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Time to talk the talk!

Designs on Property tracks and summarises the monthly property indices. Kate Faulkner says, It’s time for estate agents to really engage with their local community – people won’t be walking through the door as much, so it’s time to go out and give helpful advice.

Kate Faulkner
HEADLINES

House imageRightmove: “Second-stepper sellers most likely to find a buyer before Christmas as prices jump 1.1 per cent”
naea | propertymark: “Estate agents agree – ‘house buying process is outdated.’”
RICS: “Demand backdrop continues to deteriorate.”
Nationwide: “Slight pick up in annual house price growth in October.”
Halifax: “Annual house price growth rises to 4.5 per cent.”
LSL Acadata HPI: “Growth in house prices slows yet remains positive in many areas.”
Hometrack: “City house price inflation is running at 4.9 per annum down from six per cent a year ago.”

KEY FACTS

Average prices across the indices vary from mortgaged only prices from the Nationwide HPI of £211,085, through to marketing prices (ie not necessarily sold) from Rightmove of £313,435, a 48 per cent difference. Average sold prices from the UK HPI stand at £243,520.

If people panic and become desperate to move, prices may fall more, creating bargains for the brave.

Kate says:
Kate Faulkner imageIf you iron out the ‘average’ property price growth from 2000, each year property prices grew by six-eight per cent across the UK. With inflation running at an average of three per cent and some years offering price growth in double digits of 25-35 per cent, in the past property has given great investment returns. People have made money from property since 2000, whether or not that was their aim. The figures since 2005 show the stark difference in property performance across the UK with six-eight per cent annual increases dropping to an average of just 3.6 per cent (based on UKHPI data), pretty much meaning price growth has halved. UK HPI data still shows a 5.3 per cent growth, but his is likely to fall back to the 1-2.5 per cent levels the other indices are now showing. The question is how long will it take the public to realise that property is not the money-maker it has been in the past? Or will their love of property continue to blind them into thinking it will always be the ‘best place to put your money’.

REGIONAL DIFFERENCES

Having seen the national picture show tiny amounts of property price growth, the starkness of the differences by country and region is incredible, yet hardly mentioned by the media. The latest BBC report on Radio 4 You and Yours showed that 58 per cent of wards across England and Wales had lower house prices than 10 years ago – taking into account inflation. And our stats show that Wales and Scotland on average haven’t grown at all for 10 years, even though they have seen three-four per cent growth year on year. Northern Ireland has clearly had its ‘property price bubble burst’ yet still the media dominate their headlines with ‘housing is unaffordable’.

Kate says:
It’s really time now for the property industry to think about what it can do over the coming years to help people understand the reality of what’s happening. Property is more affordable in many areas. First-time buyers can get on the ladder (although it’s tough in areas like London and the south) and although welcome, the Bank of Mum & Dad is not necessarily a ‘need’ but a ‘luxury gift’ our third generation homeowners can afford to give. For those who don’t have access to the Bank of Mum and Dad, Help to Buy schemes can be useful.

Agents and lenders have a choice; continue to allow low transactions based on myth and nonsense about affordability and stamp duty in some areas of the country or make a concerted effort to help solve people’s housing questions and problems at a local level and act as their property adviser, rather than just sell and let properties. People need more help and the industry needs more transactions in both the sale and rental market. From my perspective, local experts sharing local knowledge about the reality of their property market is a must if we aren’t going to see more transactions fall and possibly see prices dip over the coming year. Whether a homeowner, tenant or an investor, now is the time for estate agents to really engage with their local community – people won’t be walking through the door as much, so it’s time to go out and give helpful advice, even if it doesn’t deliver a direct lead there and then.

RICS: “Respondents in London continue to report downward pressure on prices, with the net balance coming in at -63 per cent (the poorest reading since 2009). Similarly, the price gauge remains negative in the South East (albeit to a significantly lesser extent than in the capital), while East Anglia and the North East also returned readings below zero.

