House price growth remains steady for third month

The latest data and analysis from LSL has revealed that house price growth has remained steady at 1.8% for the third consecutive month.

Related topics:  Property
Warren Lewis
17th September 2018
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According to the report, monthly prices rose modestly in August, rising just 0.1%, but it is enough to put an end to consistent falls seen every month since March.

Regional variances are still very evident. Annual price increases, by contrast, remain steady, holding at 1.8% for the third month in a row. That’s up from a 1.7% annual increase in May, but a fall from 3.8% in January and 4.5% last August.

The 1.8% increase is significantly below inflation of 2.3% (CPI), meaning real-terms falls. However, every region continues to show nominal increases in annual prices.

LSL data shows that the average home in England and Wales is now worth £303,199, up £5,300 on the previous year.

London posted an annual price increase of 3.6% in July. The West Midlands, East Midlands and North East also all continue to record rises above inflation. The South East, where growth is weakest, nevertheless saw its annual growth increase in July, bucking the trend nation-wide.

Broadly, though, the market is flat across regions, and transactions are low – down 0.1% in August compared to July with an estimated 79,900 completed. Annually they are estimated to be down 4% on the same period in 2017, and at their lowest in five years.

The real-terms fall in prices in many regions is likely to help first time buyers, however, and many expect these to be the dominant players in the market this year. Housing related announcements expected in November’s Autumn Budget may also offer more help.

Oliver Blake, Managing Director of Your Move and Reeds Rains estate agents said: “The slower market should help ease the affordability challenge faced by many buyers. Even in London, where an average increase was recorded over the month, homes in most boroughs are significantly cheaper in real terms than they were this time last year.”

The capital started the year recording the biggest monthly fall in prices since the financial crisis, acting as a significant drag on the market. Now prices are up 3.6% in the year to July at £625,040.

Some other areas also continue to see good growth. Redbridge up 6.5% annually to £477,196; Kensington and Chelsea (still the most expensive borough with average prices of £1,834,640) is up 7.5% annually; Merton is up 10.1% to £659,305; and Lambeth is up 5.7% to £660,895.
More areas have seen prices drop, however, with prices falling in 21 out of 33 boroughs in London.

The biggest fall was in Westminster, which sits between Kensington and Chelsea and the City of London to make up the top three by price in the capital. Values in the borough are down 11.8% annually, largely a result of its failure to repeat the significant number of registrations of new build flats that boosted prices last year.

Outside London, the top regions for growth remained unchanged in July, with the West Midlands (up 2.9%) annually, East Midlands (up 2.7%) and North East (up 2.6%) topping the table. Growth rates in the first two slowed, while they remained unchanged in the North East, but all three continued to report increases above inflation.

The West Midlands conurbation saw prices up 4.7% – among the strongest growth of any unitary authority area. Other strong performers include Tyne and Wear (up 4.8%) and Darlington (up 4.4%) in the North East; and, to a lesser extent in the East Midlands, with prices in Leicestershire up 3.7% annually.

They are all put in the shade, however, by surging prices in some lower performing regions: Bournemouth, up 6.4% against 1.2% for the South West region as a whole; West Berkshire, bucking the trend in the South East (where growth is just 0.2%) with a 12.7% annual price rise; and Monmouthshire, already the most expensive local authority area in Wales, topping the table. With overall prices up 14.0% annually (against 2.1% for all of Wales), the average price paid for a detached home in the area has risen £60,000 from £325k in July 2017 to £385k one year later.

The South East, with the weakest growth, also saw the biggest drop over the year, in Slough, where prices are down 6.6% annually. That is largely a result of a lack of new build homes in the data, with just one new build sale recorded at the Land Registry for the period between June and August, compared to 43 in the same period last year. This may change as the Land Registry figures for these months are updated.
Despite the relative slowdown across regions, the clear majority of areas still continue to grow, with almost three quarters showing annual increases in prices in the year to July.

Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst, comment: "A flattening market might generally be viewed positively, but of course it does impact on those who have bought at peak prices and not least those who have used the Help to Buy scheme and bought a newly-built home. Typically, new purchasers have less room to negotiate on price without taking a loss. In the case of Help to Buy purchasers, any loss is of course shared with the government (just as any increase in the value is shared).

The recent extensive commentary on Help to Buy and the publication of a Home Builders Federation report highlighting the achievements of the current scheme do underline the clear tensions that are building in the run-up to the November Autumn Statement, when we can reasonably expect the government to set out its plans for the scheme post-2021. Various options have been canvassed by a variety of parties - from retention, modification and scrapping - the last seems unlikely, given timings and Brexit. The very open nature of the scheme and its impact on new build prices have been the subject of criticism, but it has boosted housing supply – a core policy objective.

Given the consultations triggered by the very green Housing Green Paper that was issued in August, it is likely that there will be other housing-related announcements in November. The pressure to do more continues, and not least in relation to the private rented sector where many younger and older households are finding their long-term homes. There is little hard data that suggests landlords are selling up in numbers on the back of the tax and policy changes introduced in recent years. However, there are fewer purchases of investment property, and considerable rethinking around a sensible portfolio which can return profits despite the changes which are working through over the next few years.

All in all, the pendulum has swung towards first time buyers, and experts suggest they will be the dominant group in the market this year despite all the continuing negatives we have highlighted. The government now needs to signal that it will continue to work to support new entrants to home ownership, and to ensure that we can bring more certainty to the macro-economy as soon as possible. The housing market is a key component of that economy, while at the same time being hugely reliant upon it. Transaction costs and most notably stamp duty remain high, despite recent concessions, and as we show below transactions remain reduced by historic standards. Ideally we want more transactions but without surging prices, in order that households may better adjust homes to their personal circumstances."

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