February 2018

28/02/2018

London Sales Volumes on a 9-year Low

The Land Registry's most recently-available monthly figures for London's housing sales volumes - for October 2017 - reveal the lowest number, at 6,264, for nine years (5,225 in October 2008).

For the capital, the stark truth is that year-on-year sales volumes have been falling in 19 out of the last 24 months and month-on-month sales volumes in 12 months out of 24.

London prices rose by a fractional 0.8% month-on-month - to £484,173 - in December (the most recently-available month for house price data from the Land Registry). But prices peaked in September, at £486,777, and their direction at present is very hard to call.

First time buyer stamp duty relief causes a blip?

In the aftermath of Chancellor Hammond's first time buyer stamp duty relief announced in last November's budget, many talked up the apparent re-emergence of first time buyers into the market and the increasing share of overall sales this group took.

More recent signs are that there may have been an initial increase in the number of first time buyers buying property immediately after the measure - and perhaps enough to be a factor in London's most recent monthly house price rise - but this has now tailed off. The National Association of Estate Agent's (NAEA) most recent housing market update provides more evidence of this and is discussed below.

England and Wales: highest prices but ever-shrinking sales volumes

The average price of a home in England and Wales rose to £287,336, but, following recent trends, month-on-month price rises are becoming smaller and smaller, with this most recently month-on-month rise just 0.4%.

Not dissimilar to the position for London, sales volumes for October 2017, the most recently-available monthly figures, were, at 67,408, at their lowest for an October since 2012 when the figure was 59,571.

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Young middle-income earners locked out of the housing market

The Institute of Financial Studies (IFS), a prominent think tank, produced figures which suggest that The biggest decline in home ownership in the last 20 years has been among middle-income 25 to 34-year-olds (click to visit the IFS's website to view the research)

In 1995-96, 65% of this group owned a home, but just 27% do in 2015-16, with the biggest drop in south-east England. They are defined as having net pay of between £22,200 to £30,600. Around 1/3 of them are university graduates and around 60% have children.

Perhaps the most stark trend revealed was that the the proportion of these middle earners owning a home (27%) has moved closer to the likelihood of those with a low income (8%) than those on a high income (64%).

NAEA: First Time Buyer Sales Fall

Although the NAEA's headline for its January report trumpeted an increase in the number of house-hunters for the month - a 37% rise - along with an increase in the number of properties available, the report noted that sales to first time buyers fell.

And even though the total number of house-hunters increased per branch, year-on-year the figure was down 14% from 425 in January 2017 to 367 this January.

"The percentage of sales to first time buyers fell to 27%, down from 32% in December."


75% of properties sold for less than asking price

The curious impasse regarding sticky high property prices with respect to falling sales volumes continues to be evidenced by the number of properties sold for less than asking price, which was 75%. Even though this has been as high as 85% (November 2017), this curious anomaly persists.

Additionally there was a year-on-year drop in the percentage of homes sold for more than asking price, from 7% in January 2017 to 4% in January 2018.

Government fails again on housing promises

Given that comparatively recently, Prime Minister Theresa May vowed to take full responsibility for fixing the UK's housing market crisis, statistics presently paint a dire picture.

The Government has repeatedly pledged to build 300,000 homes per year but, between 1 October 2017 and 30 September 2017, there were only 155,220 houses completed, barely 50% of the stated target. Unfortunately this is hardly news for housing market observers.

Andrew Boast, SAM Conveyancing's CEO and Co-founder, said:
"The fact that so many properties continue to be sold for less than asking price gives clear evidence of our continuing dysfunctional UK housing market. The Chancellor's stamp duty relief seems to have been taken up initially by some of the more fortunate first time buyers, but even this gesture may already be counterproductive in encouraging the general price level to remain unrealistically high.

"What's particularly stark is the collapse of the middle-income market of younger buyers; it looks as though increasing numbers of potential first time buyers are despairing of ever being able to own their own homes. The Government promised to take the lead on house building but continue to fail miserably. Once again, something has to give and all fundamentals point to eventual price falls, however drawn out the process seems to be proving to be."

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