All hail housing's Boris Bounce! May it continue! Feb 2020
28/02/2020
98
9 min read
Our housing market report for this month leads with good news for most sector stakeholders: sales volumes have risen in both England and Wales and London as well as prices.
Estate agents, surveyors and mortgage brokers will all welcome this news; prospective home buyers – vital to the market – will be less pleased at the price rises.
[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]
England and Wales House prices Reach New Peak
Average property prices in England and Wales rose 0.5% month-on-month and 2.2% year-on-year to £246,788, their highest ever, according to the most recently available month's figures. It's hard not to argue that the election of new Prime Minister Boris Johnson with a stomping 80 seat majority hasn't been a factor.
Although realists know that Brexit is a process which has just started – and the details of any trade deal with the EU are much less than clear – just the sense of a more assured direction of travel is likely to have settled many buyers' nerves.
England and Wales' house sales volumes up monthly, down yearly
The most recent figures available for sales volumes in England and Wales showed a rise month-on-month – 4.6% to 69,931 – even if year-on-year sales volumes were down by 15.5%.
Given the turbulence of the last few years since the referendum, we can expect some more extreme differences in longer period comparisons.
London's house prices approach previous peak
Average house prices in London experienced their second month of rises both in monthly and yearly terms, which will please most housing market stakeholders. A 1.6% monthly and a 2.2% yearly rise brought prices up to £483,922, just £4,605 below the £488,527 peak recorded in July 2017 or a fraction less than 1% of the highest prices ever.
This won't please first time buyers of course, however London is never likely to become an easily accessible region for this group to buy properties in. The price recovery will, however, please untold estate agents and also the fact that this recovery can be seen 'across the board' for all property types and was most marked for detached properties.
London's sales volumes mimic the England & Wales picture
Although the degree was markedly less, sales volumes also recovered in the capital month-on-month, with 6,807 sales recorded, a 0.7% increase. The month before showed a 19.2% month-on-month drop.
In fact a number of media reports have posited that London's 'recovery' is all about the top end of the market rather than any other cohort.
According to HMRC, although total sales volumes in the UK for the last 3 months of 2019 moved by less than 0.5%, from October to December, the number of £1 million-plus sales jumped by 12.8 per cent on the same period in 2018 to a total of 5,300.
This made it the highest number of £1 million+ property transactions for the last quarter of the year in at least the last decade.
The year-on-year picture was, however, very similar to that of England and Wales: there was a 15% drop; once again, markets behaved quite immoderately in the period between the European Union referendum and the December 2019 General Election; so some allowance of swings year-on-year might be understandable.
And evidence of optimism from other sources has also observable in various media reports…
'UK house prices: fastest growth rate for 18 months' says Nationwide
Nationwide, one of the largest high street lenders, released figures pointing at the fastest growth rate in 18 months for UK house prices, according to media reports.
The rise in February was the fastest since July 2018, at 2.3% up from 1.9% for January according to the lender. Nationwide's chief economist, Robert Gardener, was quoted as saying that although economic growth ground to a halt in the final three months of 2019, this was accompanied by labour market conditions staying buoyant and borrowing costs low.
He also cited the general election outcome as being a likely causal factor, however he warned that uncertainties could end up hurting UK house prices.
And nobody could have predicted the outbreak of the corona virus and its effect on the global economy, a classic case of an 'unknown unknown' which it's almost impossible to have contingency plans for…
Real wages rise: Inflation falls but wages static
There was good news on the inflation front; the Consumer Price Index fell 0.28% from last month even though it rose 1.8% year-on-year. Month-on-month however, real wages remained the same, at £544 on average for total pay weekly. This was the highest recorded figure along with last month's (for November) since records began in 2000 however.
The combined effect represented a minor real wage increase, something which will please everybody, however minor it is.
Real wage rises are always welcome, however small…!
Mortgage and Remortgage Approvals Up
There was further evidence of optimism in the Bank of England's figures for mortgage and remortgage approvals.
