Rightmove: “Home-movers need to act now to move by Christmas.”
NAEA Propertymark: “First time buyers reap the rewards of a slow summer.”
RICS: “Sales market remains broadly flat at headline level.”
Nationwide: “Slowing in annual house price growth in August.”
Halifax: “Annual house price growth rises to 3.7 per cent in August.”
LSL Acadata HPI: “Average house price in England and Wales now £302,251.”
LCPAca Residential Index: “Annual prices remain static whilst transactions continue to fall.”
Hometrack: “UK city house price inflation moderates to 4.2 per cent year on year ranging from +7.5 per cent to -4.0 per cent.”
Average prices across the indices vary from mortgaged-only prices from the Nationwide HPI of £214,745, through to marketing prices (ie not necessarily sold) from Rightmove of £301,973 and actual prices from LSL Acadata HPI of £302,251. Average sold prices from the UK HPI stand at £228,384 .
Our judgement is that the average inventory on the books of estate agents is likely to remain close to historic lows. RICS
Kate says: Between 2000 and 2018, average property prices increased each year by 6-10 per cent depending on the area. However, since 2005, even before the credit crunch, property price growth started to slow in many areas, reducing average annual property price growth to around 3 per cent from 2005 to today – half the levels people have been used to. In 2018, prices were always expected to slow, following rapid growth in the south and east of the country, with prices hitting new affordability buffers due to a tightening of lending criteria, and coupled with reduced demand from buy-to- let investors.
The highest average price for England and Wales is Rightmove’s asking price: £309,000 vs Nationwide’s mortgaged property sales price of £217,000, suggesting a 30 per cent difference.
YoY capital growth continues to slow with prices moving more in line with wage growth. Forecasts suggest this will continue for the rest of the year and for 2019, with an uptick expected in 2020.
Uncertainty in the economy and reports of constant fears over Brexit are likely to lead to people deciding to ‘stay put’, reducing stock on the market and demand.
The biggest danger to the market is stagnation… ie no-one moves!
COUNTRY AND REGIONAL SUMMARY
Kate says: The country differences across the UK remain vast over the last 10 years and even year on year. Average price changes over the last 10 years range from -42 per cent in Northern Ireland (even though prices are up 4.4 per cent YoY) to 28 per cent up in England, although this is mostly driven by London (up 60 per cent), the South East (38 per cent) and the East of England (up 39 per cent, mostly due to the success of Cambridge).
Regionally, variations still remain enormous, running from prices being down -9 per cent over the last 10 years in North East versus 60 per cent growth for London – despite recent falls.
Interestingly, both areas are seeing year-on-year falls of just under 1 per cent.
Within the regions there are even deeper ‘doldrums’. A report from Savills (Q2 2018) shows a 17 per cent fall in prices since a 2014 peak in Prime Central London, through to a 6.6 per cent fall in Prime North and East London.
Overall, all Prime London has fallen by 10.6 per cent.
RICS: “Feedback to the RICS survey continues to suggest a stronger market in Scotland, Northern Ireland, much of the north of England, the Midlands and Wales. The London Price balance was little changed over the month at -40 per cent but this does represent a shift from the reading of -66 per cent in April. The results for the South East and East Anglia are consistent with very modest price declines, while the data for the South West points to a broadly flat picture.”
LSL Acadata HPI: “Prices in the West Midlands which are up 3.3 per cent on the year, led by strong performance in Warwickshire, up 6.3 per cent annually, and Herefordshire, up 4.8 per cent. In addition the North East saw prices rise by 2.9 per cent over the year, with Darlington up 7.5 per cent. It was one of six unitary authorities to set a new peak in May, too, with others including Merseyside (up 2.5 per cent annually) in the North West, Bournemouth (4.6 per cent) in the South West, and Caerphilly (3.4 per cent) and Monmouthshire (up 10.9 per cent annually) in Wales.”
