However, LSL reports that the figure is still up on an annual basis, with prices increasing 1.6% and all regions in England and Wales recording modest, but positive growth.
Flat prices are largely down to slower activity. In July, there was an estimated 75,000 transactions: 2% down on June and 6% lower than the seasonal trend. Transactions in the first seven months of 2018 are estimated to be 4% below the same period in 2017.
The annual rate of house price growth of 1.6% is below inflation, meaning that we are seeing a modest real-term decline in prices in many areas. Moreover, while there’s still some variation in the rate of growth between regions – from 3.3% in the West Midlands to 0.5% in the South East and East – the range is narrower than at almost any time since our records began in 2000.
What effect the Bank of England base rate rise at the start of August will have on this, however, remains to be seen.
Oliver Blake, Managing Director of Your Move and Reeds Rains estate agents said: “Whilst the market continues to be challenging all regions and most local authorities continue to show house price growth, proving its resilience.”
The average price of a property In London now stands at £625,529 at the end of June with prices falling in almost two thirds (21 out of 33) of the city’s boroughs on an annual basis. The biggest drops on an annual basis have been seen in the City of London, down 19.4% (albeit on a small number of transactions), Hammersmith and Fulham, and Southwark, both down 11.7%. In both Westminster and Hammersmith and
Fulham, sales of new builds in previous months or years can explain much of the swing in prices.
Overall, the most expensive borough remains Kensington and Chelsea, where prices are down modestly (1.9%) on an annual basis to £1,765,033, while the cheapest borough is still Barking and Dagenham, with an average price of 308,547, up 1.8% annually. London also saw the number of sales in the second quarter fall by 7% on last year, and it remains a mixed picture.
Of note are prices in the West Midlands which are up 3.3% on the year, led by strong performance in Warwickshire, up 6.3% annually, and Herefordshire, up 4.8%. In addition the North East saw prices rise by 2.9% over the year, with Darlington up 7.5%. It was one of 6 unitary authorities to set a new peak in May, too, with others including Merseyside (up 2.5% annually) in the North West, Bournemouth (4.6%) in the South West, and Caerphilly (3.4%) and Monmouthshire (up 10.9% annually) in Wales.
West Berkshire in the South East also set a new peak price, and with growth of 11.5% has seen the highest annual increase of any area. This is in large part due to a £9 million sale near Newbury, however, and performance in the region as a whole is weak: prices in the South East are up just 0.5% annually, and it accounts for the lion’s share of areas (7 out of 31) where prices have fallen over the year. Growth in the East of England is similarly weak, also at 0.5% annually.
Overall, however, 77 out of 108 unitary authority areas (71%) are still recording price rises over the year. On a monthly basis, meanwhile, June 2018 saw prices fall in 69 of the 108 unitary authority areas, but this is down from 73 in May. As well as West Berkshire, Monmouthshire in Wales has also seen strong growth, up 10.9% annually, despite already being Wales’ most expensive local authority area by average house price (£283,144 against a Welsh average of £177,056).
At the other end of the scale, on an annual basis, the authority with the largest reduction in prices is Halton, in the North West, which includes the towns of Runcorn and Widnes. Prices were down 6.1% annually, largely due to an absence of the new build properties that helped boost prices last year.
Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst, comment: "All the evidence suggests that house prices are stabilising. The annual rate of house price growth now stands at 1.6% when including London and the South East, or at 1.2% when excluding these two areas. The change in this rate over the last two months amounts to just 0.2% when including London and the South East, or 0.9% if London and the South East are excluded.
Whichever series is selected, the main story remains that house price growth at the national level is not changing significantly from month to month. Although there are monthly variations, the underlying trend is toward flatlining. Given that the rate of increase is below inflation, this means we have a very modest real-terms decline in prices.
On a monthly basis, the overall rate of house price inflation in July fell again, and this month by -0.2%. This is the fifth month in succession in which the rate was negative, although the rate of decline has fallen over the last two months.
The Housing Market
Clearly, we are reporting on trends prior to the recent increase in the Bank of England base rate on 1st August, which we would expect to result in a further reduction in housing market activity. The picture painted by our own analysis above and below is of a market which is still - in broad terms - slowing and stabilising. The government’s own quarterly data on stamp duty receipts issued on 31st July showed that transactions and receipts were down on those of 2017. Of course, the first time buyer exemption contributes to this. Over 52,000 buyers claimed the exemption in the latest period, making a total of more than 120,000 with relief granted, and having a value in excess of £280 million.
The Bank of England has also added its own commentary on the housing market in the latest Inflation Report (August), released as part of the MPC commentary around the interest rate decision. The Bank argues that “the weakness in the housing market appears to be concentrated in London”.
The Bank has suggested that although London has tended to lead other areas in the past in terms of market prices and activity, it sees the current weakness of London as specific to the capital, and thus having limited relevance to other parts of the UK. The Bank highlights the slowing Buy-to-Let market, Stamp duty and the range of Brexit-related effects - and not least migration as the key drivers.
The Bank notes that 12% of households in London are EU nationals, and that they occupy 20% of the PRS in the capital. Looking ahead,
the Bank concludes that in the near term, income growth should support the housing market and see HPI rise “to a little over 3% by mid-2019”.
With Parliament now in recess there was the inevitable rush of publications in the last few weeks. One of great significance to housing was the release of the new National Planning Policy Framework (NPPF) for England. Government has sought to further improve the planning system, albeit by strengthening central controls which in turn pose challenges to the sensitive issues of local control. Although government recognises that household numbers are being adjusted downwards to reflect Brexit etc, it is still insisting on meeting the 300,000 homes target. The pressure to deliver more homes continues, and we can expect further announcements on housing supply over the next few months and not least at the Autumn budget.
The latest English Housing survey data highlight the reasons why. The percentage of home owners has remained stable at 63% over recent years, but it is down from 71% in the early 2000s. The number of mortgaged home owners is down from a peak of 8.5 million in 2000 to just over 6.5 million in 2016-17 – a fall of 2 million. This reflects not only the fall in younger people entering the tenure with a mortgage, but also the ageing of the population with more households becoming outright owners. The number of outright owners has gone up from 5.7 million in 2000 to 7.8 million in 2016-17.
Housing Transactions
In July 2018, we estimate that there were 75,000 transactions - based on Land Registry figures - 2% 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 4% increase in sales volumes is the ‘norm’ for this time of year, so on a seasonally-adjusted basis, sales have declined by some 6%. We estimate that transactions in the first seven months of 2018 are 4% 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.
