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API points to house price falls
Although the discount on properties sold at auction increased slightly in July, the key message is that it has been remarkably stable, at around 20%, since the beginning of the year. Instead of leading the way, house price futures appear simply to have projected forward recent house price trends. They pointed to further price gains during the rally, but now that the rally has come to an end, futures prices have dropped, and are once again predicting house price falls.
Our own view is that housing remains significantly overvalued, relative to earnings. Some of the adjustment to a more sustainable level may occur with incomes rising gradually against a backdrop of broadly stable prices. That is what happened through much of the 1990s. But in the near term, with earnings growth subdued, further house prices falls seem likely. The magnitude of the discount available on properties sold at auction suggests that many investors support this view.
- The reading on the Fathom/Zoopla Auction Price Index (API) in July was 81.0. By implication, the median property sold at auction went for a discount of 19.0% to the conventional market. The June API was 82.4, implying a discount of 17.6%.
- The standard deviation of discounts has increased slightly, moving from 30.6% in June to 39.2% in July.
- The inter-quartile range of prices achieved at auction, which covers the central 50% of the distribution of ‘discounts’, was from 3% above to 35% below the conventional market value.
- The July API is based on 349 properties sold at auction during that month.
Members can access the full archive of Auction Price Index updates using the green search tool bar below.
For further information on the Auction Price Index, or other proprietary indices published by Fathom Financial Consulting, please contact us at enquiries@fathom-consulting.com or on +44(0)20 7796 9561.
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By Andrew Brigden
Here, the latest Auction Price Index update, points to further deterioration in the housing market, suggesting the recovery in property prices is at an end.
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By Andrew Brigden
Here, the latest reading of the Auction Price Index in May was 85, suggesting homes under the hammer were sold at a 15% discount to the wider market.
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By Andrew Brigden
The reading on the Fathom / Zoopla Auction Price Index (API) in April was 84.0. By implication, the median property sold at auction went for a discount of 16.0% to the conventional market.
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By Andrew Brigden
The discount available on properties sold at auction in March was a little smaller than the figure for February, and here we discuss why.
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By Andrew Brigden
The latest reading of the Fathom / Zoopla Auction Price Index shows that although auction prices recovered some lost ground last month, the index continues to point to further fall in prices achieved on the conventional market in 2010.
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