2009 was a puzzle. The UK economy was in the midst of the deepest recession since the dinosaurs became extinct (or at least since before the author was born, which is much the same thing), and yet the great, long predicted crash in house prices came to a shuddering halt, and then moved into reverse.

Property bears, that is to say those creatures who believe a crash in house prices is as inevitable as four-yearly disasters for the English football team, had their faith tested to its very core. Property bulls, that is to say those creatures who believe rising house prices are as inevitable as four-yearly saturation of the TV schedule with football matches, said: “TOLD YOU SO.”

The truth is, the reasons behind the recovery in the housing market are quite complicated. See: Why did house prices rise in the depths of recession?

But whatever the reasons for the 2009 recovery, evidence out this morning suggests things are changing.

The latest survey from the Royal Institution of Chartered Surveyors (RICS) pointed to the most significant change in the dynamics of demand and supply since the days leading up to the housing crash.

Also in the news today are two separate reports; one predicting anaemia for the UK housing market for the next decade, another providing evidence on why it is that overreaction can often be the biggest factor that lies behind crashes and booms.

Then there’s the ‘big three’ and the Bank of England. The last ten days or so have seen the latest housing surveys from the Halifax, Nationwide, and Hometrack. The picture that emerges from these reports is getting clearer, with growing evidence that house prices are turning down again. And this evidence seems to be supported by the latest data from the Bank of England on mortgage approvals.

RICS points down

Every month RICS asks its surveyors if prices were up or down in their region. It takes the percentage number who said up, deducts from that the percentage number who say down, and out the other end comes its headline index. In June the index stood at plus 9, so it is still positive. But this was the lowest reading since July 2009. In the previous month the index stood at 26, and in the last few months of 2009 was in the low 30s. If the index continues to fall and goes negative, then it will be undeniable that house prices across the land are falling again.

And it does indeed seem likely this headline index will turn negative soon. First off, the RICS index tracking price expectations has turned negative.

But more significantly, the index tracking new instructions (which determines new supply) rose to its highest level since May 2007, with a score of plus 27. The index tracking enquiries (which determines new demand) turned negative, at -5.

RICS also publishes the ratio of sales to stock, which is based on sales over the previous three months to total stock. The ratio fell to 25 per cent, the lowest level since June 2009. To put this in context, in 2008 the ratio was even lower, at one point around 12. But then again, during the boom the ratio rose above 60.

The point is, however, that the indicators are pointing towards falls in this ratio.

So RICS points down; what do the Halifax, Nationwide, Hometrack and Bank of England data say? Click here for the answer (but there is a clue in the heading):

Halifax sees house price fall for third successive month

PwC joins the bears

Meanwhile, PwC has made a prediction to make all bears chomp on their picnic with renewed glee.

The giant firm of accountants reckons there is a 70 per cent chance that the real cost of property in 2015 will be lower than the 2008 level, and that there is a 50 per cent chance that prices will not rise above their previous peak (that’s adjusted for inflation) until 2020.

John Hawksworth, who is in charge of macroeconomics at PwC, said: “Although the average house price overvaluation of around 25 per cent in mid-2007 is down to around 5 per cent-10 per cent despite the rally since March 2009, our analysis suggests that house prices remain vulnerable to setbacks.”

Mind you, not all agree. Earlier in the year, cebr predicted that house prices in 2013 would be 26 per cent up on the 2009 level. See: cebr updated house price forecasts show continued rise – with mortgage rates falling from 4% to 3% within next year

Then there’s the FSA. It may be making things far worse for the housing market. See: FSA wants to end self-certified mortgages

And finally

So, it seems the evidence that the housing market is turning is now becoming pretty overwhelming. We will have to wait another month of course to see whether the new trend continues.

But right now, it appears the chances of falls in house prices later this year and next are very high indeed.

But does it matter?

This is what PwC’s John Hawksworth said: “While it can be argued in theory that house price changes have little effect on overall UK wealth, our econometric analysis suggests that an unanticipated future fall in house prices could have a significant impact in dampening the speed of the recovery in consumer spending in the medium term.”

Of course he is right. The reason why savings were low during the boom was not because we had become a nation of reckless spenders. It was because we had been fooled by rising house prices into thinking we were doing better than we really were.

There is a real danger that if house prices once again go on a downward trajectory we will be fooled again, but this time in the opposite direction; we will save, fearing for the worst, and as a result, aggregate demand will crash and the worst will become more likely to happen.

