December 2017

7 min read

Will the Housing Market recover after the Holiday Lull?

December is normally a month when housing market professionals expect market activity to slow down as people take holidays. We certainly observed this phenomenon repeating but some commentators have argued that it started earlier than usual.

When we additionally factor in the first Bank of England base rate rise - albeit only to 0.50% -  and continuing uncertainty in the run-up to actual Brexit, it may be that the forecast for the UK housing market in the New Year remains a troubled one; the rise in remortgage approvals compared to mortgage approvals does nothing to dispel this.

If we look at sales volumes for the first 9 months of the year for the last 3 years, there is yet more evidence of a shrinking market in terms of sales volumes, with the sharpest fall coming in 2017. 

For the period January - September for the years 2015, 2016 and 2017, sales volumes were 702,301, 698,873 and 562,865 respectively.

Reports that 85% houses are sold for less than the stated asking price - a new record - give further evidence of a dysfunctional housing market.

One optimistic forecast recently came from Prime Minister Theresa May, who claimed that Chancellor Philip Hammond's stamp duty relief for first time buyers has already helped 16,000 people in 6 weeks. Certainly first time buyers as a proportion of all buyers increased in November, according to the National Association of Estate Agents (NAEA) (see below).

Changes in Average House Prices

Source: UK House Price Index - Latest data October 2017

Average sale prices in England and Wales declined slightly, to £235,723, down 0.5% from month-on-month but up 4.7% year-on-year. Year-on-year annual average house price growth continues to slow.

London's prices fell by 0.9% month-on-month, to £481,102, the largest monthly percentage fall since May 2011.

The rate at which average house prices are increasing is continuing to slow year-on-year - 2.1% for October, which is the smallest rise since March (1.7%) - this accompanies a continuing fall in sales volumes.

Regional Differences in Average House Price Year-on-Year

Source: UK House Price Index - Compare October 2017 to October 2016

  • London - £481,102 - Increase of 2.1%
  • South East - £322,311 - Increase of 4.7%
  • South West - £251,376 - Increase of 6.7%
  • East Midlands - £184,544 - Increase of 7.0%
  • West Midlands - £186,351 - Increase of 5.2%
  • Wales - £153,316 - Increase of 4.5%
  • East of England - £289,168 - Increase of 6.1%
  • North East - £127,224 - Increase of 2.4%
  • North West - £154,056 - Increase of 3.9%
  • Yorks and Humber - £155,281 - Increase of 3.3%

Changes in Sales Volumes

Source: UK House Price Index - Latest data August 2017

Sales volumes in England and Wales as a whole rose 2.9% month-on-month, to 74,099, compared to last month's fall of 12.7% although year-on-year, volumes were down 11.6%, a fall for the second month in a row.

For London, sales volumes month-on-month declined 0.4% to 7,186, the second month in a row of month-on-month falls. Year-on-year, sales volumes fell 15.8%; the only months which experienced year-on-year rises since December 2015 were March 2016, April 2017 and May 2017.

Regional Differences in Sales Volumes Year-on-Year

Source: UK House Price Index - Compare August 2017 to August 2016 Latest data available

  • London - 7,186 - Decrease of 15.8%
  • South East - 12,839 - Decrease of 12.3%
  • South West - 8,772 - Decrease of 10.7%
  • East Midlands - 6,405 - Decrease of 15.0%
  • West Midlands - 6,935 - Decrease of 13.4%
  • Wales - 3,982 - Decrease of 3.4%
  • East of England - 8,690 - Decrease of 12.3%
  • North East - 2,944 - Decrease of 9.2%
  • North West - 9,427 - Decrease of 7.7%
  • Yorks and Humber - 6,919 - Decrease of 10.7%

Remortgage Approvals hit Nine-Year High, Mortgages Steady

Alongside the first base rate rise in more than 10 years, the Bank of England released figures showing that remortgage loan approvals hit a nine-year high in November.

Lenders approved 53,922 remortgage loans in the month, the highest monthly figure since October 2008.

Alongside this, mortgage approvals edged up to 65,139 from 64,887 in October, but this was slightly below the monthly average of 66,562 over the previous 6 months.

Many analysts have reasoned in media reports that the remortgage strength is a product of people continuing to wish to stay put rather than move in an uncertain housing market. Others have commented that the rise is fuelled by volumes of interest-only mortgages coming to the end of their term and people who have taken them out having to remortgage in order to clear the debts.

The BoE's figures also revealed a fall back in consumer borrowing using overdrafts, credit cards and personal loans to a near 2-year low. The first base rate rise in 10 years is likely to have made many consumers lower their borrowing.

Help to Buy used by thousands with incomes greater than £100,000/yr

The Government has released figures showing that about 36,000 people using the Help to Buy Scheme - around a third of 108,620 total clients – had incomes of over £50,000 and a further 3,858 had incomes of over £100,000. These figures have triggered a number of comments from industry experts in media reports questioning how well-targeted the scheme is.

National Association of Estate Agents' November Housing Market Update

Houses selling for less than asking price at highest percentage ever

The National Association of Estate Agents' latest housing market update - for November - headlined with the news that 85% of properties sold for less than the asking price in November, "the highest [percentage] seen since records began in 2013".

The figure increased from 78% in October, and is marginally higher than for last November when 84% of properties sold for less than asking price. In contrast, the NAEA reported that only 12% of properties sold at the original asking price in November, the lowest percentage on record as well.

First Time Buyer sales proportion increases

The NAEA noted the encouraging news that sales of properties to first time buyers made up 27% of all sales, an increase of 5% month-on-month.

In absolute terms, however, the number of sales agreed per NAEA member branch decreased for the first time since July, from eight per branch in October, to seven in November.

Both supply of and demand for housing drops

The NAEA reported that the number of properties available to buy on estate agents’ books dropped by 19% from 42 in October, to 34 in November, when 33 properties were available on average per branch.

According to the NAEA, demand from house hunters decreased by 5% in November to 333, from 349 in October, which is the lowest number since September 2016.

Agents: Hammond's First Time Buyer Stamp Duty Relief not enough

A third (33%) of the NAEA's member agents, when polled, expressed the opinion that Chancellor Philip Hammond's stamp duty relief for first time buyers will not do enough to help them get on the ladder and a further 20% thought that his measures would have no impact on the number of first time buyers entering the market.

In terms of the measures that the agents wanted to see to encourage more first time buyers to buy, 54% wanted more affordable housing, 31% wanted to see the return of 100% loan-to-value mortgages and 13% thought discounted surveyor's costs would help.

In the final note of the NAEA report, Mark Hayward, the organisation's Chief Executive, said:

"A record number of properties sold for less than the original asking price last month, but despite this, demand for housing and the number of homes available decreased. We usually see a slow-down in the property market around Christmas time but our November data shows this happened much earlier this year. It’s clear that more and more potential buyers and sellers have put their plans on hold early so they can start afresh next year."

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