June 2017

29/06/2017

Record high prices, rapidly falling demand: what is going on?

Many commentators have argued that the general election increased caution in an already cautious housing market and that there are now some observably positive signs regarding housing supply in the offing.

The underlying picture, however, remains one of sales volumes declining year-on-year and with no respite and prices rising at an increasingly slow rate. Although London, for example, still showed a month-on-month house price rise, when a number of boroughs within it are examined, such as Lewisham and Hillingdon, prices have actually fallen, by 2.3% and 0.5% respectively month-on-month.

The Government's Queen's Speech made passing reference to housing but there were no new legislative measures announced, simply an acknowledgement of the scale of the problem the country faces, which is very disappointing for housing campaigners and stakeholders in general.

According to the Bank of England's most recent statistics, there was a very small increase - 0.2% - in the number of residential mortgages granted for May compared to April (65,202 vs 65,051), but a considerably larger rise in remortgages granted - 5.9% - in the number of remortgages granted for the same period (42,955 vs. 40,437). On the face of it, this might imply that people are staying put and making home improvements rather than moving home, however the unknown here is the number of cash purchases being made to buy homes, particularly because overseas investors most often buy with cash.

The Government recorded 39,520 new build completions in the first quarter of 2017, giving an average for each month (January, February and March) of just over 13,173. The monthly average for the previous quarter (total 36,320) was 12,106, equating to an 8.8% increase. Between October 2016 and March 2017, the overall number of mortgages granted decreased from 67,457 to 66,267 or a decrease of 1.8%. This leaves open the possibility that the vast majority of new builds may be being bought for cash and a large proportion within that representing overseas investors, certainly not first time buyers, unless the latter have suddenly become far richer than might normally be expected..

[NB Sales volumes and price data below are taken from the most recent figures available from the Land Registry's House Price Index, which describe price data up to April 2017 and sales volumes up to February 2017.]

Month-on-month, sales volumes were up slightly in England & Wales by 0.6% but down for London by 5%. Year-on-year, however, sales volumes have continually fallen for the last 11 months for both regions.

Regarding prices in England & Wales, prices rose by 1.5% last month and year-on-year, prices rose very slightly by 5.6% compared to last month's year-on-year rise of 4.8%. For London, prices rose by 0.7% month-on-month and by 4.6% year-on-year compared to last month's year-on-year rise of 3.2%.

The average house price in England and Wales is presently £231,269 and in London it is £482,779.

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Monthly Sales Volume Variances for England & Wales


Month 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

-18.2%

-52.8%

May 2016

78,582

63,228

-19.5%

+14.1%

June 2016

89,201

77,792

-12.8%

+23.0%

July 2016

97,643

81,651

-16.4%

+5.0%

August 2016

88,590

83,259 -6.0% +2.0%
September 2016

86,348

79,379 -8.1% -4.7%
October 2016
94,494

73,631

-22.1%
-7.2%
November 2016
83,325

76,187

-8.6%
+3.5%
December 2016
84,496

78,758

-6.8%
+3.4%
January 2017

63,751 (2016)

55,567 (2017)

-12.8%

-29.6%

February 2017

67,867 (2016)

55,791 (2017) -17.8%

+0.6%

2017 Year to Date 
Sales Volume
(Jan - Feb 2017)
131,618 (2016)

111,358

-15.4%
(-20,260)


NAEA: only 3% of properties sold above asking price

The National Association of Estate Agents' monthly Housing Market Report stated that only 3% of homes were sold above the asking price, which is down 4% from April and is the lowest level since October.

Currently 77% of - more than 3 in 4 - homes are selling for less than asking price, up 5% from April.

Demand - mixed news

The NAEA recorded that the number of house hunters per member branch fell by 8% from 381 in April to 350 in May - a 6-month low - and put this down to uncertainty caused by the recent general election. Year-on-year however it noted that demand has risen 15% since May 2016, when 304 buyers were registered per branch.

Supply - minor cause for optimism?

The NAEA recorded that housing supply rose 11% from April to 40 properties per branch and rose slightly year-on-year: last May, there were 37 properties per branch.

Sales agreed per branch rose from 8 in April to 10 in May, which was the same number recorded for March.


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

£221,564

+9.5%

+1.2%

June

£205,747

£223,662 +8.7%

+1.0%

July

£209,200

£225,939

+8.0%

+1.0%

August

£211,391

£226,154 +7.0% +0.1%
September

£211,916

£225,847

+6.6% -0.1%
October

£212,268

£225,196

+6.1% -0.3%
November

£213,973

£226,151

+5.7% +0.4%
December

£215,023

£227,112

+5.6% +0.4%
January

£215,638
(Sale Price 2016)
£227,068
(Sale Price 2017)

+5.3% 0.0%
February

£216,083
(Sale Price 2016)

£228,444
(Sale Price 2017)

+5.7%

+0.6%

March

£217,901
(Sale Price 2016)

£228,446
(Sale Price 2017)

+4.8%

0.0%

April

£218,968
(Sale Price 2016)

£231,269
(Sale Price 2017)

+5.6%

+1.2%



Mark Hayward, Chief Executive of the NAEA said: "As a rule of thumb, periods of political uncertainty impact the way buyers and sellers interact with the housing market. In May, it looks like new buyers were stalling their house search until after the election; however the number of sales agreed per branch increased meaning the political landscape hasn’t deterred all house hunters. Following the result of the general election, it will be interesting to see how the market reacts over the coming months as summer is peak house-moving season."

Andrew Boast, Co-founder of SAM Conveyancing said: "The possible reasons for optimism in the present housing market at present would need to be observed over a period of many months before stakeholders can become more upbeat. The fundamentals remain that there is a continuing crisis and although the Queen's Speech did mention the issue, there were no new concrete proposals or initiatives stated within it and first time buyers in particular seem to have been at best overlooked.

Unless there is considerably more house-building activity - and this encouraged by changes to the planning regime and other institutional factors - it is presently difficult to see a way out of the continuing crisis."

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