In part, prices went up because although demand was low, supply was even lower. This column said throughout this period that in such circumstances it would take only a modest change in the key supply and demand variables to have a major effect on price.

The bulls say rising prices are inevitable because the UK’s population is rising and the supply of property is constrained.

But the truth is, there is another factor, always present, pushing up on house prices, and it relates to the faith Brits have in their home as a kind of castle offering security against the savage economic world.

The saying that an Englishman’s home is his castle is just one metaphor illustrating the importance of property in the British psyche. Here is another: ‘The housing ladder’.

You hear the words ‘property ladder’ bandied about so much that people forget that property, just like shares, can go down as well as up. If investment companies started talking about the equity ladder, no doubt the FSA would come down on them like the ton of bricks that should have been used to build a home. But you can’t ban words from popular usage.

The Brits’ obsession with property may have been moulded in the midst of 1970s inflation, when the true cost of mortgages crashed within a few years of taking them out, as the rate of interest lagged wildly below the inflation rate. Or it may have been moulded in the aftermath of the Second World War, when property prices relative to income really were cheap. Or maybe it was a combination: house price inflation in the 1950s and 1960s because prices were cheap to begin with, followed by house price inflation thanks to negative real interest rates.

The bulls say further rises in house prices are inevitable, going by the latest data out this morning predicting the UK’s population would rise to 78 million by 2051, from 59 million in 2001.

The bears argue that house prices cannot stay at current levels indefinitely, because they are simply unaffordable. The bulls say: “What are you talking about, mortgages are affordable because interest rates are low.” The bears say: “What about the principal. It is all very well saying interest rates are low, but you still have to pay back the sum you borrowed in the first place. In any case, interest rates may go up.” Besides, they argue, the market needs first time buyers, and right now, this is an endangered species. The bears have one more argument. They say that in the long run, regardless of the demographics, people will find a way of coping with low supply. For example, it may become more common for house-shares.  People who own large homes may let out some rooms. A couple of years ago we ran a story focusing on this argument see: Housing under-supply myth: house price crash may bring families closer together

Return to House prices: the bears are back

Mortgages:

100,230 mortgages were approved in May, which was 1 per cent down on the month before. The total value of mortgages in the month was worth £11.4bn, 3 per cent up on April. Mortgages approved for house purchases stood at 49.8 thousand, similar to the level seen in the previous month but down on the average over the six-month period to January which was 51,865. Approvals in May were 15 per cent below the November mini peak, and 50 per cent below the 2006 high. Paul Diggle, Property Economist at Capital Economics said: “Whilst lenders remain credit constrained, offering enticing deals to capture new business is difficult, meaning that for now we cannot see a quick end to subdued activity.”

For more see Bank of England release

 What the ‘big three’ surveys say

According to the Nationwide, house prices still rose in June, but by just 0.1 per cent. This followed a rise of 0.5 per cent in May and a 1.1 per cent rise the month before. According to the building society, the annual rate of house price inflation to June was a healthy 8.7 per cent, but over the last six months prices rose by 3 per cent. Martin Gahbauer, Nationwide’s Chief Economist, said: “Looking beyond the short-term, the spending cuts and tax increases in the Budget will clearly put a squeeze on household disposable incomes, which are undoubtedly an important driver of house prices. Given the already elevated level of the house price to earnings ratio, this limits the scope for property values to maintain the very strong upward momentum that we have seen over the last year. However, the acceleration of the fiscal consolidation means that interest rates are likely to be lower than they otherwise would have been, which should provide some offsetting support to households and mortgage affordability.”

According to the Halifax survey, house prices fell by 0.6 per cent in June. It was the third month in a row which saw house prices fall on a monthly basis. The Halifax index now indicates that house prices are 6.3 per cent up on a year ago. Martin Ellis, housing economist at Lloyds (which owns the Halifax) said: “A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year. An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates, however, continues to support housing demand.”

According to Hometrack, house prices rose by 0.1 per cent in June, after seeing rises of 0.2 per cent in each of the two previous months. Hometrack has annual house price inflation running at 2.1 per cent. Richard Donnell, Director of Research, Hometrack said: “Over the last four months the supply of homes for sale has grown three times faster than demand – new supply has grown 15% compared to a 4.9% increase in demand…Looking further ahead, higher interest rates are likely to be the primary catalyst for a material change in market conditions.”