TOWN AND CITY DIFFERENCES
Edinburgh, Peterborough and Leicester top the year-on-year property price charts this month, with above-average long-term annual growth of 8 per cent or more.
It’s interesting that this shows almost no pattern at all, when prices in the past have typically rippled out from London to the Home Counties, then to the regions. Manchester is also performing well and is, by all accounts, currently an extremely busy market, but interestingly the annual growth is still below the long-term growth and, over the last 10 years, prices have failed to keep up with inflation (24 per cent growth vs 31 per cent inflation).
LSL Acadata HPI: “In July 2018, we estimate that there were 75,000 transactions – based on Land Registry figures – two per cent lower than our revised June total. This reduction in sales numbers needs to be viewed against the seasonal trend of the last twenty years, where a four per cent increase in sales volumes is the ‘norm’ for this time of year, so on a seasonally-adjusted basis, sales have declined by some six per cent. We estimate that transactions in the first seven months of 2018 are four per cent below the same period in 2017. The recent rise in the Bank of England base interest rate is likely to further reduce activity, and to result in a widening of the shortfall between the 2018 figures and those achieved in 2017.”
NAEA Propertymark: “Almost a third of sales (30 per cent) were made to FTBs in July, as the group took advantage of the quieter period. This was up from 29 per cent in June and is an increase of seven percentage points from July 2017 when less than a quarter (23 per cent) of sales were made to the group. However, the number of sales agreed per branch decreased overall in July; falling from nine in June to an average of eight last month.”
Bank of England: “Households borrowed an extra £3.2 billion secured against their homes in July. Net lending has been relatively stable over the past year or so, but this was the lowest monthly secured net lending since April 2017. Despite this, the annual growth rate for mortgage lending remained unchanged at 3.2 per cent in July, and has now been around three per cent since late 2016.”
UK Finance: “There were 34,900 new first-time buyer mortgages completed in the month, some 3.6 per cent fewer than in the same month a year earlier. The £5.8bn of new lending in the month was 1.7 per cent down year-on-year. The average first-time buyer is 30 and has a gross household income of £42,000.
“There were 33,700 new homemover mortgages completed in the month, some 7.9 per cent fewer than in the same month a year earlier. The £7.3bn of new lending in the month was 6.4 per-cent down year-on-year. The average home mover is 39 and has a gross household income of £56,000.”
PROPERTY DEMAND AND SUPPLY
Rightmove: “This month’s 2.3 per cent (-£7,218) fall in new seller asking prices maintains the historical trend of sellers coming to market in the peak summer holiday month pricing aggressively to try and secure quicker sales. The 2.3 per cent drop is slightly bigger than the 2.1 per cent fall in August 2017, with the major drag on the national average being the more subdued market in London and the commuter belt region of the South East.
If those two regions are excluded then the rest of the country has a monthly drop of 1.5 per cent. A look at the year-on-year figures show that new seller asking prices are muted at 1.1 per cent higher than a year ago, which helps buyer affordability.
Sales agreed numbers are broadly flat, down by 0.8 per cent compared to this time last year, and as 2018 progresses they are improving compared to their position earlier in the year.”
RICS: “It is perhaps no surprise that as speculation built ahead of the August Bank of England meeting (which was to see a quarter point rise in base rates) the headline New Buyer Enquiries series was little changed over the month with a net balance of +two per cent. The New Instructions measure similarly signalled a flat picture, following two months in a row of very modest increases.
We acknowledged, last month, that we harbour some doubts as to whether the pipeline of new supply into the sales market would continue to improve in the light of the feedback received on appraisals being conducted by valuers. For the record, the appraisal balance in July was once again firmly negative. As a result, our judgement is that the average inventory on the books of estate agents is likely to remain close to historic lows.”
Kate says: Transaction changes will be critical over the coming months to see what will happen to the market moving forward – across the country. Currently, all the trends seem to suggest the market will tighten. This, coupled with the uncertainty of Brexit and the squeeze on wages, is likely to exacerbate the current reports on the number of agents who are going to struggle into the future.