So if you want to know what is going to happen next with UK House prices, tap the barometer.
The monthly housing market survey from the Royal Institution of Charted Surveyors or RICS is a good one. Every month RICS asks a number of estate agents if house prices were up or down in the previous month. They then take the percentage number who said up, the percentage number who said down, subtract the latter from the former, and the RICS headline index comes out at the other end.
Very occasionally, the index crosses the axis. It went from positive to negative in August 2007, and stayed there for two years. It is easy to be wise in hindsight, but looking back from our lofty perch in 2013, we can say that that the wise economist in 2007 should have recognised that moment as pointing to real problems ahead – not just for UK house prices, but also for UK plc.
In August 2009, the index went positive, and very soon afterwards all the other housing market surveys defied common sense by showing rising house prices. It didn’t make much sense; after all the UK was in recession, but it was true nonetheless, and the RICS index was the first to signal the change.
Then in July 2012, the index went negative again and has stayed there ever since.
But in recent months, something interesting has been happening. The RICS index has been moving upwards, so that in December, it reached the giddy heights of zero. Yes, that’s right, the same number of surveyors said up as down.
So, the markets drew a deep breath. Those who desperately wanted to see another housing market boom said their prayers. Would the index for January rise by the one percentage point needed to suggest the UK housing market is in recovery mode?
Well, the latest RICS survey was out this week. What did it say?
Hold on, while the envelope is opened. So here goes, cue drum roll…
The RICS headline index for the January housing market survey was…minus 4.
Oh dear – that was a disappointment.
There was another disappointment too. RICS revised its data for December, and said that actually the index did not score zero that month after all; rather it was minus one.
Okay, the readings are not that bad. The long awaited recovery in UK house prices may be close, but it is not happening yet.
As an aside, why is another matter. Sure interest rates are low, but they won’t stay low forever. Growth in average wages is still being outstripped by inflation.
House prices are close to heading north because the great British public are desperate to buy, and first time buyers are desperate to get on the housing ladder. Why they feel like that is another matter entirely.
© Investment & Business News 2013