand don’t seem to apply there.

According to the Evening Standard, the house even needs modernisation.

But then again, it appears he wants the house for personal use; this is not an investment portfolio he is building. And if he was looking at the property as an investment, we would have some advice for the richest man on these shores: “stick with steel.”

And for that matter, we would like to humbly suggest Mr Trump has misread the signals this time.

According to the latest housing survey from Rightmove, the number of properties for sale has now breached the one-million mark, contributing to a ratio of 15 properties for sale for every successful buyer. Last year, the average was 7:1.   But, more to the point, average unsold stock per estate agency branch continues to rise to new record levels, to 75 homes per branch from 73 in the previous month. “Not only is this the highest ever in June,” says Rightmove, “it is the highest figure Rightmove has ever recorded.”

Inventory is the key.  In the US there are signs that sales are outstripping new supply, that’s houses coming on to the market.  But inventory levels are so huge it probably won’t be until well into next year, that inventory levels fall to a manageable level and prices stop falling.

But in the UK, there are no signs yet of inventory falling.  According to the British Banking Association, just 28,000 mortgages for house purchases were approved in May.     That was 20 per cent down on last month and 56 per cent down on a year ago. 

If the fall in house prices stops any time soon, it will be a miracle.