Return to House prices: the bears are back

Back during the boom, mortgage lending was mad. This is not being wise in hindsight, this column said so often enough at the time. Now, as chastened banks overreact and do the precise opposite of what they were doing, the FSA has joined the party.

Have you ever found yourself in the midst of a traffic jam doing about 0.1 miles per hour, only to see signs warning of traffic ahead and to reduce speed: ‘NOW’? Galling, isn’t it.

Well, that’s what the FSA is like. Its incompetence during the boom beggared belief, and now it wants to impose limits on mortgage lending. It wants to see an end to self-certified mortgages, and wants to ensure lenders don’t just take into account whether customers can simply afford the interest on their mortgages, but that they can repay the capital too.

There is a snag. Self-certified mortgages are aimed at people who are self employed.

The FSA, in its exuberance to lock the door long after the housing horse has bolted, may end up making matters worse.

By the way, a similar argument can be made about subprime. Subprime mortgages are a good idea, and should provide an invaluable service to certain people who perhaps have been unlucky in the past. Subprime mortgages never were the problem, rather it was the way they were sold, or mis-sold. Now, thanks to overreaction, subprime mortgages have gone the way of the dodo.

It is called the recency bias, when we are unduly influenced by recent events. So lottery ticket sales rise in a store that had recently sold a winning ticket. Or, after 9/11, travellers drive more and fly less, and as a result there are more fatal car crashes. (This change in mode of travel was responsible for more deaths in the US than occurred as a direct result of the terrorist attacks.)

We are not arguing that reforms to mortgage lending are not required. But can we really trust an organisation whose judgement was so woeful during the boom, not to make matters worse, again?

Return to House prices: the bears are back

The Royal Institution of Chartered Surveyors tracks new enquiries, which determine new demand, and new instructions, which determine new supply. In 2009, new instructions fell and new enquiries rose. Hence we saw rising house prices, even though the volume of transactions was low.

But by the autumn of last year things seemed to change, with the RICS index tracking enquiries falling, and the index tracking instructions rising. Then in January this year, the instruction index rose above the enquiries index, and has stayed above it ever since.

This morning (15 June) the RICS survey for May was published, and the new enquiries index rose from 9 to 10. The new instructions index rose from 11 to 21. (The indices are created from the percentage difference between surveyors who report a rise or fall in enquiries and instructions.) Seventy-three per cent of surveyors said that they expected the decision on HIPs to lead to a higher level of new vendor instructions, with the increase in supply anticipated to be around 15 per cent.

It seems certain that the removal of HIPs and fears over capital gains tax changes are leading to a rush of properties coming on the market. This in turn is likely to mean falls in prices in the months ahead.

Today’s articles:
BP – the bill rises and rises
RICS points to rising supply
Japan – central bank finds the plan that UK needs
Greece and Spain see more angst
World Cup to boost economy

According to the Nationwide, prices were up 0.5 per cent in May on the month before. The annual rate of house price inflation is 10.5 per cent. According to the building society the average house price in May 2010 was just 10 per cent below the 2007 peak.

According to the latest Halifax survey, prices fell 0.4 per cent, and the annual inflation rate is 6.9 per cent. According to the Halifax the average house price in May 2010 was 16 per cent below the 2007 peak.

Commenting on the Halifax figures, Martin Ellis, housing economist at Lloyds said: “The relative recovery in house prices in 2009 was driven by a boost to demand from reduced interest rates combined with a lack of properties for sale. These factors have lost some momentum in recent months. Further falls in the number of people in employment are curbing housing demand whilst the pickup in market conditions last year has encouraged more homeowners to attempt to sell their property.”

The Nationwide chose to focus on the effect of planned changes in capital gains tax. Martin Gahbauer, who is the chief economist at the Building Society, said timing in the tax changes may prove to be key. He said: “If there is a significant time lag between the announcement of the increase and its actual implementation, then some second home owners and buy-to-let landlords may decide to sell in advance of the higher rate being introduced. Such a development could lead the supply-demand balance to shift more in favour of buyers and relieve the current upward pressure on house prices. However, it is difficult to know with any precision how many people would bring forward a decision to sell.”

He went on to talk about the changes in MIRAS implemented in 1988, which you may remember. Before then, it was possible for couples buying a property to both benefit from tax relief – called MIRAS. In March 1988 the chancellor announced plans to remove this tax break , but only for new mortgages. The date the removal was implemented was postponed to August. During the few months between the Budget and August, house prices rocketed and then crashed.

