Rightmove: “An active start to 2016 and surprisingly good news for first-time buyers.”
NAEA: “Supply of available housing halves in 10 years.”
RICS: “Near term price expectations reach 20 month high.”
Nationwide: “House price growth remains steady in January.”
Halifax: “Quarterly house price growth at 2.2 per cent.”
LSL: “House prices increase £18,000 in 2015.”
Hometrack: “City house price inflation accelerates to 15 month high of 11.4 per cent.”
Land Registry: “The annual price change now stands at 6.4 per cent.”
Latest National Market Movements
Kate says: Most indices show 6-7 per cent increases for the end of 2015, except the Halifax which shows 9.5 per cent. Rightmove reports good news for first time buyers saying, “there’s more property coming to market” with “asking prices pretty much the same as a month ago.”
In a rare good market for both buyers and sellers, the trading up/down market should do well this year as confidence – key to property market success – is high. According to The Halifax Housing Market Confidence Tracker, “a majority of people believe that average UK property prices will be higher 12 months from now.”
The question is what will happen on 16th March when George Osborne clarifies the 3 per cent Stamp Duty for second home buyers and how will this affect the market?
Regional Price Differences
Kate says: LSL’s index shows 900,650 home sales in 2015, a decline of 2.6 per cent from 2014, but sales in the second half were above those in 2014. Usefully, the research delves deeper to show an increase in detached home sales – up five per cent year-on-year – in the final quarter of 2015. This provides great commentary at a regional level and good insight to which property types and areas are doing well from a volume of sales perspective as well as price.
There is interesting commentary on the impact of George Osborne’s attack on landlords. LSL point out that “A recent Sunday Times analysis, in conjunction with a major estate agency suggested that from the sales the firm recorded in 2015, only a third of homes sold to investors attracted any kind of offer from someone who wanted the property as a main residence (whether first time buyer or not), and that investor purchases made up around 15 per cent of sales.” In other words BTL investors are not really competing with ‘normal buyers’ at all. Hometrack broadly agrees, with stats suggesting “eight out of every 10 sales… still go to owner-occupiers.”
So although investors are being heavily penalised for buying homes, the idea that this is going to make life ‘easier’ for buyers is highly unlikely. The question is if investor demand is ‘choked off’ in areas with a high demand for rented property, what will happen to rents and prices in these local markets if supply is switched from the PRS to the sales market?
Towns and City Differences
RICS: “All parts of the UK reported price rises, with East Anglia and the South East seeing the firmest price momentum. (Dec 15).”
LSL: “The South East has the highest rate of house price inflation at 8.1 per cent. All 25 local authority areas in the South East record positive movements in prices, topped by Luton at 18.5 per cent, followed by Reading at 16.2 per cent. The East Midlands moved to second place displacing East Anglia into third position, with growth in the City of Nottingham and the county of Nottinghamshire at 10.6 per cent and 8.8 per cent respectively, assisting its overall rate of 6.7 per cent. Greater London is currently in fourth position at 5.6 per cent. (Dec 15).”
Hometrack: “Hometrack’s UK Cities House Price Index recorded a further jump in the annual rate of house price growth to 11.4 per cent, up from 10.2 per cent the previous month and 8.9 per cent twelve months ago, the highest rate of growth for 15 months. Cambridge continues to perform like London and has registered the highest annual rate of growth at 14.4 per cent followed by London (13.8 per cent) and Bristol (12.8 per cent). (Dec 15).”
Land Registry: “The region with the most significant annual price increase is London at 12.4 per cent. The North East saw the smallest annual price increase of 0.8 per cent. London experienced the greatest monthly price rise at 2.1 per cent. Wales had the most significant monthly price decrease at -0.8 per cent. (Dec 15).”
LSL’s data shows the biggest monthly boost was in Bournemouth “with a 2.9 per cent (£7,371) upswing – driven by more tech jobs,” and the “Strongest sales surge was in the North West, up 8.8 per cent year-on-year as buyers seek more property for their money.” In addition, “The fastest growth year-on-year across the country has been experienced in Luton where home values are up 17.5 per cent, with trains to London only taking 23 minutes.”