Mortgage approvals were up both month-on-month and year-on-year, by 3.3% and 4.2% respectively, to 67,241. As is not often the case, however, this was accompanied by remortgage approvals also being up on both measures. This was variously by 2.5% and 3.0% to 49,680.
It is difficult not to be optimistic about these figures. Most often, the direction of travel of the two measures is opposite, however it seems that since the last month, people have managed not only to secure more mortgage approvals for buying new homes but also for the purpose of staying put and investing in their present living situations.
One would expect to encounter evidence of an increase in first time buyer numbers as well – this would crown matters.
NAEA: sales to first time buyers static
In fact, estate agents reported static figures month-on-month regarding first time buyer purchases.
in January, sales to this cohort represented 29% of all sales, the same for December although year-on-year, this wasan increase of three percentage points from January 2019 when the number of sales made to the group stood at 26%.
What other news was there about first time buyer-related matters?
Watchdog finds evidence of serious breaches in leasehold selling
First time buyers are more likely to buy leasehold properties and the Competition and Markets Authority recently reported evidence of an abundance of unfair practices by housing developers detrimental to prospective buyers.
The evidence concerned matters like:
- an increase in contracts involving ground rent doubling every 10 years, trapping buyers unable to sell on their homes;
- prices set for the freehold purchase of leaseholds increasing by thousands of pounds with little warning;
- lack of information about the nature – and costs – of leasehold compared to freehold during the sales process; and
- unreasonable fees for routine matters such as home improvement licences.
The results of a lengthy leasehold consultation involving the Government, conveyancing lawyers and other stakeholders are due to be reported this year and these findings hopefully should carry some weight in any legal changes that might follow.
Help to Buy – arrears and possible negative equity to come
Figures from media reports show that more than one in 20 recipients of Help to Buy loans had fallen into arrears at the end of November as their interest bills mounted.
Although, according to ministers quoted in these reports, most of the customers in arrears were only one or two payments behind, a further alarming note was sounded by the Financial Conduct Authority which warned that Help to Buy risked trapping thousands in negative equity if house prices fall.
And other media reports claimed that high house prices have pushed first time buyers into middle age, with one couple buying for the first time aged variously 52 and 46.
In fact the Affordable Housing Commission released the findings from a survey which claimed that the continuing housing crisis – there still is one – is "disrupting family life and making people ill".
The AHC's key findings were:
- 13% of UK adults polled (under the age of 45 in a couple) have delayed or not had children due to their housing situation – potentially affecting 1.8 million people nationally.
- Nearly a third (31%) of parents with adult children living at home, who took part in the poll, don’t expect them to move out or for it to take 10 or more years – potentially affecting 2.4 million people nationally.
- A quarter (25%) of those surveyed who are living in unaffordable housing said their mental health has suffered because of their housing situation — potentially affecting 2 million people nationally.
One positive development, however was the Peabody Housing Association announcing its plan to sell 250 year shared ownership leases – as opposed to 99 years – from this point. In eliminating the need for first buyers to get lease extensions, it makes shared ownership much more of an agreeable prospect overall and it's a move which might mean other housing associations will follow suit.
We can but hope…although 82% of properties last month sold for less than asking price: some UK housing market habits are very resistant to change.
Andrew Boast, co-founder of SAM Conveyancing, said:
"The Boris Bounce has affected our housing market: there's too much evidence available to claim otherwise. Everyone can take heart from the month-on-month price and sales volume data which we've reported."
"What isn't quite certain, however, is what's likely to happen in the next 10 months in the run-up to the resolution of trade negotiations with the EU. It also won't be news to virtually anyone that the whole world is having to adjust to a new curved ball, the corona virus, whose globally destructive effects have in no sense peaked."
"There's also more nuanced news from the first time buyer side of the market - there's little evidence that this group is taking great part in the present joyful housing tidings. Perhaps the review into leasehold practices due later in the year might help spread the current optimism more widely."
"Let's hope then that the Boris Bounce continues and translates into housing market fundamentals improving in the longer term and at last doing something to tackle what continues to be rightly referred to as a housing crisis."
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