It is possible that the changes in CGT, stamp duty and the removal of the requirement for Home Information Packs, could spark off a rush of properties coming on the market. The monthly survey from the Royal Institution of Chartered Surveyors (RICS) is probably the best report for providing information on the levels of new enquiries and new instructions. The next RICS survey will be out next week, and it will be fascinating to see whether it picks up on material changes in new instructions.

For the latest graphs showing house prices from Halifax, Nationwide and Howetrack from November 2003 to May this year, go to Economic snapshot and select house prices tab.

“With regard to what the short-term impact will be on the housing market and house prices, the key question is around the timing and implementation of any CGT increase. If there is a significant time lag between the announcement of the increase and its actual implementation, then some second home owners and buy-to-let landlords may decide to sell in advance of the higher rate being introduced. Such a development could lead the supply-demand balance to shift more in favour of buyers and relieve the current upward pressure on house prices. However, it is difficult to know with any precision how many people would bring forward a decision to sell.”

Meanwhile, and according to according to the latest figures from the Bank of England on mortgage lending, the volume of mortgages for house purchases rose from 49,000 in March to 49,900 in April. Ed Stansfield, Chief Property Economist at Capital Economics said: “Looking only at new loans for house purchase, at 49,871 the number of new mortgages approved reached a four-month high. Despite their recent rise, however, house purchase approvals remain more than 15% below their November peak, which itself was some 30% to 40% below levels that might be considered normal. Extrapolating from the last two months suggests that it could well take another seven months before November’s high is regained.”

It looked at all the economies in the OECD, but in this article we are just looking at the UK, US, Japan, Germany, France and Spain. Japan makes a fascinating read because it shows us what could happen. Data on the US yields a surprising conclusion. As for Germany, well, it tells us something we already knew, but it’s good to see some numbers behind the talk. As for the UK and Spain, well, oh dear.

Alas, the OECD data only goes back to 1992, which is a shame because Japan’s woes began before that. But in 1992, the average price of Japanese property relative to rent was 128, and relative to income 110. Every year since, without one single exception, has seen both ratios fall on the previous year. In 2009, the ratio of price to rent was 66.9, and price to income was 66. (Figures are based on a long-term average of 100).

Just remember the classic reasons used to justify high house prices in the UK: land is short and the density of the population is high; Britain is an island, therefore house prices will always go up. It is odd though, because when the author of this article did geography at school he was told that Japan was an island (or several if you want to be more precise), and the population even more dense.

As for the US, right now the ratio of price to income in 2009 was 97, compared to an average since 1992 of 94, and a period high of 107. Now there are several interesting things here. First of all, note that the current price is only marginally above the average. Secondly, see how the scores are quite low. To put this in context, at peak the average ratio of price to income in the UK was 150. It is odd, however. Despite the fact that US house prices are not especially high in historical terms, it is generally agreed that they are likely to fall quite rapidly this year. In fact, the latest Case-Shiller reports have been showing declines for several months now, and with the stock of unsold houses so high, if US prices don’t continue to fall it would be about as big a surprise as the US winning the World Cup.

What’s interesting about Germany is how boring the data is. From 1992 to 2009, the ratio of price to income peaked at 92, and currently stands at its lowest point so far of 64. So, in Germany, prices have always been cheap, and right now are cheaper than ever. (It’s funny how savings are high in countries where house prices are low, isn’t it. It’s just a coincidence, of course, as economists kept telling us during the noughties that house prices don’t really affect the mix between consumption and savings. Click on this article to read what we really think about that .)

In Italy the latest ratio of price to income to income is 107, compared to a series average of 98.

But it is in the UK, France and Spain where we see the real fireworks. In these countries the series average for price to income is 105, 82, and 118 respectively. The highest scores between 1992 and 2009 are 150, 138 and 157 respectively. The latest reading, following the same order as above, is 126, 124 and 136.

In other words, house prices in the UK, France and Spain relative to income are still very high.

But before we leave this topic, there is one more gem lurking within the data. Let’s take the UK. At one point the average price to rent ratio was just 78. During the peak of the boom it was 165, last year 135.

Now you can argue that house prices should be high because of the shortage of supply. But if that was the case, rent should be high too. Why is it, then, that the ratio is now so much higher than at the low point? Surely if lack of supply was the real driver of high house prices, then the ratio of price to rent should be unaffected.

