How low can the housing market go? Figures published last week by HM Revenue & Customs showed that there were just 59,000 property transactions last month, only marginally down from the 60,000 recorded in August, but an extraordinary 62% lower than the peak of 154,000 in December 2006. We have yet to see what effect the turbulence of the past few weeks has had on the number of sales. HMRC’s figures, by the way, include only properties that change hands for more than £40,000. The way things are going, it may have to change that definition.

The low level of transactions reflects, of course, the fact that there is not much demand from credit-constrained buyers. Rising unemployment, with the broader jobless total increasing at its fastest rate since the last recession, is likely to keep demand down, as is buyer caution about investing in a falling market.

Supply, however, is also constrained – a point emphasised by Rightmove, the property website, in its latest monthly survey. It notes that the shortage of new sellers putting homes up for sale means agents are having to do what they normally do only in boom times: putting houses on the market that they know to be overpriced in order to get the business. Thus, the average number of properties on agents’ books has dropped from 78 to 76, yet figures from Rightmove show that asking prices rose by 1% in its October survey. In the West Midlands, East Anglia and the southeast, asking prices rose by more than 2% in the same period.

In addition, sellers also appear to be adopting a new tactic. Knowing that they are likely to be subjected to intense haggling from the so-called property vultures - “gazundering” – they are setting prices deliberately high to provide room for bargaining.

As Miles Shipside, commercial director of Rightmove, puts it: “Any potential buyer will drive a hard bargain, so the temptation for sellers to price up and negotiate later may seem like a good idea. These are not the tactics of sellers in real financial hardship. It would appear that the economic downturn has yet to become an everyday reality for most people.”

For sellers hoping to get an elevated price in a dismal market, such a dose of reality may kick in soon.

home.economics@sunday-times.co.uk

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