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Housing supply contracts

new buyers imageReport Headlines:

Rightmove: “Strongest August market since credit crunch as sellers stay away.”
Home.co.uk: “Property drought worsens.”
NAEA: “Housing demand continues to grow, remaining at eleven year high.”
RICS: “Steady demand growth and a lack of stock continue to drive prices higher.” Nationwide: “Annual house price growth softens in August.”
Halifax: “Annual house price growth rises to 9.0 per cent.” Agency Express: “August’s property market springs no surprises.”
LSL: “Strongest July for sales since 2007.”
Hometrack: “City level price accelerating.”
Land Registry: “July data shows a monthly price increase of 1.7 per cent.”

Kate says: This month’s reports are great news from a sales and price perspective, with buyers keen to purchase and sales volumes being reported as strong – basically business growth all around. There is conflict between Rightmove saying sellers are staying away, while the NAEA says demand is as high as 11 years ago and stock up by 25 per cent. Whichever is correct, the reality reported by Rightmove is that more people won’t move unless they can find property to buy; they need to understand that moving isn’t as inhibitive as first thought and affordability, although tough in some areas, isn’t a problem everywhere. It’s important to recognise we do have a housing crisis – but we shouldn’t believe nor let people locally believe – that it affects everyone, everywhere – 50 per cent of people in England own their property outright and many areas have prices at the same level as 10 years ago.

At national level, new buyer enquiries rose for the fourth month in succession, most regions reported some growth.

Regional Price Differences

Home.co.uk: “Regions which suffered the greatest reductions in supply over the last seven years have also shown the greatest price growth. London shows the biggest contraction in supply over the last eight years at 69 per cent. For the buyer, this means the competition is fierce and prices have skyrocketed. At the other extreme, the North East and Yorkshire show prices remain below pre-crisis peaks (-8.7 and -4.0 per cent). In Wales and the North West, prices remain below 2007 levels. (Aug 1).”
RICS: “Prices are reported to be rising across the majority of areas with Northern Ireland, the North West and East Anglia seeing the strongest momentum. The North East is the exception, where prices have fallen for the third consecutive month. The strongest near term price expectations were returned from Northern Ireland, the North West and London. The North East is the only region in which prices are not anticipated to rise over the coming three months, though respondents expect increases during the year ahead. (July 15).”
LSL: “East Anglia has taken over the top spot from the South East as the region with the highest rate of annual house price growth, at 6.3 per cent, based on data for June 2015. Greater London has fallen one further place since last month to eighth position, with a 1.8 per cent increase in annual price growth, only marginally above the North and Wales, which both saw an annual increase of 1.7 per cent. (July 15).”
Hometrack: “All cities except Aberdeen are registering house price growth ahead of growth in average earnings (2.4 per cent). The highest year on year growth is 10.9 per cent in Cambridge followed by Oxford, London and Bristol. The lowest is Aberdeen (-0.7 per cent) where weakness in the oil price is impacting the local economy and demand. Other cities with below average house price growth are Newcastle, Liverpool and Sheffield at 2.5 per cent and 4.5 per cent.”
Land Registry: “The region with the highest annual price increase is the East at 8.9 per cent. The North East had the lowest at 0.4 per cent. The East also experienced the greatest monthly price rise at 2.8 per cent. Wales had the only monthly decrease with a fall of 0.3 per cent. (July 15).”

Kate says: “Hometrack sums things up best: “the relative performance of house prices since 2007 remains wide and reflects different economic and demand side drivers of house prices.” We absolutely do not have “one” market anymore. Differing economic performance, population changes and property supply mean micro markets for big, expensive houses in some areas sell brilliantly, while in others no buyers can be found; it’s the same for small flats or houses in other areas. If we want a successful market, it’s up to everyone at a local level to work together to report what’s really happening in their market so the media can report the facts, not the fiction.”