By way of contrast, the price balances elsewhere remain generally firm, with the North West of England, Wales, Scotland and Northern Ireland all returning numbers consistent with further house price gains.”

LSL Acadata HPI: “In Greater London, prices fell by 0.8 per cent in August to take the average down 0.7 per cent on the same time last year, however the fortunes of the individual boroughs vary widely. The 11 boroughs in the top third of the market have seen prices fall an average of 2.5 per cent in the last 12 months; the 11 mid-priced boroughs are down 0.8 per cent; and prices in the cheapest third have continued to rise, by 2.7 per cent. The UK is still seeing solid growth in the East of England, up 4.5 per cent annually, and the South West, up 4 per cent. The North West and East Midlands are also seeing good figures, up 3.9 per cent and 3.7 per cent, respectively. Wales, the West Midlands and Yorkshire and the Humber all show more modest growth although the annual rate in these regions has increased.”

Hometrack: “Across the 20-city index, annual growth ranges from -1.8 per cent in Aberdeen to +6.7 per cent in Edinburgh. There are five cities where the current level of nominal house price growth is below the rate of consumer price inflation – Aberdeen, Cambridge, Oxford, London and Cardiff.

“While most cities are registering house price growth below that a year ago, there are six cities where the annual rate of growth is higher, most notably in Scotland. Edinburgh is the fastest growing city covered by the index (6.7 per cent), overtaking Manchester (6.5 per cent) and Birmingham (5.9 per cent) where the rate of inflation has moderated slightly. Glasgow has also recorded a marked increase in the rate of house price inflation from 1.8 per cent a year ago to 5.3 per cent today.”

PROPERTY TRANSACTIONS

Most commentary focuses on what is happening to property prices, but as anyone in the property industry knows, 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.

LSL Acadata HPI: “We estimate the number of housing transactions in September 2017 in England & Wales at 63,000, based on Land Registry numbers and their methodology for accounting for domestic property sales. This is down by 22 per cent on August’s total, however, transactions in August were eight per cent higher than might be expected at that time of year.”

naea | propertymark: “Despite supply and demand for properties both increasing, the number of sales agreed per branch remained at eight in September – the same as July and August. Sales made to FTBs remained at 23 per cent in September, the same as the previous two months.”

Bank of England: “Mortgage approvals for house purchase fell slightly to 66,232 in September, close to their recent average, with approvals for remortgaging at 47,598, which is an increase on the previous month.”

UK Finance: “House purchase approvals of 41,584 in September were a little stronger than the monthly average of 41,006 over the previous six months and seven per cent higher than in September last year.”

PROPERTY DEMAND AND SUPPLY

RICS: “In terms of activity, the New Buyer Enquiries series continued to signal a softening in demand, with the national net balance coming in at -20 per cent (unchanged from September). Likewise, agreed sales were also reported to have fallen, as 20 per cent more respondents noted a decline in transactions over the month. What’s more, Wales, Scotland and the North East were the only areas to have seen any pick-up during October, while sales trends were either flat or negative across the rest of the UK. “Following a couple of months in which new instructions had held broadly stable, the latest results point to a renewed deterioration in the flow of fresh listings coming to market. Even so, given the drop in average sales per estate agent branch, stock levels have now risen slightly from the record low seen in June earlier this year.”

Kate says:
It is likely to take until February/March to know what is really likely to happen to the 2018 property market. RICS is always a great lead indicator of whether a market is picking up or slowing and this month’s report certainly indicates that both demand and supply is softening, suggesting transactions are going to fall. As ever, if demand falls as much as supply, then prices may just stagnate, whereas if people start to panic a little and become ‘desperate’ to move, this could start to drive prices down further and may mean some bargains available for brave investors.

The reality remains we are in a situation where our population is rising and the need for properties to buy and to rent is increasing, but people can only afford to pay so much and if there is a lack of properties to move into, we are likely to see a continued rise in stagnation as people ‘stay put’ and in homelessness at the vulnerable end of the market.

December 4, 2017

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