July 2017

by:

Updated:

31/07/2017

5 min read

Housing Market Continues to Shrink

The most recent available data, up to March 2017, from the Land Registry shows that despite an 11.4% increase in sales volumes month-on-month for the housing market in England and Wales, 65,793 compared to 58,281 for March, the long term trends continue to show an increasingly shrinking housing market.

The discontinuity caused by reaction to the 2nd home stamp duty surcharge of last April is well understood, so the 43.9% year-on-year decrease in volumes compared to last year's 117,255 can largely be explained away by stating that there was a highly unusual flurry of activity last March as people sought to lessen their stamp duty liabilities.

However the cold fact remains that you have to go back to March 2013 (56,336) to find a lower sales volume for March and additionally falling year-on-year sales volumes in England & Wales have been observed for the last 12 months in a row.

The conundrum of house prices rising along with sales volumes falling, which varies from conventional wisdom on supply and demand, continues, although the National Association of Estate Agents' findings on asking prices, referred to below, make matters more intriguing.

London volumes follow suit

London similarly showed a month-on-month increase in sales volumes; April saw 6,941 sales whereas March had only 6,362. Given that this was the first month-on-month rise since December, this must be treated with optimism.

However, year-on-year volumes have also fallen for each of the last 12 months in turn and you have to go back as far as March 2011 to find a March in recent years which had lower sales volumes (6,675).

Prices up in England and Wales...barely...

The Land Registry has published price data for the UK for months up to and including May 2017.

While it's true that Prices in England & Wales are at their highest level, having risen month-on-month for 9 out of the last 12 months and for the last 12 months year-on-year, prices increases have been declining in rate, both year-on-year and month-on-month (they fell month-on-month in September and October 2016 and March 2017).

The most recently-available (Land Registry) average house price for England & Wales is £232,478.

...And falling again in London

Month-on-month, prices fell in May by 0.3% in London; this is the 5th month out of the last year where prices in the capital have fallen. Year-on-year, as for England & Wales, prices have continued to rise, and monthly since October 2009, however the increase, of 3.0%, is the second lowest since May 2012 (the lowest was in March 2017, where prices rose by just 2.6% year-on-year).

The most recently-available (Land Registry) average house price for London is £481,345.

Monthly Sales Volume Variances for England & Wales

Month	cf. Sales Volume 2015	Sales Volume 2016	Annual Variance	Monthly Variance
February 2016	62,329	67,867	+8.9%	+6.1%
March 2016	70,924	117,255	+65.3%	+42.1%
April 2016	67,784	55,412	-18.3%	-111.6%
May 2016	78,582	63,304	-19.4%	+12.5%
June 2016	89,201	77,942	-12.6%	+18.8%
July 2016	97,643	81,788	-16.2%	+4.7%
August 2016	88,590	83,437	-5.8%	+2.0%
September 2016	86,348	79,629	-7.8%	-4.8%
October 2016	94,494	74,039	-21.6%	-7.6%
November 2016	83,325	76,919	-7.7%	+3.7%
December 2016	84,496	81,301	-3.8%	+5.4%
January 2017	63,751 (2016)	57,779 (2017)	-9.4%	-40.7%
February 2017	67,867 (2016)	58,281 (2017)	-14.1%	+0.9%
March 2016	117,255 (2016)	65,793	-43.9%	+11.4%
2017 Year to Date Sales Volume (Jan - March 2017)	248,873 (2016)	181,853	-16.9% (-67,020)

NAEA: just 2% of properties sold above asking price

The National Association of Estate Agents' monthly Housing Market Report stated that only 2% of homes were sold above asking price, which is down 1% from May.

This figure continues to fall month-on-month and should the trend continue, properties which manage to sell for above asking price may become very few and far between.

The other side of the equation, properties sold below asking price, which was measured at 79% of all properties sold for June, a rise of 2% from May, also shows a continuing longer term rise.

This data serves to question just how representative and realistic headline house price data is; it may be that prices have already come to a turning point but this has not yet filtered through.

(Frustrated?) demand rises

The NAEA noted that demand - as shown by the number of house hunters registered by its member estate agents - rose by 10% month-on-month in June (384/branch vs. 350/branch for May) and by 16% year-on-year (in June 2016, there were 330/branch).

These are considerable rises by any measure and placed alongside the long-term fall in sales volumes described above and the NAEA's own reported drop in houses for sale per branch (37/branch for June, 40/branch for May), it's clear that demand continues to be frustrated.

First time buyer sales up in proportion

The NAEA reported an increase in proportion of sales to first time buyers to 30% of all sales. Once again, this news could be treated with optimism, however when all sales volumes continue to fall, it makes it more difficult to claim that first time buyer fortunes are experiencing an upturn.

Monthly Property Price Variance for England & Wales

Month	Sale Price 2015	Sale Price 2016	Annual Variance	Monthly Variance
April	£201,968	£218,968	+8.4%	+0.5%
May	£204,179	£221,552	+8.5%	+1.2%
June	£205,747	£223,687	+8.7%	+1.0%
July	£209,200	£225,952	+8.0%	+1.0%
August	£211,391	£226,141	+7.0%	+0.1%
September	£211,916	£225,868	+6.6%	-0.1%
October	£212,268	£225,182	+6.1%	-0.3%
November	£213,973	£226,066	+5.7%	+0.4%
December	£215,023	£227,012	+5.6%	+0.4%
January	£215,638 (Sale Price 2016)	£227,080 (Sale Price 2017)	+5.3%	0.0%
February	£216,083 (Sale Price 2016)	£228,281 (Sale Price 2017)	+5.6%	+0.5%
March	£217,901 (Sale Price 2016)	£227,744 (Sale Price 2017)	+4.5%	-0.2%
April	£218,968 (Sale Price 2016)	£231,250 (Sale Price 2017)	+5.6%	+1.5%
May	£221,552 (Sale Price 2016)	£232,478 (Sale Price 2017)	+4.9%	+0.5%

Mark Hayward, Chief Executive of the NAEA said: "In May, we saw a period of political uncertainty, with new buyers stalling their house search until after the election. In June however, it seems the market has bounced back, with the number of house hunters rising.

"Although we have seen a decrease in the number of houses available per branch, we have seen a rise in the number of sales – which is typical of this time of year as buyers and sellers push through their property transactions ahead of the quieter summer months."

Andrew Boast, Co-founder of SAM Conveyancing said: "Long term sales volumes continue to decline, giving evidence of a continually shrinking housing market, which is dire news for all stakeholders. The slight month-on-month increase in volumes must be welcomed, but we need many more months like it.

The NAEA's evidence that the vast majority of houses are now being sold below asking price raises many questions about current pricing levels and criteria. The positive news about first time buyer proportions is to be welcomed but with the proviso that the whole market needs shaking up to increase sales volumes, for the benefit of all participants."