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House price myths debunked

Designs on Property tracks and summarises the monthly property indices. Kate Faulkner says, “The average age of a first time buyer today is hardly that different from 2003, 14 years ago, even in London!”

Kate Faulkner

Kate Faulkner imageRightmove: “Midlands leads the country as price of property coming to market jumps 1.3 per cent.”
NAEA Propertymark: “Number of house sales agreed reaches a ten year high.”
Nationwide: “House price growth softens in March.”
Halifax: “Annual house price growth falls to 3.8 per cent.”
Hometrack: “City house price growth running at 6.4 per cent, down from 7.8 per cent twelve months ago.”


First time buyers imageAverage prices across the indices vary from mortgaged only prices from the Nationwide HPI (Mar 17) of £207,308, through to marketing prices (ie not necessarily sold) from Rightmove (Mar 17) of £310,108, a 49 per cent difference. Average sold prices from the UK HPI stand at £234,794. (Jan 17).

Kate says: Most reports are reflecting a fall in property price growth of differing levels and although Rightmove say that the Midlands leads with a ‘jump’ of 1.3 per cent in property price growth, that’s more like a little hop in my view! Hometrack’s City Index also suggests that sales offices, especially in the ‘high value cities’ are starting to see volumes static to falling as affordability tightens. While in contrast, naea | propertymark says, “Sales agreed rose to a 10 year high in February, to 11 per branch,” pointing out that the last time this happened was September 2007. This is surprising considering the huge quarter we had last year when landlords were trying to beat the Stamp Duty rise. However, they also agree that prices are under pressure reporting that despite strong sales, “Seventy-four per cent of the sales made were below the original asking price”.

Affordability is an issue but interest rates are so low most FTBs still only borrow 3-4 times their income.

The really good news though so far this year is that despite a slowing market we aren’t seeing people’s confidence eroded by talk in the media about house price crashes, which can drive prices down. It does appear we have a more sensible approach culturally to house prices – growth isn’t always good – a slowdown in price growth can be a healthy thing for everyone as long as it doesn’t lead to panic buying or selling.


Nationwide: “The Outer South East was the strongest performing region in Q1 2017, with average prices up 6.4 per cent year-on-year. The North continued to be the weakest performing region, with a slight decline in prices compared with Q1 2016. Northern Ireland saw a pick-up in the rate of growth compared to the last quarter, with a 3.8 per cent annual increase. Price growth in Scotland remained fairly steady at 2.9 per cent, while Wales saw a slight softening in annual house price growth to 1.2 per cent. “While regional growth rates have begun to converge, there remain significant disparities in price levels. This is particularly apparent when looking at prices relative to their 2007 peak. For example, prices in London are nearly 60 per cent above 2007 levels, while those in the North, Yorkshire & Humberside and North West are still lower than their 2007 peaks.”
Hometrack: “A continued slowdown in London house price growth, where the rate of annual price increase (5.6 per cent) is at its lowest level since 2013, is acting as a drag on headline growth. Above average rates of growth are being recorded in regional cities such as Manchester, the fastest growing city covered by the index (8.8 per cent), as well as Portsmouth, Bristol and Glasgow.”

Kate says: It’s remarkable really that ten years on from the credit crunch most media reports and PR are concentrating on how ‘unaffordable’ property is, while in actual fact, the opposite is pretty much true. According to the Land Registry, property prices in three out of our four countries are still lower than they were 10 years ago and the Nationwide data shows that 3/10 regions still haven’t recovered to the price levels of 2007. When you also consider that mortgage rates are far lower than they were 10 years ago, with many at record rates, coupled with government support via Help to Buy equity loan and the ISAs, to some extent buyers haven’t seen such a good market outside the traditionally fast paced economies of the likes of London, Bristol, Cambridge and Oxford.

The local nature of prices and rents give agents that really understand their local economy and how supply and demand work in their area, an ideal opportunity to set themselves apart from the competition. The agents that will continue to succeed in my view are ones that advise people on property decisions, the days of just selling or letting homes have gone, a local agent should be as important to people’s property decisions as a financial advisor is to their overall wealth.


