Rightmove: “Record home-hunter activity fuels rises in most regions.”
naea | propertymark: “House-hunters flood the market.”
RICS: “Activity indicators continue to weaken.”
Nationwide: “House price growth falls back in February.”
Halifax: “Annual house price growth slows to 1.8 per cent.”
LSL Acadata HPI: “House prices edge up in January.”
LCPAca Residential Index: “England and Wales sees biggest quarterly price fall since global financial crisis (GFC).”
Hometrack: “UK city house price inflation +5 per cent year on year.”
Average prices across the indices vary from mortgaged only prices from the Nationwide HPI of £210,402, through to marketing prices (ie not necessarily sold) from Rightmove of £300,001, and actual prices from LSL Acadata HPI of £301,477 – a 43 per cent difference. Average sold prices from the UK HPI stand at £243,582.
Kate says: There has been some fascinating analysis in the latest property price indices, mostly around demand, supply and transactions as opposed to ‘average’ house prices which, let’s face it, are now a poor measure of what’s happening in the property market from an individual agent and consumer perspective.
The main figure is the number of transactions – how many people are managing to buy and sell – and whether this is increasing or decreasing. According to Rightmove, increased home hunter activity is helping a recovery in sales agreed, which in Q4 17 saw an average drop of -5.5 per cent on the previous year, but this fall was only -1.6 per cent Jan 18 vs 17, with six out of 10 of the fastest selling locations being in the East and West Midlands.
House prices, supply, demand and sales are individual to a postcode and part of the discussion with potential sellers that helps to secure instructions.
Halifax points out that sales are above 100,000 for the 13th month in succession, with January’s transactions of 102,610 being the highest month since April last year.
In the main, sales are holding up nationally with some regional differences.
From an agent perspective, according to Rightmove, average properties for sale are 42; RICS: 40 and the naea | propertymark: 36 properties (38 the year before). Although lower than pre-2007 levels, it has been pretty much the norm for the last 12 months. Other data from naea | propertymark finds, “In January, 4 per cent of sales were sold for more than the asking price, down from 7 per cent in January 2017. A fifth (20 per cent) were sold at asking price, and three quarters (76 per cent) at less than asking price”.
Kate says: Hometrack offers interesting analysis on the reasons behind the completely different property price performance between cities since market lows of 2009. It shows that most of the growth in London happened in 2014-15 while in cities such as Birmingham and Manchester it was in 2016-17. From a demand and supply perspective, London, the South and East have slowed, but remember that this comes after major activity since the falls in demand during the recession; the bulk of transactions are now supported by the Midlands and North which have taken longer to recover.
From a price growth perspective, Hometrack believes that although prices in Midland and Northern cities are unlikely to grow at the rates London has seen due to their lack of high levels of “overseas and investor buying”, Manchester and Birmingham could see growth of 20-30 per cent over the next 3-4 years, while London is likely to “drift lower in real terms in the coming 2-3 years”.
RICS: “The price data shows stark regional variations with the price readings particularly strong in Wales, the North West, Northern Ireland and the East Midlands. In contrast, feedback on prices remains negative to a greater or lesser degree in London, East Anglia, the South East and the North.”
LSL Acadata HPI: “The South West (up 3.9 per cent) and North West (3.8 per cent) lead growth, with other areas up between 2.3 per cent and 2.6 per cent, apart from Yorks and Humber where prices are up a more modest 1.4 per cent annually. The fall in average prices of 4.3 per cent annually in London is the biggest seen since August 2009 and are still concentrated in the most expensive boroughs.
In the South East, Portsmouth is up 7.1 per cent annually, and Brighton and Hove set a new peak price in December. Wales continues to see growth of 2.6 per cent over the year, almost matched by the East of England (up 2.4 per cent), East Midlands (also 2.4 per cent) and West Midlands (2.3 per cent). It’s the North West (3.8 per cent) and, still, the South West (3.9 per cent) that lead the table.”