Hometrack’s city data shows that the economic powerhouse, Cambridge, continues to outperform London with a 14.4 per cent increase, while London grows at 13.8 per cent with Bristol at 12.8 per cent.
Beyond these areas, price growth is only achieving 8-10 per cent even in strong property markets such as Oxford. Land Registry data shows property prices in Liverpool and Manchester, although still (by their measure) way behind price heights achieved in 2008, are seeing strong 5 per cent+ price growth year on year, potential good news for those currently trapped in negative equity.
Demand for Property
Rightmove: “Demand during the first working week of 2016 is up by 21 per cent on the same period in 2015. (Jan 16).”
NAEA: “Sales to first time buyers (FTBs) increased this month, with under a quarter (24 per cent) sales to the group; a decrease from 26 per cent in December 2014. The average number of sales completed per branch fell in December, dropping from eight in November, to seven. (Dec 15).”
RICS: “Demand rose across all parts with the exception of East Anglia where 26 per cent more contributors reported a decrease in enquiries. (Dec 15).”
LSL: “The strongest December for sales since 2006, up 7.1 per cent year-on-year as buyers compete for fewer homes on the market, with buyer demand increasing 8.5 per cent compared to November 2015. (Dec 15).”
Agency Express: “National figures show month on month increases in properties ‘Sold’ rising by 31.2 per cent. (Jan 16).”
Bank of England: “The number of loan approvals for house purchase was 70,837 in December, compared to the average of 69,462 over the previous six months. (Dec 15).”
Land Registry: “From July 2015 to October 2015, sales volumes averaged 80,691 transactions per month – a decrease from the last year, when sales volumes averaged 84,517 per month. (Dec 15).”
NAEA agents had 37 properties in December 2015 compared to 72 in December 2014. This is why bigger agents are buying up smaller successful agencies.
Despite all the headlines saying what a buoyant market 2015 was, in reality, the actual number of sales moved slightly upwards according to Halifax who researched the HMRC data to conclude: “UK home sales totalled 1.23 million in 2015; marginally higher than the 1.22 million recorded in 2014”. As LSL confirm, “sales picked up during the year with transactions in the second half of 2015 6 per cent higher than in the same period in 2014”.
Data from Rightmove suggests that “demand as measured by visits to the Rightmove website in the first working week of 2016 is up by 21 per cent on the same period in 2015.” However, we will have to wait for a few months to see if this actually translates into higher buying and selling activity rather than people more keen to look this year than last! The concern remains in that, according to Nationwide, “construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.”
Supply of Property
Rightmove: “A lack of property coming to market has been an upwards driver of both prices and unfulfilled demand, though there has been a 1.8 per cent year-on-year uplift in newly-marketed properties.
“There is welcome news for first-time buyers with a 6.6 per cent year-on-year increase in the number of fresh homes in their target sector of two bedrooms or fewer, the highest since 2007. (Jan 16).”
NAEA: “The available supply of housing decreased in December, to 37 houses per member branch. This is the joint lowest for 2015 and almost half that of December 2005, when there were an average 72 houses available per branch. (Dec 15).”
RICS: “New instructions to sell edged up slightly for the first time since January 2015, with more parts of the UK seeing a rise in new instructions, however modest, rather than a fall for the first time in over two years. (Dec 15).”
Agency Express: “All regions reported an increase in new listings ‘For Sale’. After three consecutive months of decline, Wales saw an injection of properties coming to the market rising by 124.4 per cent, while the West saw new listings rise by 126.9 per cent. (Jan 16).”
Supply is probably the single most feared issue in the property market at the moment. Buyer demand is strong, but the supply of property isn’t coming through. Unlike many industries, production can’t be scaled up and down quickly in line with demand. Agents will have to find ways of attracting new instructions while high street offices will be battling competition from cheaper, mainly on-line propositions.
The most serious stat, though, from all the reports is from the NAEA who recorded that there were, “Thirty-seven properties available in December 2015, compared to 72 in December 2005” showing stock levels per agent had halved. This is no doubt why the bigger agents are on a spending spree to buy up smaller, locally successful agents.
Kate Faulkner, Property Market Analyst and Commentator
www.propertychecklists.co.uk Email: firstname.lastname@example.org
Telephone: 01652 641722