MONEY COMMENT
Sellers Flood The Housing Market

By Stuart Watson (TMFTiger)
February 20, 2003

There is an increasing level of anxiety about the housing market. That was the central message in the latest monthly survey from the Royal Institution of Chartered Surveyors. It reported the level of house price inflation had slowed for the fourth month in a row, with falls recorded in London and the South East.

Media comment about possible heavy price falls (guilty as charged) and war fears have meant that demand for housing is easing. No real surprise there. On the other hand, more homes are coming onto the market as people perceive now could be a good time to sell. Of course, that only makes sense if you're moving down the housing ladder or hopping off it altogether. Otherwise, you're just swapping one overpriced home for a larger but equally overpriced one!

The comments at the back of the survey (pdf file) from surveyors around the UK usually make interesting reading. They reveal that asking prices aren't being achieved in many areas, with transactions being completed at up to 10% lower. However, that sounds like a sign of healthy market to me. Recent stories of sales above asking prices were a classic sign of a market that was overheating.

Some sellers are refusing to budge on price, though. "Sensibly priced" properties are still being sold, although there is a lack of demand for larger homes in many areas. The recent interest rate cut is not seen as having had too much impact on the overall market. Again, that's not unexpected, given that many lenders have only passed on a small part of this month's rate cut.

Excessive speculation about the future direction of house prices is often a waste of time. There are too many housing surveys going around for most of us to sensibly digest. In reality, you can't easily step in and out of the housing market, so the best policy is make sure your finances are equipped to cope with a price fall, should it happen.

If you have only a small amount of equity in your house, then it makes sense to overpay on your mortgage to give yourself a little cushion. If mortgage payments are taking a large chunk of your monthly pay, then look at some of the fixed deals on offer, so that you can be certain about how much you'll pay. If you're thinking about moving, then do so because you need to, rather than trying to second guess the direction of the market. And be extra choosy: there are signs that it's starting to become a buyer's market.

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