Too many for sale? How can there be so many homes for sale but no buyers?

After this blog last month started a healthy debate both here and on Twitter, let’s take it to the next level. House price analysts say a glut of homes on sale and falling numbers of buyers are causing small price drops now, with perhaps more to come.

But if people buy and sell at the same time, as most surely do, why are demand and supply out of line?

The mismatch
The Royal Institution of Chartered Surveyors says in mid-2007, before the credit crunch, estate agents typically sold 45% of their stock every three months. That fell to 15% in mid-2008 before rising to 30% early this year.

But now, with more homes on sale, the sale-to-stock ratio is back down to 24%.

Exploding a myth
This increased supply suggests that in reality selling and buying do not necessarily happen simultaneously. There is a small but important time gap.

Research by Santander says 1.1m homes in Brtain were put on the market in the year to  August but did not sell, often because would-be buyers could not get a mortgage.

Some estate agents say that as a result, more sellers now wait to find a purchaser before registering as buyers themselves to avoid spending time and energy finding a dream home only to lose it because they cannot sell their old property.

“Supply and demand balance over time but there’s always a lag, never an exact balance. A year ago there were more buyers but fewer homes, so prices rose. Now it’s the reverse” says Lucian Cook, research guru at estate agent Savills.

In addition the new-build sector, which slumped in 2008 and 2009, is recovering and adds 120,000 new properties on sale per year without creating new buyers.

Dying, divorcing but not buying
A further factor is probate sales; elderly owners die and their properties are sold by relatives who already own homes – so they inherit the proceeds and do not buy. Land Registry figures show that in 2007 some 7% of deals were probate sales. But now, with home sales halved but death rates static, they account for 15% of the market.

There are also 120,000 divorces a year. Analysis by Savills shows that in a third of cases the couple sell their home and, at first, each person rents before buying later.

In the past these ‘sell-but-not-buy’ figures have been balanced or outweighed by first time buyers, who purchase with nothing to sell. But tougher mortgage conditions and average deposits rising to £35,000 mean FTB numbers are 50% of the level in 2007.

Let’s see if that starts a debate.

Entry intercoms, electric gates, immaculate lawns and clipped hedges – all of these usually point to a highly desired and wealthy street. But research released today has revealed which ones can claim to top the list of the UK’s most expensive.

The costliest is Wycombe Square (pictured), a ‘new’ square of 19  luxury Georgian townhouses and 48 apartments all snapped up by a raft of bankers and pop musicians back in 2005.

The square, which is set around a central garden, has regularly been in the newspapers as various high profile residents have bought in and out of the postcode, particularly when senior Barclays investment chief Bob Diamond purchased his house there for £10.5 million in 2005, only to sell it for £25 million in 2008. At the time Diamond had been hired by London mayor Boris Johnson to raise money for the capital’s deprived teenagers.

The average price for a home on the square, the research by Halifax reveals,  is a more modest £5.4 million, but that puts it at the top of the UK’s rich-list property pile, closely followed by exclusively London and South East roads. These include:

1. Wycombe Square, Kensington,London W8 – £5.4m

2. Ingram Avenue, Hampstead, London NW11 – £4.8m

3. Cottesmore Gardens, Kensington, London W8 – £4.2m

4. Mallord Street, Kensington, London SW3 – £3.9m

5. Stormont Road, Highgate, London, N64 – £3.37m

6. Brunswick Gardens, London, W8 – £3.08m

7. Bedford Gardens, Kensington, London, W8 – £2.9m

8. Sloane Gardens, Kensington, London, SW1 – £2.7m

9. Parkside, Wimbledon, London, SW19 – £2.68m

10 Paultons Square, Kensington, London, SW3 – £2.66m

Outside of the top ten only roads in Leatherhead, Virginia Water and Sevenoaks were in the next ten most expensive, and the dearest roads in the north and north west of England are still five times cheaper than their counterparts down south – particularly when compared to the London Borough of Kensington Chelsea.

“This borough has long had a global appeal, but the fall in the value of the pound has helped to attract foreign buyers over the past year despite the worldwide recession,” says Nitesh Patel of the Halifax.

A new survey by Impartial.co.uk says we are all seriously overestimating the current value of our homes – and that younger homeowners especially are in denial about falling home values.

Apparently the average younger homeowner thinks their property is worth – oh, about £2,000 more than it was a couple of months ago. (Maybe they added a wet room.)

Well, this is awkward. Actually, kids – your property is more likely to be valued at… er, around £7,000 less. Sorry about that.

Of course it would be unfair to put the spotlight on the iPod set alone. Many sellers are only now starting to realise that it’s necessary to lower their asking price if they want to move house any time soon.

Savvy Londoners apparently have a more realistic view of things, estimating their property values to have fallen by around £46,000 on average. I can only imagine this pragmatic point of view is due in part to growing up fast on the mean streets of Mayfair.

The Primelocation.com September House Price Index shows that prime London values have decreased for the fourth month running, dropping nearly 1.8% since August. The decline in house prices has been quite widely documented.

So why are the majority of us still in denial about the value of our homes? And why younger people especially?

Here are some possible reasons:

• We’ve been too obsessed with Obamarama to notice what else is happening in the world
• Anytime our eyes alight on a newspaper article about falling house prices, they’re quickly distracted by a photo of Amy Winehouse looking dangerously malnourished on the opposite page
• The Olympics dazzled us for a month or so with shiny opening and closing ceremonies – not to mention all the sports and whatnot. Blame China.

Any other ideas?