Demand for Property

NAEA: “The number of house-hunters registered per branch increased from 439 in June to 462 – the highest demand in 11 years. Sales per branch remains the same as last month, with nine sales agreed in July. Alarmingly, in July, agents reported a decrease in sales to FTBs, with under a quarter (23 per cent) of sales made to this group. This is however an increase from last year, when only 20 per cent sales were made to FTBs in July. (July 15).”
RICS: “At the national level, new buyer enquiries rose for the fourth month in succession. All areas reported some growth except the South East. Despite sustained improvement in demand, newly agreed sales were more or less unchanged at national level. This supports the idea that, although there is buyer interest, the supply shortage is preventing transaction rising.”
Halifax: “UK home sales declined by 4 per cent between June and July, but remained above 100,000. The volume of mortgage approvals for house purchases increased by 3 per cent. Strengthening demand and constrained supply are likely to mean that house price growth continues. (Aug 15).”
Agency Express: “National ‘Sold’ figures fell by 10.4 per cent and the decline in figures has been greater than those recorded in 2014. All regions reported declines in properties ‘Sold’. The largest decline was in the East Midlands which, for the first time in seven months fell by 19.9 per cent. The North East also fell by 16.9 per cent, as did East Anglia falling by 13.4 per cent.”
Bank of England: “The number of loan approvals for house purchase was 68,764 in July, compared to the average of 64,186 over the previous six months. (July 15).”
LSL: “Home sales reached 90,000 in July, a boost of 13 per cent on June; the first time this year that sales levels have overtaken the equivalent month in 2014 – the strongest July since 2007. “The strongest sales growth has been outside of London and the South East.

The North and Yorkshire & Humberside had the fastest sales growth, with Q2 sales jumping 29 per cent and 25 per cent respectively on the previous quarter. Detached properties had the biggest quarterly boost – in the North, sales of this type of home increased by 41 per cent. However, first-time buyer sales hit the brakes in January, sales of flats have seen the slowest improvement, rising just 12 per cent during Q2. (July 15).”
Land Registry: “From February 2015 to May 2015, sales volumes averaged 61,283 transactions per month. This is a decrease from a year earlier, when sales volumes averaged 70,029. (July 15).”

From February to May 2015 sales volumes averaged 61,283 transactions per month – last year that figure was 70,029.

Kate says: “LSL tends to look in depth at volumes and they are seeing a real growth in July in areas outside of London. Agents in the South have benefited from the market, so it’s good this is now spreading elsewhere as it will boost economic activity. But as with regional price differences, there are property type differences too with demand for larger properties benefiting versus flats. And there is a big problem looming that is largely going unreported. Some city centre flats are still selling out at less than 50 per cent of their original price and may not recover in my lifetime. Someone, somewhere needs to find a good solution to help trapped owners in this situation.”

Supply of Property

Rightmove: “Our year-on-year statistics show the number of properties coming to market this month compared to the same period in 2014 is down by eight per cent. One factor is the lack of new-build supply over the last 20 years, exacerbated by current new home volumes still well below the levels reached just before the credit crunch. The historic new-build shortfall results in less housing stock available to come to market, while the current newbuild shortfall limits the number of existing property owners looking to sell their house to buy the limited number of suitable new homes available. (Aug 15).”
Home.co.uk: “The number of properties on the market in England and Wales is 11 per cent lower than in August last year and 39 per cent less than in August 2007. Whilst national supply levels are at an all-time low and trending down, a more detailed regional analysis of supply shows how this key market driver varies across the nation. The regions which have suffered the greatest reductions in supply over the last seven years have also shown the greatest price growth. The lack of supply is felt most keenly in London and the East of England, where volumes of properties entering the market are down 23 per cent and 16 per cent respectively. (Aug 15).”
NAEA: “The supply of available housing grew to meet increasing demand this month, with 25 per cent more housing stock available than in June. This is the highest that availability has been in two years, increasing from 44 in June to 55. (July 15).”
RICS: “New vendor instructions dropped back for a sixth consecutive month with a net balance of 22 per cent of contributors reporting a decrease. The decline was widespread with 9 of the 12 areas of the UK that we monitor experiencing a decline, led by a particularly sharp fall in East Anglia. Meanwhile, Northern Ireland and the North East of England were the only markets to see a noticeable pick up in new vendor listings. (July 15).”
Agency Express: “The Property Activity Index highlighted a decline in properties coming on to the market with only 2 of the 12 regions recording increases in new listings ‘For Sale’. The North West bucked the seasonal trend with a robust increase of 17.5 per cent, marking their best August since the Index’s first records in 2007. Wales also reported a healthy increase of three per cent recording their largest rise in properties ‘Sold’ since March earlier thisyear. (Aug 15).”
Kate says: “Interesting that RICs has a different view on vendor instructions to the NAEA, with one saying it’s up and another down. In contrast, Northern Ireland is definitely seeing a revival, both in prices and sales volumes, but it’s not reported accurately. This revival is definitely a recovery following a 50 per cent fall in prices, so it’s good news, but needs to be put into context. Agents and the new build industry, whether stock is from housing associations, councils or traditional developers, need to work together to promote the stock that is available now and in the future.”

Kate Faulkner, Property Market Analyst and Commentator www.designsonproperty.co.uk
Email: kate@designsonproperty.co.uk
Telephone: 01652 641722

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