Here was my prediction for 2008:
"The UK Housing Market will slow much faster than most economists are predicting and the overall rate might touch 20% by the year end. Those viewing the market are not factoring in the role of psychology enough into the falling market. My friends who are estate agents reckon they will all have closed within 3 months - so things are looking pretty bleak."
Well, good as my predictive capacities are, this seems like good foresight to me. If only
I had been able to persuade the missus to sell last year...
In any event the news today is that estate agents are selling one house a week. If we assume this is an average house of £175k with an average 1.5% commission, then agents have a weekly income of £2650. This has to cover staff wages, advertising, bills, taxes, transport etc. Not may businesses are going to make it on £10.5k a month turnover - what profit could be taken out of that annually for the owner?
This demonstrates two things, firstly, there needs to be more retrenchment in this sector as it is over-supplied for the current environment. Secondly, that with such low volume prices may well be hit by a sudden adjustment downwards that will be catalyst for demand. Similar to the 'capitulation' in stock markets.
A key knock-on for this is to the retail property market, already flooded and struggling. Perhaps even a chance for more aggressive retailers to expand and lock-in low rents?
For what its worth, the 20% ish fall we have this year I can see being followed by a 10-15% fall next year until prices flatten out. The market really needs the repossesions to be brought to market to cause the capitulation event. That or Alistair Darling can wave his magic wand this week and make more trouble for us all in the long-term.....