New figures from Your Move and Reeds Raines have shown that the rate of annual house price growth has slowed for the tenth successive month in March to 0.7%, compared to 5.1% a year ago.
According to the data, average prices in England and Wales are now £301,490, up £130 on a month earlier and just £1,985 up on a year ago.
The market remains starkly divided, however, with prices falling in London and the South East but continuing to grow elsewhere. In fact, six out of the ten regions have recently set new peak average prices.
Oliver Blake, Managing Director of Your Move and Reeds Rains estate agents, said: “The slowdown in London and the South East is now well established. Yet the performance of many of our key cities and regions elsewhere shows that there’s still life in the market yet.”
The market’s significantly slowed since its peak in February 2016, when house prices were growing at 9.0% annually, but the slowdown is much more pronounced in London and the South East than elsewhere. Excluding those two regions, the rest of England and Wales has seen prices grow at a more solid 2.6%, and other cities continue to power on, such as Bristol, with 8.4% annual growth.
Even within London, there are striking exceptions to the general trend: Kensington and Chelsea, for instance, has seen prices increase by close to a third in the last year.
And, whilst transactions levels are down, with an estimated 63,500 completed in March, that’s 6% higher than February.
Prices in London fell for the third month in a row in February, dropping by 0.7% to leave the average property in the capital worth £602,539, down 1.5% on last year.
Unlike previous months, price falls are no longer concentrated in the most expensive boroughs: the top 11 of London’s 33 boroughs have actually seen the smallest fall over the twelve months to March, down just 0.2%, compared to 4% among the mid-priced boroughs and 0.3% in the cheapest 11.
This is, however, almost entirely due to a massive 30.7% annual increase in the average price in Kensington and Chelsea, London’s most expensive borough – and that largely the result of just seven high value property sales. These transactions, each for prices over £10 million, pushed the average price in the borough to a new peak of £2,570,950. By contrast, other high end areas have seen big falls in the last 12 months, including a 15.9% drop in prices in Wandsworth, 14.7% for Richmond upon Thames and 11.4% in the City of London.
Overall, cheaper property in London does remain more robust, with the 11 lowest priced areas accounting for almost half the 11 boroughs to still report increases in the last year. That includes the two very cheapest – Bexley, and Barking and Dagenham (with prices up 3.4% and 3.3%, respectively). Only Redbridge, the 12th cheapest borough in London, grew stronger, up 6.2%. Redbridge was also the only borough, other than Kensington and Chelsea, to set a new peak average price in the month.
Outside London, it is hard to spot the slowdown in property prices. At least nine of the major cities in England & Wales set new peak prices in February, led by Bristol in the South West with 8.4% annual growth, but with cities across England and Wales showing strong growth. They include Merseyside (up 5.7%) and Greater Manchester (5.1%) in the North West; Leicester (5.8%) and Derby (4.0%) in the East Midlands; the West Midlands conurbation, which includes Birmingham (3.5%); West Yorkshire, with Leeds, in Yorks and Humber (3.7%); and Cardiff in Wales (up 5.8%).
More generally, many of the country’s regions continue to record solid growth in prices, with the North West still leading the way. Growth in its two major population centres is supported by strong performance elsewhere, with 10.3% annual growth in Warrington and 14.1% in Blackburn with Darwen, the fastest annual growth outside Rutland – up 16.5%, but based on the smallest monthly number of transactions of any of the 108 unitary authorities in the country.
The East Midlands also has more than Rutland to sustain it, though. Nottingham (up 6.9% annually), Nottinghamshire (5.6%) and Leicester (5.8%) have all grown strongly in the last year. As a result, the region has now overtaken the South West as the second fastest growing market – if only just. Average prices in the latter are up 3.5% annually, due not only to Bristol’s performance, but also good performance from Bournemouth (6.2%), Cornwall (5.6%), Torbay (8.4%) and North Somerset (12.7%).
The last of these is among those bucking the downward trend in transactions, too: over the three months to the end of February 2018, it saw an 18% increase in transactions compared the same period the year before – equal to the increase in Hartlepool and second only to the increase in Hull, where transactions rose 67%, following a slow period the year before.
Overall there’s significant strength across the market in England and Wales. Almost three quarters (79 of 108) unitary authority areas recorded price rises over the last year, and 35 set a new peak average price in February.
Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst, comment: "The retreat in house prices continued in March, and this is now the tenth month in which the annual rate of house price growth has slowed. The average annual rate now stands at 0.7% when including London and the South East, or at 2.6% when excluding these two regions. It peaked in February 2016 - at 9.0% - including London and the South East, or at 6.7% without, just prior to the introduction of the 3% surcharge on second homes and buy-to- let properties. Subsequent to the introduction of this tax, the rates of price growth have been falling, and at an accelerated rate since September 2017.
However, England & Wales are divided into two distinct groups, with Greater London and the South East experiencing price falls on an annual basis, while the remaining seven regions and Wales are all seeing a positive movement in their average house prices over the year. Indeed, six GOR areas in the ascendancy have recently set new peak average prices, being the North West, the East Midlands, the South West, Yorkshire and the Humber, the West Midlands and Wales.
The average price of a home in England & Wales now stands at £301,490, which is a modest £130 gain from one month earlier. However, some 67 unitary authority areas / counties saw prices rise in the month, which represent some 62% of the 108 areas which we monitor. The headline change in price of just £130 for England & Wales as a whole masks the widespread differences that exist across the various areas in the country. This News Release and analysis sets out the major trends.
The Housing Market
The continued slowdown in the housing market - as reflected in prices and transactions - has wide implications across England & Wales. It is already clearly impacting upon surveying and estate agency activity, but it now also encompasses home improvement, white goods and other allied industries, along with all the services linked to them. There is a general tendency by economists to understate the impact of the housing market on the economy and the range of multiplier effects it has in terms of labour mobility, wealth distribution, education and much more.
The sustained decline we have reported on here shows no real signs of ending, despite the scale of government support pumped into this market. Of course, as we show, there are areas which buck these general trends and where the market is more buoyant. However, national surveys of consumer confidence certainly suggest that demand side sentiment echoes what we are observing on the supply side. The Building Societies Association recently released its March Property Tracker report. This showed that fewer respondents thought it was a good time to buy (24%), compared to those who felt the opposite (27%) and that confidence had been in decline since June 2016.
The general malaise is also evident in the reduction in homes being put on the market, with households preferring to stay and improve rather than move, reflecting the high cost of transactions for many. The surge of first time buyer activity hasn’t come through yet - despite the cuts in Stamp Duty introduced to help them - and the deposit barrier remains a significant constraint. At the same time, the recently published UK Housing Review 2018 affordability index makes clear that the mortgage costs-to-household income ratio for first time buyers has improved.
While the index has been broadly static for England since 2014 (180.6 for 2017), it is well down on the peak of 237.6 in 2007. Though the London index is now 251, ie slightly down on 2016, it is up on the previous peak of 244.2 in 2007. However, for all other English regions and Wales the index is down, highlighting the reduction in mortgage costs over this period - the product of a low Bank base rate and intense market competition between lenders.
The current Housing Minister Dominic Raab MP was recently quoted as saying that more attention should be given to the impact lower immigration might have on the housing market, and not least on house prices (the suggestion being that immigration had boosted prices). Clearly there will be some effects, though many migrants go into the private rented sector rather than home ownership, and non-EU net migration remains unaffected by Brexit while the strength of the pound as a currency is also a factor of some significance. It is certainly the case that Brexit will not in itself solve the UK’s (or England & Wales’) housing problems.
In March 2018 there were an estimated 63,500 transactions - based on Land Registry figures - up by 6% on February’s total. This climb in numbers needs to be set against the seasonal trend of the last twenty years, where a 25% increase in sales volumes is the ‘norm’ for this time of year, so on a seasonally-adjusted basis, turnover has declined by 19%. Some of this decline in sales, on a seasonal basis, will be due to the ‘beast from the east” having arrived at the end of February: snow, rain and travel disruption not being particularly conducive to house-hunting - but there is also a lack of properties being put up for sale.
According to the RICS’ (Royal Institution of Chartered Surveyors) February Outlook “The RICS New Instruction indicator is falling once again, and by the biggest margin on a seasonally adjusted basis (-24% in net balance terms) since July 2016. This has pushed the average inventory (per branch) … to a record low of just under 42”. As we have discussed earlier, for a whole variety of reasons owners are not putting their homes on the market."