For more on house prices and our view on the arguments for and against further rises/crash, see House prices: digging beneath the foundations

All in all April was a good month for those hoping to see rises in house prices.

According to the Nationwide, average prices rose 1 per cent, with the annual rate moving up to 10 per cent. Martin Gahbauer, Nationwide’s Chief Economist, said: “The strong rebound in house prices over the last year has taken place within the context of a subdued mortgage market, with the number of mortgage advances across the industry still well down on pre crisis ‘norms’… the more important driver of rising house prices has been the low level of stock for sale, as many homeowners and buy-to-let landlords continue to wait for prices to recover to peak 2007 levels before deciding to sell up or move.”

According to Hometrack, prices were up 0.3 per cent, and said: “The housing market recovery of the last 12 months has been built on a scarcity of housing for sale. During the whole of 2009 the stock of housing for sale increased by just 7% – this in contrast to the first 2 months of 2010 when the supply of homes for sale increased by 10.2%. Over March the growth in the number of homes coming to the market exceeded new buyers registering with agents.”

As for the Halifax, it reported a modest 0.1 per cent drop, but a rise in the annual rate to 6.6 per cent. It said: “The improvement in house prices since spring 2009 has encouraged more people to try to sell their property. New sales instructions have risen, helping to push up the stock of unsold properties in recent months. As a result, the imbalance between supply and demand is easing somewhat. Our view is that house prices will be flat during 2010 as a whole.”

The Bank of England’s latest mortgage data, this time for March, reported that mortgage approvals for house purchases were up 4.3 per cent, after falling in the three previous months.  However, approvals remain very low, and around 90 per cent down on the 2007 peak.

And that brings us to the Royal Institution of Chartered Surveyors. As you know, this column is a fan of this monthly survey. Its headline index, produced by asking surveyors if prices were up or down in their region, and taking the percentage number who said down, from the percentage number who said up, has shown itself to be an excellent barometer of the market. But also within the RICS survey is data on the number of new enquiries, which is an indicator of changing demand, and is a force pushing up on prices; and the number of new instructions, an indicator of supply, pulling down on prices.

The headline RICS index saw a big jump in April, up from 9, which was a seven-month low, to 17. Actually, 17 is not an especially high score, and is indicative of modest growth in prices, but it’s the jump that is the most significant aspect of this.

But supposing we look beneath the surface, and see what is going on with the forces that influence demand and supply. For some time now there have been signs that forces have been upping supply and pulling down on demand, with the RICS index tracking enquiries falling into steady decline since last year’s summer. Meanwhile, the index following new instructions has been rising, from minus 21 last May, to plus 21 last month.

It seems, however, that in April the trend stopped. The enquiries index rose sharply from zero to plus 8, while the index for new instructions fell from 21 to 11.

Now, one month’s worth of data does not indicate a trend. As ever with these things we will have to wait another month to see if this was a one-off blip or a change in direction.

What is clear is that things are not clear. There is evidence pointing to both falls and rises.

Recently, the Centre for Economics and Business Research suggested we are set to see strong rises in house prices over the next couple of years.

We suspect that what we are really seeing is evidence of how few people understand the seriousness of the economic dangers we face. Maybe there is one thing the three main political parties did manage to achieve in the election mania, and that was to successfully fool the electorate into a false sense of confidence. Let’s hope we are wrong, and the political parties were not misleading us at all, but that rather they were smack on.

Of course, central banks want to drive up asset prices. They are hoping that quantitative easing (QE) will lead to a rise in consumer borrowing pushing up demand. But they have also said that if this does not work, then they are hoping that QE will lead to higher asset prices, which will then lead to higher demand. But this seems to be a dangerous strategy, and could even backfire into central banks blowing up bubbles. To an extent, it does feel that we are in danger of seeing the same errors which led to the credit crunch in the first place. Globally we would agree that the underlying problem is lack of demand, but for the UK, US and certain other economies, the problem is still quite different. QE may be the right policy, but is being administered by the wrong banks.

The most interesting of the reports is the one out this morning from RICS. This is the one whose headline index seems to be something of a barometer for the market. But RICS also publishes data that peeks a little deeper into the market, and among other things reveals information on the number of new enquiries from potential buyers and new instructions from would-be sellers. It is this dynamic, instructions versus enquiries, that surely determines prices several months down the line.

So, what did all this data tell us?

