11 buyers for every property!

HEADLINES

Rightmove: “Lowest annual increase since 2013 gives warning to over-pricing sellers.”
NAEA Propertymark: “11 buyers chase every property.”
RICS: “Prices continue to rise steadily at the national level.” Nationwide: “UK house prices continued to rise steadily in February.” Halifax: “Annual house price growth declines to 5.1 per cent.”
LSL Acadata HPI: “Highest house price growth for a year with Birmingham and Merseyside experiencing new peak.”
Hometrack: “City level house price growth 6.9 per cent year on year down on 7.9 per cent recorded in January 2016.”

KEY FACTS

Average prices across the indices vary from mortgage only prices from Nationwide HPI of £205,846, through to marketing prices (ie not necessarily sold) from Rightmove of £306,231, a 48 per cent difference. Average sold prices from UK HPI stand at £236,424.

Kate says: Despite a fear of the property market slowing dramatically and even going into a slight ‘reverse’ gear, the figures and feedback in these early days from indices and agents does seem to continue to be positive, even if growth is weaker.

A surge in new buyers means that competition is rife, with an average of 11 buyers chasing each property.

Rightmove suggests that properties are coming onto the market at the “smallest price rise at this time of year since February 2009,” up just two per cent and warns sellers and agents to price fairly, suggesting that they are “40 per cent more likely to sell if priced right when they first come to market” and in their experience, “buyers are reluctant to enquire if property is priced just a few per cent too high.”

LSL Acadata HPI reminds us that, “we will need to wait until April 2017 before the changes associated with the introduction of the stamp duty surcharge drop out of the annual statistics, and the rate of annual house price growth better reflects the underlying trends in house prices that currently appear to be prevalent.”

REGIONAL DIFFERENCES

RICS: “Respondents in most regions reported an increase in prices with the strongest growth in the North West of England and notable improvements in Northern Ireland as well. London and the North East of England remain the exceptions with momentum in the former deteriorating for the fourth consecutive month. In fact, surveyors have now reported a fall rather than a rise in London prices for a full year.” LSL Acadata HPI: “In January 2017, in eight regions the annual rate of house price growth reduced compared to the previous month. Only in the South West did prices rise at a faster rate than December, with five areas experiencing new peak prices in the month. The West Midlands remained at the same level as the previous month, with annual price growth at 4.2 per cent.

Of the eight regions where price growth slowed, the largest reduction, of -1.3 per cent, was in the East of England. Despite this fall, the East of England still remains the region with the highest rate of house price inflation for the ninth month in succession, at 5.9 per cent, with its London commuter areas of Luton and Essex setting new peak prices in the month. The North East is the only region with negative growth in prices on an annual basis.”

Hometrack: “City level house price inflation is running at 6.9 per cent while year on year growth in London, at 6.4 per cent, the lowest for 42 months, is set to slow further. “The markets with the highest capital values in London continue to register modest year on year price falls of up to three per cent, as weaker demand feeds into pricing at a faster rate than in outer London. We expect the rate of house price inflation for the London city index to to slow over 2017 towards 0 per cent.

“Manchester is the fastest growing city outside southern England where prices are up 8.3 per cent in the last year on an average price that is a third that of London.”

Kate says: Prices in England continue to forge ahead – on average. However, we need to understand the role of cash in property transactions and how inflation impacts on property values, especially from an investor’s perspective.

Taking the 21 per cent increase in property prices in England since the height of the market, this may look like healthy growth. But take into consideration that inflation, ie the cost of living, has gone up by 27 per cent since then, it’s actually not great news as the 50 per cent of people who own property with cash have potentially seen a real fall in what their property will actually purchase should they cash it in.

This situation gets better or worse depending on where and when you bought. If you bought near or at the height before the crash, areas such as Northern Ireland and Scotland still haven’t recovered to their peak nearly 10 years ago now, although it looks like Wales may achieve this, this year.

According to Hometrack’s City Index, “The growth in city house prices since 2009 has been highly varied ranging from 13 per cent to 85 per cent. There remains material upside for house prices in large regional cities outside London, showing the huge divergence in property price growth not just regionally, but by town and by postcode.”

With changes to buy-to-let taxation, it’s important than anyone investing cash in property longterm has an analysis to see whether they’d be better off re-mortgaging, even a little, to see if they could secure greater returns on their investments, rather than the current capital losses.

Nationwide looks further into cash purchases and their impact on the market. Their current data shows that in 2005, cash purchases accounted for just 20 per cent of transactions, this grew to a peak of 38 per cent in Q1 2016 – prior to the stamp duty hike. Currently the South West has the highest level of cash purchases (a big area for second homes) at near 45 per cent while Scotland has the lowest, 30 per cent.

The question remains whether post April, will the regions outside of London and the South have the double digit growth that we’ve seen in the past or are we now truly into an era of low priced growth?

PROPERTY TRANSACTIONS

Property prices are driven by supply and demand, which is why performance is so localised, down to a property on a street.

LSL Acadata HPI: “The number of housing transactions in February 2017 in England & Wales is estimated at 62,000. This is 0.4 per cent lower than January’s total, and goes against the seasonal trend of an increase of 3.2 per cent for this time of year. However, sales volumes have been higher in the first two months of 2017 than in both 2015 and 2013.”

NAEA Propertymark: “In January, three in ten (30 per cent) sales were made to FTBs, a slight decrease from December when 32 per cent of sales were made to the group.”

Bank of England: “Approvals of loans secured on dwellings for house purchase increased for the fourth consecutive month and, at 69,928, were the highest since February 2016.”

BBA: “House purchase approval numbers of 44,657 were 2.5 per cent lower than in January 2016 but 2.5 per cent higher than December and above the 2016 monthly average of 41,320.”

Kate says: Sales appear to be pretty robust so far and certainly looking at the latest set of quarterly data from LSL (apart from London and the South East). However this will go completely awry when March’s data is included due to the huge upsurge in demand for second homes prior to the additional three per cent stamp duty rise.

It is good to see though, that much of the growth in transactions since the credit crunch is from first time buyers. According to the NAEA, “In January, 30 per cent sales were made to FTBs” suggesting that future transactions are more assured with these sales turning into second steppers of the future as well as more FTBs being encouraged into the market by the initiatives such as the Help to Buy ISA, Starter Homes, more Shared Ownership and Help to Buy (although the latter is not just for FTBS). Agents need to continue this year to help keep the market moving by targeting existing tenants to see if they can be tempted to buy, while re-filling tenanted stock with the increase in households wanting /needing to rent. Being aware of local schemes and reaching out to potential FTBs who may well think it is ‘impossible to buy’ when in reality, properties in many areas could be considered to be ‘good value’ in comparison to the past.

SUPPLY AND DEMAND

RICS: “New buyer enquires seem to have gradually lost steam over the past few months ending February on a flat reading. At a regional level, momentum remains strongest in the South West and weakest in the East Midlands. Meanwhile, the deterioration in the supply of new listings reported in January was confirmed once again this month with 14 per cent more respondents reporting a decline in instructions relative to the prior period’s 12 per cent. The pace at which new instructions are dwindling appears to be particularly acute in the North West of England and West Midlands.”

Kate says: It’s scary that despite the current government doing what it considers it can to provide more stock for sale that the RICS is continuing to record ‘the average stock per surveyor just shy of a record low.’ This in turn continues to see prices rising. While supply continues to be constrained, it will continue to drive the market forward from a price perspective as long as people have the money to spend.