No pregnant pause for the housing market

HERE is a terrifying story that sends a clear signal that the current house price mania – In London at least – is far from over. A large house went on the market in Crouch End, a reasonably nice area of North London with reasonably good schools and reasonable access to public transport. In other words one of many similar properties in the wider area.

The asking price was north of £800,000 as it typical for four and five bedroom homes in the capital’s nicer suburbs. The lucky vendor ended up having eight potential buyers come to visit the house on one day, meaning the the winner was going to have move fast.

For one of the buyers speed was of the essence as she was heavily pregnant and on her way to hospital to deliver her baby. Four people put in an offer and she was one of them. Sadly I don’t know whether she was the winner – it doesn’t really matter for the purpose of this tale.

The point is that its shows that the market is being sustained by a large amount of demand and a shortage of supply. Yes it is plainly not rational to go househunting when nine months pregnant, but then the market has reached levels where the irrational is rational.

That is not the same as saying that house prices themselves are irrational when they can be explained by fundamental factors such as demand, supply, real incomes and the cost and ease of access to finance.

The issue is whether any of these underlying factors will change. Apart from Gordon Brown’s latest initiative on eco-friendly homebuilding there does not look to be a huge amount of supply coming down the track. Opopulation trends point to continued growth in the number of households. Interest rates have risen by a percentage point in the last year and may go further. So far this has not had a major impact on the housing market although the jury is still out on that.

House prices rose 1.0 per cent in April, according to Halifax bank, although this was the lowest monthly grwoth this year after a run of bumper rises. The Government's measure, the Deparment of Communities and Local Government index, picked up a similar slowdown in March.

The Royal Institution of Chartered Surveyors, whose index of activity captures elements other than prices, found a slowdown in both the number of sales and new buyer enquiries although nothing dramatic or worrying. Certainly the RICS data continue to suggest that while interest rate rises are slowing demand, they are not leading to an abrupt shift in behaviour.

As long as the heavily-pregnant are happy to ensure the labours of househunting, it seems that this cycle has still to reach maturity.