First out of the blocks was the Bank of England, revealing its latest figures on mortgage approvals for house purchases. For February, they were down. Actually, the fall was only modest, dropping from 48,000 to 47,000, but more to the point the month before saw a much bigger fall, dropping from 58,000. The average number of monthly approvals over the last six months was 55,000, so clearly both January and February were well below this.

Next away was Hometrack. It recorded a 0.3 per cent rise in average house prices in March, and an annual rise of 1.3 per cent. It put emphasis on the relationship between buyers and sellers, saying: “The housing market recovery of the last 12 months has been built on a scarcity of housing for sale. During the whole of 2009 the stock of housing for sale increased by just 7 per cent – this in contrast to the first 2 months of 2010 when the supply of homes for sale increased by 10.2 per cent. Over March the growth in the number of homes coming to the market exceeded new buyers registering with agents.”

But then added: “The increase in supply is not some precursor to the re-emergence of a buyers’ market. Instead it represents a rebuilding of the depleted stock of housing for sale which many agents faced at the start of the year. Over the last six months of 2009 the supply of homes for sale grew by just 1 per cent while sales volumes grew by 20 per cent…Rather we’re seeing a return to normal market conditions and overall we’re moving from a sellers’ market back towards something more akin to normal conditions with supply and demand broadly in balance.”

The Nationwide had prices rising in March, up 0.7 per cent, after falling 0.8 per cent the month before. It has house prices rising by 9 per cent over the year to March. Martin Gahbauer, Nationwide’s Chief Economist, said: “The last two months are consistent with a relatively flat profile for house prices, and in line with the recent drops seen in buyer enquiries and house sales.”

Then there’s the Halifax index. This recorded a 1.1 per cent rise, after a nasty 1.6 per cent drop the month before. It has prices up 5.2 per cent over the last 12 months. Martin Ellis, Housing Economist at Lloyds (the Halifax parent company) said: “There are signs that an increase in the number of properties available for sale is beginning to reduce the imbalance between supply and demand. This should help to contain the upward pressure on house prices.”

All three of the surveys referred to above made much of the recent changes to stamp duty, with the Halifax, for example, saying: “The temporary increase in the lowest stamp duty threshold announced in last month’s Budget will mean that most first-time buyers do not pay the tax. At £250,000, more than nine in ten first-time buyers would have been exempt from paying stamp duty in 2009 compared with just over one in two if the lowest threshold had been £125,000. The southern regions of England will benefit most. Around three-quarters of first-time buyers in Greater London and the South East will be removed from the stamp duty tax net as a result of increasing the threshold from £125,000 to £250,000.”

Then this morning we have the latest RICS survey. Its headline index, the one produced by asking surveyors if prices were up or down and taking the percentage number who said down from the percentage number who said up, fell from plus 18 to plus 9. It is still positive, meaning more surveyors recorded rises than falls, but the index has fallen sharply in recent months, dropping from 35 in November, to 30 in December, 31 in January, 18 in February and now 9 for March.

But the more significant finding from RICS relates to the relationship between new instructions and enquiries. The index tracking enquiries fell to zero, meaning surveyors were split on whether the enquiries were up or down. But the index tracking new instructions jumped from plus 16 to plus 21. It was the third month in a row in which the new instructions index exceeded the new enquiries index.

But the most interesting analysis from these reports comes from comparing the differences between the enquiries and the instructions indices. Back in March last year, the index tracking enquiries stood at 49, and instructions at minus 21, throwing up a difference of 70. This pointed to rises ahead. And sure enough, just as day follows night, house prices rose rapidly according to the indices published by the Halifax and Nationwide over the next few months.

But from that point on the different between the two indices began to fall, eventually falling to plus 3 in December, minus 15 in January, minus 9 in February and then minus 21 for March.

For several months now, it has been said here that if the trend continues, and the enquiries index continues to fall while the instructions index continues to rise, then the market will see price falls in the months ahead. But we have got beyond that now. We are no longer talking about trends continuing. Even if the two indices stay unchanged, it is clear that forces are now beginning to drag down on house prices.

The Halifax and Co. may talk about containing upward pressure, but actually it seems far more likely that pressure is pushing in the other direction altogether and we are in for a period of falling house prices, now, probably starting towards the end of spring.

And frankly, this is how it should be. The economy is still very fragile, taxes are sure to rise, job losses in the public sector are inevitable. Given these underlying conditions, last year’s rises in house prices felt almost perverse.