The data from LSL/Acadata provides the “average of all prices paid for houses”, including those made with cash.
Although England and Wales have experienced record-breaking temperatures over the last few months, the term ‘hot’ would not be an appropriate description of the housing market over this last summer. The average house price in England & Wales has risen by just £32 over the last twelve months: effectively prices are static and clearly not keeping pace with consumer price inflation, however defined (RPI, CPI or CPIH). House prices have therefore been falling over the last year when expressed in real terms – a factor some will give weight to.
On a month-on-month basis, prices at the national level have decreased by -0.1%, with the average market price now below £300,000 – a decrease of some £300 in August. Prices in England & Wales are currently £4,000 below their peak of £303,889, which was reached some 18 months ago in February 2018.
The Housing Market
On the whole the housing market is probably performing quite well. Mortgage approvals have risen slightly, new buyer enquiries have edged up, and first time buyers are active. Some commentators are suggesting that given uncertain timescales, households have decided to get on with it and move/buy. This attitude is probably underpinned by the current intense mortgage market competition, with 5-year fixed rate mortgages at their cheapest on record. But as is evident from the latest UK Finance Mortgage Trends update covering the first half of 2019, there has been a 2% reduction in new loans to buyers (first-time buyer loans down 0.7%, Homemover loans down 3% and buy to let down 3.7% - all figures exclude re-mortgages).
England & Wales are recording static house prices (falling in real terms), along with modestly reduced transaction numbers. However, this is not a downturn; rather a marking time whilst waiting for the settlement of wider factors. Indeed, given the continued wage growth for many including in the public sector, we are seeing some restoration of demand capacity, which will then find expression in the market when the current fog lifts.
Housing Transactions
Based on Land Registry counts for England & Wales, LSL/Acadata estimate that there were 76,000 transactions in August 2019 – 6% lower than their (revised) estimate of 81,000 sales in July. Normally we would expect a +5% seasonal rise in sales volumes, based on data for the last eight years (excluding 2016), so the decrease of -6% represents an -11% fall in transactions on a seasonally-adjusted basis. Overall, our transaction count for the first eight months of 2019 was 6% down on the sales volumes for the equivalent period in 2018
Clearly, the picture is more complicated when broken down by country and region. There is a noticeable North/South divide, with the more northern regions having the lower % reduction in transactions in 2019 compared to both 2018 and 2017. Affordability is a major driver influencing this, given improved incomes in 2019, with the most affordable areas of the North East and Wales witnessing a positive movement in sales volumes in 2019, compared to the previous year(s).
Annual & Monthly Price Trends
On an annual basis, London prices in July 2019 increased by some £4,100, or +0.7%. We have had to downgrade our previous average price for June, as new build sales did not prove to be as high as we had estimated. Consequently, July becomes the first time in eleven months that London has seen an increase in its annual rate - we wait to see if this is the beginning of a sustained recovery. Given that 21 of the 33 London boroughs still saw prices fall over the year, there must be a question mark over this.
The positive change in the annual rate, on a weight-adjusted basis, can be largely ascribed to Barnet, Camden and Richmond upon Thames, with increases of +5.6%, +6.1% and +3.3% respectively. The month saw some high-price house sales in each of these boroughs, including a £15 million detached home in Barnet close to Hampstead Heath; a £15.5 million terrace in Camden overlooking Regents Park; and a £7.1 million detached home in River Lane, Richmond, close to Ham House. These high values are not ‘exceptional’ events for these three boroughs, although they have assisted in maintaining upward pressure on average house prices in the three boroughs concerned.
Looking at the monthly change in London in July, average prices have increased by some £2,750, or 0.5%, the same rate as seen in our revised June total.
The recent fall in the value of sterling will further reinforce the attractiveness of London for foreign investors. July price falls in such upmarket London boroughs as Kensington & Chelsea -5.0%, City of London -11.3%, City of Westminster -0.3% and Islington -4.3% may prove attractive to overseas buyers seeking property as a safe investment.
Annual Price Trends
On an annual basis, prices in July 2019 rose in England & Wales by £1,009, or +0.3%. This is the second month in a row that the annual rate has been positive, having been preceded by five months of falling values when compared to twelve months earlier.
In July 2019, at the unitary authority/county level, there were 40 areas where on an annual basis prices fell, an increase of three areas compared to the previous month. Reflecting on where these areas are (with last month’s comparable figures in brackets), 12 are located in the South East (14), 7 are in the East of England (6) with 5 in the South West (5), 4 each are located in the West Midlands (1) and in Wales (4) with 3 located in Yorkshire and the Humber (2), 2 each are located in the North East (3) and the East Midlands (2) and finally one is located in the North West (0). This means that four regions have seen an increase in the number of authorities with price falls, two have seen a decrease in this count and three have remained with the same number as last month, suggesting on balance that the situation has marginally deteriorated. The three regions with the highest number of authorities having a negative movement in prices over the last 12 months are all located in the south of England.
Peak Prices
Monthly Trends
On a monthly basis, the average price of a home in England & Wales in July rose by £64, which equates to a nil % change in the month. In each of the last twelve months, the average house price in England & Wales has not changed by more than ±0.7%, indicating a relatively subdued period of house price movements – although, as we discuss in this News Release, individual prices for particular locations have frequently exceeded this monthly rate.
