Global property prices: why sellers are still asking too much

The worldwide impact of the property crash is far from uniform, according to a global survey of house prices over the past year.
The latest Global House Price Index from agents Knight Frank (KF) dents the idea that all nations are suffering equally at the mercy of global recession.

Covering 46 countries, it found home prices rising or falling within a margin of five per cent in 25 of them.

The KF table reveals strong house-price rises over the past year in Israel (up 10.9 per cent), Czech Republic (9.9 per cent), the British Channel island of Jersey (6.9 per cent) and Switzerland (5.6 per cent).

Prices in India climbed by 5.1 per cent, with Austria (4.1 per cent), Russia (3.6 per cent) and Belgium (2.7 per cent) all performing creditably last year.

By contrast, the biggest drops were in Latvia (36 per cent), Singapore (23.8 per cent) and the USA (16.5 per cent). The UK was the fifth-heaviest house price faller, down 16.5 per cent over the year, and by 4.5 per cent in the first quarter of 2009.

Faring marginally better than Britain during the past year were Denmark (-11.6 per cent), Ireland (-10 per cent) and Norway (-9.4 per cent).

France, despite a 5.7 per cent annual drop, actually rallied to gain 0.1 per cent in the last quarter. Spain, down 6.8 per cent in a year, fell three per cent in the first quarter of 2009.
Although the speed of the price fall varies from country to country, KF fears the situation will get worse in most places before they get better.

It is particularly alarmed by the prospect of unemployment rates hitting double figures in many countries by late 2010, for the first time since the early 1990s.

Nick Barnes, head of KF's international research, said: "The worst and most widespread economic recession since the 1930s continues to batter housing markets across the globe.

"The world's housing markets remain under intense pressure with little evidence of any of the hoped-for 'green shoots', and even the improvement in performance shown in some countries in the last quarter may yet turn out to be a false dawn."

That belief was supported by Stuart Law of Assetz, a property investment and development company delivering carefully selected UK and overseas property projects as well as property funds.

"Dubai, in particular, is under pressure," Law said, "partly because it has many investors who tend to panic early, while the US is also unable to find a proper floor to property values.

"By contrast, the UK has seen falls of 15 to 20 per cent, and is now very close to the bottom. The problem in the UK is that investors are back in anger at the distressed end of the market, and not at price levels indicated by estate agents.

"Unless the distressed sector dries up, the real market is bound to remain weak – which means turnover cannot recover."

Many homeowners, unaware of the full impact of the property crash, are in danger of over-estimating the value of their bricks and mortar by £35,000 (Dh211,000) and more, said a new survey. It means they could come unstuck if they try to remortgage – unless they have paid more off their loan, they might need a higher LTV ratio on a new loan than lenders will allow.
Research from British lender Abbey Mortgages found that, on average, owners estimate the value of their homes to be worth £190,175. But official Land Registry figures put today's average house price at only £152,895 – representing a gap of more than £37,200.

Nici Audhlam-Gardiner, Abbey's Director of Mortgages, said the big danger is for homeowners who need a new mortgage deal at some stage in the future. As prices keep falling, owners who linger for too long on a Standard Variable Rate (SVR) loan, may be hit by tight loan-to-value (LTV) limits on their next loan.

Housing expert Henry Pryor said: "There has been a wide discrepancy for some time between the average Halifax house price achieved of £157,326 against latest figures from Rightmove showing the average asking price to be standing at £227,441, down only 6.2 per cent on May 2008.

"It is clear that vendors decided to bump prices up, as the daffodils came out, and the green shoots of recovery came back into people's consideration, possibly a little prematurely."
Pryor points out that the 6.2 per cent fall in asking prices measured by Rightmove must be set against the actual fall in sale prices achieved in the past year of about 17 per cent. "It shows a big divergence between sellers's aspirations and reality," he said.

"Sellers are damned if they do and damned if they don't. Do they pitch a price realistically in the first place, or wait for one of those rare buyers to come along in a position to proceed, who is almost certain to pitch an offer well below the asking price.

"Most vendors obviously prefer to start with a high price, and come down to convince the buyer that they have landed a bargain. Agents may be so desperate for business that they deliberately over-value to get homes onto their books."

Pryor said 67,800 homes went on sale for the first time during April, against 150,500 in April last year.

The volume of house sales, which averaged 3,839 per day over the past eight years, fell to 2,967 in April 2008 and to 1,933 in April 2009.