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Potential buyers priced out of the market

Designs on Property tracks and summarises the property indices. Kate Faulkner says, “Despite better volumes and faster selling times, prices aren’t showing much movement. Improved transaction levels typically mean price rises – but not in this market.”

Kate Fualkner

Link to Kate Faulkner


Rightmove: “No Brexit deal yet, but families are doing housing deals.”
Home.co.uk: “Brexit blues make for slowest Spring market in five years.”
NAEA Propertymark: “Lowest March on record for supply of properties available to buy.”
RICS: “Market sentiment little changed following Brexit extension.”
Nationwide: “UK house price growth remained weak in April.”
Halifax: “Average house price now £236,619.”
LSL Acadata HPI: “A split across England and Wales.”
LCPAca Residential Index: “Weakest price growth since 2013.”
Hometrack: “UK city house price growth slows to 1.7%.”

Key facts

Average prices across the indices vary from mortgaged-only prices from the Nationwide HPI of £214,920, through to marketing prices (ie not necessarily sold) from Rightmove of £305,449 and actual prices from LSL Acadata HPI of £303,073. Average sold prices from the UK HPI stand at £226,234. There is a 41% difference between the highest average price from LSL which include cash sales and the lowest from Nationwide, which reflect mortgaged homes.

Scotland is perhaps the surprise this month with the figures suggesting a backward step and no growth since 2007/8.

Kate Faulkner imageKate says: “Normally around this time of year the market is buoyant, in fact looking back over past reports, I was often saying, post the credit crunch, the market was a ‘game of two halves’ with the first half of the year rising, and the second half of the year falling back. So far this year, prices have pretty much ‘limped along’ from one month to the next showing little growth. There has been some criticism of the Halifax data and I agree, there is an issue. We noticed when the recession hit their data had become erratic and didn’t match other reports, especially when it came to month on month/year on year changes. However, that doesn’t mean all their data should be ignored, the longer term analysis they do on seaside towns, first time buyers, best places to live etc. are often useful and good PR the industry can use with consumers.

UK HPI Market analysis by country

Country wise, Wales and Northern Ireland continue to do well year on year, although prices haven’t really changed much for 12 years now in Wales, while in Northern Ireland, the average price being just over £136,000 versus the low of £97,428 is an amazing recovery – although sadly not a rise people can benefit from if they bought at the average £225,000 seen before the crash. Scotland is perhaps the surprise this month with the figures suggesting a backward step and no growth since 2007/8. It appears this is mostly down to prices falling for flats rather than houses and Aberdeen is one of the toughest markets while areas like Midlothian seem to be thriving. According to the Land Registry “prices increased over the last year in 22 out of 32 local authority areas”. Scotland is such a diverse mix of geographies it’s important to focus on local market expertise rather than averages and it’s worth noting the RICS gives a much more positive view of the Scottish market.

Regional differences

“The regions with high growth since the credit crunch are now falling back, with most of the other indices such as the RICS and LSL suggesting the South West is now following falls such as those seen in London and the South East. Meanwhile, Home. co.uk is showing that this is reflected in the time to sell in these areas. The anomaly is the North East. Despite better volumes and quicker selling times, prices don’t seem to be showing much movement. In the past, improved transaction levels typically meant price rises on the way and vice versa, but in our ‘new era’ of property market performance, many of these ‘old trends’ aren’t applicable, again showing the need for the property industry to promote what’s really happening in the property market at a local level.”

Home.co.uk: “London’s annualised losses have notched back again from 3.2% to 3.1%, although the average price remains 6.9% lower than the peak set in May 2016. Asking price falls in the South East also continue to ease (now 1.7% year-on-year) but worsened in the East (2.9%) where the post-boom price correction is fully underway. The East Midlands is also slowing, and annualised growth has fallen to just 2.4%.”

RICS: “The regional breakdown again shows prices under pressure particularly in London and the South East, while the South West has now consistently returned negative readings on this measure for the past six months. At the same time, feedback across Northern Ireland and Scotland continues to buck the trend, with respective net balances of +47% and +28% of respondents reporting a further rise in prices.”

LSL Acadata HPI: “In February, there are four regions where annual price growth is negative, with three of these being located in the south east of England. For the second month running the largest fall in prices, of -1.9%, occurred in the South East, with the North East, at -1.8%, trailing close behind.”

Hometrack: “Weaker market conditions are spreading out from London into cities across southern England as affordability pressures grow and moving costs increase. All six cities covered by the index in southern England, outside London, are recording the lowest growth rates since 2012 – ranging from -0.6% in Oxford to +2.2% in Bristol. The cities with the highest rates of price growth at present are those where the recovery in prices since 2008 has been weakest and where affordability levels remain most attractive. Liverpool currently has the highest annual rate of house price growth (5.8%) with three other cities registering price growth over 5% – Leicester, Glasgow and Manchester. House prices in London are unchanged compared to 12 months ago.”

Property transactions

Most commentary focuses on what is happening to property prices, but property prices are driven by what happens to supply and demand, which is why performance is so localised, pretty much to a property on a street.

Sustained falls in new buyer enquiries are a key factor behind the weaker price trends in parts of the country.

To some extent, the government is likely to be ‘patting itself on the back’ for succeeding in growing home ownership with more first time buyers coming into the market. According to Nationwide, numbers are not far off what they were before the credit crunch, this is despite a relatively uncertain market at the moment. Hometrack says, “Falling sales volumes after a prolonged period of high house price growth is part and parcel of the unfolding housing cycle. The reality is that the more house prices increase over time, the more buyers are priced out of the market through a mix of affordability factors and higher moving costs.”

NAEA Propertymark: “After an increase in the number of sales made to FTBs in February, sales to the group fell from 30 per cent to 26 per cent in March. This is the same level as recorded in March 2018. “The number of sales agreed per branch remained at seven in March. Year-on-year, this is a slight decrease; in March 2018 eight sales were agreed on average per branch.”

Bank of England: “Mortgage approvals for house purchase, which give an indication of future mortgage lending, fell to 62,300.”

UK Finance: “There were 24,880 new first-time buyer mortgages completed in February 2019, 4.1 per cent more than in the same month in 2018. 23,660 homemover mortgages were completed in the month, 0.1 per cent more year-on-year. While homemovers are at the same levels they were at this time last year, this is the fifth consecutive month of year-on-year growth in first-time buyers.”

RICS: “The sustained fall in new buyer enquiries of late has been a key factor behind the weaker price trends in parts of the country and demand reportedly fell once again in the latest report. The pace of decline was similar (in net balance terms) to that seen in the previous month, while virtually all parts of the UK recorded a fall. On the back of this, the survey’s indicator on newly agreed sales remained in negative territory for a ninth consecutive month.

“Contributors continue to cite a sharp decline in new instructions coming onto the market at the headline level, with the latest net balance of -35% representing the poorest reading going back to June 2016. The subsequent lack of stock on the market continues to present potential buyers with limited choice and is likely playing a significant role in holding back activity at present. Moreover, the number of appraisals being undertaken remains down on an annual comparison, not boding well for the near term pipeline.”

NAEA Propertymark: “The number of house hunters registered per estate agent branch rose by 17 per cent in March, from 252 to 296. This is a similar level to January this year, when 297 prospective buyers were recorded per estate agent branch. Year-on-year, demand was at the lowest level recorded for the month of March since 2013, when 286 house hunters were registered. Housing demand also fell from 308 in March 2018 and 397 in March 2017.”

July 1, 2019

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