NAEA Propertymark: “In January, agents agreed eight sales per branch, a figure which increased to 11 for the first time in 10 years in February. The proportion of sales to FTBs fell to 22 per cent in February.”
Bank of England: “Approvals of loans secured on dwellings fell slightly in February. This was the first decline since August 2016, but at 125,622 they remain above the recent six-month average.”
BBA: “House purchase approval numbers of 42,613 were 4.6 per cent lower than in February 2016 and 3.5 per cent lower than January but above the 2016 monthly average of 41,287.”

Kate says: Despite the better than average volumes suggested by the NAEA, most reports suggest that overall volumes are down. The most insightful data on volumes is from Hometrack, they also suggest volumes will fall by up to five per cent in “the highest value cities” during 2017 due to affordability constraints and it only expects the likes of Birmingham and Newcastle to buck the trend.

Falling opportunities to sell will put further pressure on agencies to secure enough instructions to make a living and it’s vital that agents realise the need to encourage clients to take independent advice when it comes to property, checking they are on the right mortgage rate, and making sure, especially if they are a landlord, they are getting good financial advice on things like tax and inheritance. The more agents are seen as property advisors rather than just sales people, the more likely they are to continue to attract new business and much needed referrals.


First-time buyer affordability in the UK report imageOne of the biggest opportunities to help agents establish themselves as lifelong consumer property advisors is working to help first time buyers onto the ladder.

Poorly worded, scaremongering press releases, turned into depressing headlines are partly why people are not getting on the ladder – sadly most believe the media rather than a local housing expert. For example, reports from the National Housing Federation, Shelter, Halifax and the Post Office suggest two things:

  • Average house prices are out of reach versus people’s earnings across the country
  • People just don’t believe they can get on the ladder, so don’t try

What would be great to see is agents, brokers, IFAs and surveyors working together in their local community at shopping centres or via the local media, to show people who want to buy how they can in their local area.

Affordability claims can be over dramatised. Data from the Council of Mortgage Lenders shows that despite these horrific averages of income versus house prices, in reality, because mortgage rates are so low, most first time buyers are still only borrowing 3-4 times their income:

  • In Scotland, first time buyers are borrowing 3.03 times their income
  • In Wales, first time buyers are borrowing 3.29 times their income
  • In Northern Ireland, first buyers are borrowing 2.88 times their income

Latest data from the English Housing Survey report for 2015-16 shows the average age of a first time buyer today is hardly that different from 2003, 14 years ago, even in London! It also shows that although the age went up during the credit crunch, this was a ‘sensible’ blip as buyers held off as markets fell, but are now back and this has helped drive the age people buy back down again.


The other data that is interesting is all the noise about the ‘Bank of Mum and Dad’ in housing. As third generation home owners, it appears that people can now afford to fund larger deposits for their kids which allows them access to lower mortgage rates or higher priced first time properties.

Rather than telling people locally they ‘need’ to have huge deposits, how about helping them find out what properties they could afford at certain income levels (or with two people buying) at five per cent, Help to Buy equity loans for example on new builds, or shared ownership if they would struggle to access buying a property in its entirety?

What’s really interesting is the way the media deals with the ‘Bank of Mum and Dad’ when it comes to housing, typically blaming landlords, agents and developers for affordability issues, but rarely mention this trend is happening in other markets.

A survey from Kwik Fit estimated that parents pay £2 billion a year to help their kids with motoring costs while another survey from TopCashback suggested that “Six out of ten parents spend over £1,100 to take their over-18s on holiday”. The reality is that parents are often cash rich now because they have benefited from great house price growth and potentially good pensions too, which allows them to help their kids – so rather than the Bank of Mum and Dad being ‘chastised’ and hailed a disaster, it would be more constructive to see it as a positive and help parents to work out the best financial way to help their kids onto the ladder without starving themselves of cash.

Making sure agents and other services are doing all they can to support local people on the ladder can really help to generate much needed volume in the market, get more people on the ladder and better manage supply and demand in a dangerously stagnating market.

For the full report on FTBs visit: http://www.propertychecklists.co.uk/articles/ first-time-buyer-report-april-2017

June 21, 2017

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