While all eyes were on the crash of Northern Rock last week, something even scarier was happening. Two of Britain’s many house price indices — there were eight competing in a crowded market last time I counted — reminded us that property prices can fall as well as rise. The Royal Institution of Chartered Surveyors reported that a net balance of 1.8 per cent of its members say house prices fell in August. Then Rightmove, the property website, reported that asking prices in England and Wales had fallen by an average of 2.6 per cent.
If you have just bought a job lot of buy-to-let apartments in Docklands on the never-never, no doubt this is worrying news. But not half so worrying as the figures I have had my eyes on. If you really want an idea of what lies ahead for Britain’s property market, it is auction results that you should watch: in particular the prices being fetched by the growing number of repossessed properties.
Take a look at this: a two-bedroom apartment in a luxury waterfront block in Ipswich, sold in April for £279,950, then repossessed and auctioned in July for just £140,000. Or a flat in a mansion block in Croydon, sold for £185,000 in April 2005 and auctioned as a repossession in July for £132,500. A dozen flats in Colchester, all selling for £100,000 less than the £250,000 paid for them in spring 2006. There are many more of these sales to come: according to the RICS, 45,000 properties are likely to be repossessed next year. Where do they fit in with house price indices produced by the likes of Halifax and Nationwide? They don’t. The main indices are based on mortgage approvals; most auctioned properties, by contrast, sell for cash, so are outside the indices.
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