Green shoots or are they just weeds?

I’m a huge fan of statistics, but only when used sensibly. The biggest problem with statistics is when people jump to conclusions believing that a single statistic determines a conclusive outcome, which is exactly what the mainstream media seem to be doing with house price surveys.

Whilst these measures all seem to be signalling a rise in house prices, they actually only represent a modest increase in the transactions taking place at the moment, they do not account for the millions of properties that are not currently on the market. So yes the value of each individual mortgage application has increased on average, and yes the value of each completed house sale has increased on average. But this may not reflect the wider market as mortgages are currently being limited to about 90% of the property value, so it is possible that only those with significant equity in their current property are moving house and they are probably taking advantage of the lower prices to trade-up the property ladder.

Also summer is traditionally a time when people look to buy new homes and it remains to be seen whether these rises can be sustained once we head into the winter. Add in the ever increasing number of people unemployed, the shrinking GDP and huge public sector debt and there seems to be little reason to justify why house prices should be on the up.

These may be the early green shoots that everyone has been talking about, but in a years time we may realise they were just weeds taking advantage of a barren soil…. only time will tell.