The latest report from Kate Faulkner analyses what's happening to the economy, property prices and rents, and the impact this has on consumers and indeed the industry.
February 2016 Latest Property Price Summary
Most of the indices are showing 6-7% increases for the end of 2015, bar Halifax which seem to be recording a much higher increase of 9.5% for some reason. Rightmove report good news for first-time buyers saying “there's more property coming to market” with “asking prices pretty much the same as a month ago” and “prices have hardly increased month-on-month for properties with two bedrooms or fewer”.
And, in a rare good market for both buyers and sellers, the trading up/down market should do well this year as confidence - which is key to property market success - is high. According to The Halifax Housing Market Confidence Tracker “a majority of people believe that average UK property prices will be higher 12 months from now”. The question will be what will happen on 16th March when George Osborne clarifies the 3% Stamp Duty for second home owners and how will this affect the current buoyant market from 1st April?
Rightmove - “Active start to 2016 and surprisingly good news for first-time buyers”
NAEA - “Supply of available housing halves in ten years”
RICS - “Near term price expectations reach 20 month high”
Nationwide - “House price growth remains steady in January”
Halifax - “Quarterly house price growth at 2.2%”
LSL - “House prices increase £18,000 in 2015”
Hometrack - “City house price inflation accelerates to 15 month high of 11.4%”
Land Registry - “The annual price change now stands at 6.4 per cent”
LSL's index has some super data in it this month which shows sales in the second half of the year were above the same period in 2014. Usefully, the research delves deeper to show an increase in detached home sales - up 5% year-on-year - in the final quarter of 2015. The reason this data is useful is it provides great commentary at a regional level and good insight into which property types and areas are doing well from a volume of sales perspective as well as price.
The other interesting insight from the reports this month is the commentary on the impact of George Osborne's attack on landlords. LSL point out that “A recent Sunday Times analysis in conjunction with a major estate agency suggested that from the sales the firm recorded in 2015, only a third of homes sold to investors attracted any kind of offer from someone who wanted the property as a main residence (whether first time buyer or not), and that investor purchases made up around 15% of total sales”. In other words BTL investors are not really competing with 'normal buyers' at all. Hometrack broadly agree, with their stats suggesting “8 out of every 10 sale…. still go to owner-occupiers”. So although landlords and investors are being heavily penalised for buying homes, the idea that this is going to somehow make life 'easier' for buyers is highly unlikely.
The question that needs answering post April is if investor demand is 'choked off' in areas with a high demand for rented property, what will happen to rents and prices in these local markets if supply is switched from the PRS to the sales market?
Property Price Towns and City Differences
LSL’s data shows the biggest monthly boost was in Bournemouth “with a 2.9% (£7,371) upswing - driven by more tech jobs in the city” and the “Strongest sales surge was found in the North West, up 8.8% year-on-year as buyers seek more property for their money”. In addition, “The fastest growth year-on-year across the country has been experienced in Luton where home values are up 17.5%, with trains here only taking 23 minutes to get into St Pancras Station.”
Hometrack’s city data shows that economic powerhouse Cambridge continues to outperform London with a 14.4% increase, while London grows at 13.8% with Bristol not far behind at 12.8%. However beyond these areas, price growth is only achieving 8-10% even in strong property markets such as Oxford. From the Land Registry data, property prices in Liverpool and Manchester, although still (by their measure) way behind price heights achieved in 2008, are seeing strong 5%+ price growth year on year, potential good news for those currently trapped in negative equity.
Demand for Property
Despite all the headlines saying what a buoyant market 2015 was, in reality, the actual number of sales moved slightly upwards according to Halifax who researched the HMRC data to conclude: “UK home sales totalled 1.23 million in 2015; marginally higher than the 1.22 million recorded in 2014”. As LSL confirm, “sales picked up during the year with transactions in the second half of 2015 6% higher than in the same period in 2014”. Data from Rightmove suggests that “demand as measured by visits to the Rightmove website in the first working week of 2016 is up by 21% on the same period in 2015.” However, we will have to wait for a few months to see if this actually translates into higher buying and selling activity rather than people more keen to look this year than last! The concern remains in that, according to Nationwide, “construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability”.
Supply of Property
This is probably the single most feared issue in the property market at the moment. Buyer demand is definitely up and strong, but the supply of property isn’t coming through. Unlike many industries, production can’t be scaled up and down quickly in line with demand. As such, agents are going to have to continue to find ways of attracting new instructions while high street offices will be battling competition from cheaper, mainly on-line propositions. The scariest stat, though, from all the reports is from the NAEA who recorded that there were “37 properties available in December 2015, compared to 72 in December 2005” showing stock levels per agent had halved. This is no doubt why the bigger agents are on a spending spree to buy up smaller, locally successful agents.