Hometrack: “Edinburgh is the fastest growing city (+7.7 per cent) with Birmingham, Manchester, Leicester and Liverpool all growing by more than 6 per cent per annum. In five cities house prices are falling in real terms – Southampton, London, Oxford plus two where prices are falling in nominal terms – Cambridge (-1.1 per cent) and Aberdeen (-6.6 per cent).
“We expect average house prices in London to drift lower in real terms in the (down 16 per cent since 2014) creating scarcity.”
Kate says: Agents now need a better understanding of what’s happening in their area from an economic perspective – and to explain this in their commentary to consumers. They provide commentary on data over time, not just focus on year on year. With price changes ranging from falls in London through to double-digit rises in the likes of Manchester and Edinburgh and competition for stock likely to increase this year, the agent who is able to reassure the seller that they know what’s happening in their local market is the one who is likely to win the instruction. This means understanding what’s happening job wise, with wages, impact (or not) of new build, and things like household change perspective, key buying/selling indicators such as time to sell and chances of securing asking price versus the need to accept offers below this to secure a deal and move on.
Most commentary focuses on what is happening to property prices, but prices are driven by supply and demand, which is why performance is so localised, pretty much to a property on a street.
LSL Acadata HPI: “Reflecting the negative outlook, we estimate that the number of housing transactions in January 2018 in England & Wales at 64,000 – based on Land Registry numbers – is down by 15 per cent on December’s (revised) total. This reduction needs to be set against the seasonal trend of the last 20 years, where a 28 per cent decrease in sales volumes is the ‘norm’ at this time of year.”
At the start of 2017 it took, typically, 16.5 weeks to complete the sale process from listing. This has increased to 18.5 weeks.
naea | propertymark: “Year on year, this figure is down -14 per cent from 425 in January 2017. The number of sales agreed per branch increased to seven in January, from five in December. However, the percentage of these sales made to FTBs fell to 27 per cent, down from 32 per cent in December.”
Bank of England: “Mortgage approvals decreased in December, with falls for both house purchase and remortgaging approvals. House purchase approvals were the weakest since January 2015 at 61,039 and remortgaging approvals fell to 46,475, following strength in October and November.”
UK Finance: “There were 30,700 new home mover mortgages completed in December, some 4.7 per cent fewer than in the same month a year earlier. The £6.5bn of new lending in the month was 3 per cent down year-on-year. The average home mover is 39 and has an income of £55,000.
“There were 30,800 new first-time buyer mortgages completed in December, 5.2 per cent fewer than in the same month a year earlier.”
PROPERTY DEMAND AND SUPPLY
RICS: “Alongside ongoing concerns about affordability in some areas of the country, part of the problem may lie in the lack of choice of property to purchase, with the RICS New Instruction indicator falling once again, and by the biggest margin on a seasonally adjusted basis (-24 per cent in net balance terms) since May last year. This has pushed the average inventory (per branch) to a new record low of just under 42.
“In another sign of the increasingly challenging market environment, the average time for a sale to complete (from listing) has continued to edge upwards. At the beginning of 2017 it typically took around sixteen and a half weeks for the whole process to complete. This has climbed to around eighteen and a half weeks.”
Kate says: These measures are the lifeblood of the industry and it’s essential that more of this information reaches local media and consumers, as it’s much easier to help explain what’s happening to prices if we understand and explain what’s happening from a transaction, demand and supply perspective. From an indices perspective, it’s only possible to do this really from a ‘regional’ perspective; the advantage an agent has is to explain what’s happening in specific locations, down to postcode level and even down to individual properties. So just as with house prices being very individual to a postcode, the supply and demand and number of sales is too, and that is the kind of discussion with potential sellers and buyers that helps to secure instructions and sell deals. The indices are useful as they are often the ones that consumers read, so form their overall view of the market, but being able to explain the difference between these indices and what’s happening to individual buyer and seller markets is a skill all agents now need to secure.