London house prices rise as Brexit end game approaches: August 2019

02/09/2019
Something unexpected happened as witnessed by the most recently-available housing market fundamentals - average property prices in London actually rose!

There were some other positive 'shoots' observable here and there also, even if the general predisposition with the coming - but as yet amorphous - Brexit, meant that the general mood in England & Wales regarding the housing market was fairy gloomy.

Both the UK and Germany are on the brink of recession and will offically be so if their economies shrink in the current quarter (July-September). The UK's manufacturing activity dropped in the last quarter - as the boost from Brexit stockpiling earlier in the year unravelled.

[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]

London's prices slightly rally on the month

We're certainly mindful of the dire reportage we've given London's key housing numbers every month for some time, however, as for May (1.4%), prices actually rallied month-on-month, by 0.7%, rising to £466,824. There's no disguising that there was a year-on-year decline of 3.7% from last July's £484,615, however arguably the capital's average prices fared quite well given that the metropolis is very much in the eye of the political storm caused by the coming Brexit end game.

London's sales volumes lowest since May 2009

Unfortunately, the capital's sales volumes continue to plumb new depths; with only 5,313 recorded sales for May, this was the lowest activity since May 2009 (5,011). This volume also represented a 15.6% month-on-month fall and a 25.6% year-on-year fall.

England & Wales' prices finally fall year-on-year

For England and Wales, prices actually rallied month-on-month, by 0.7%, rising to an average £242,009 but notably this was the first year-on-year contraction in price, 0.3% since March 2019 (0.8%). This time last year, the average price in was £242,739.

For all that, this average price is only £1,569 off the highest level ever - £243,578 (August 2018); price movements in the two countries over the last year have been somewhat slight, almost cancelling their overall effects out.


Falling sales volumes

Volume figures from data from the most recently-available month, May, revealed both a year-on-year fall (22.3%) and a month-on-month fall (10.9%), to 57,471, offering scant hope for estate agents, surveyors and conveyancing solicitors at present for England and Wales.

Since 2001, May Sales Volumes show downward gradient

May-Sales-Volumes.png

Even though the actual volumes have gone up and down on a more granular level, it's clear that a line of best fit from around 2001 to the present time would have a clearly negative gradient, even allowing for the credit crunch, when volumes fell more rapidly, and then Chancellor Osborne's second home stamp duty tax grab. In the month before this tax came on line, volumes rose spectacularly – but temporarily.

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Wages rise…but inflation rises too

Nominal wages have risen to their highest levels ever – to £538 per week from £536 per week in May, a small fraction (less than 0.5%) – however inflation has risen 2.1% year-on-year meaning that the UK on average isn't receiving the pay rise that so many political pundits have said it deserves.

Mortgage and remortgage approvals both hold steady

Some experts have optimistically viewed the 67,306 mortgage approvals recorded for July – another 1.2% rise, as for June and a two-year high – as a sign that people have gone ahead with purchases in some frustration, having held on because of Brexit uncertainty.

But remortgage approvals have also risen month-on-month, to 47,430, although this is around half the level of the mortgage approvals rise. That said, the optimism might have some grounding – monthly mortgage approvals haven't been this high since July 2017, whereas you only have to go back to April to find a higher remortgage approvals figure.

More households in the UK than ever: English Housing Survey

The latest English National Housing Survey from the ONS stated that there are currently some 23.2 million households, the most in the UK ever, and 14.8 million home owners, the latter figure representing an overall 64% of home owners (including those mortgaging).

It's widely known that home ownership has fallen from a little over 70% 15 years ago, however the 64% represents a stable grouping, changing little in numbers during the last 5 years.

The percentages of those firstly in private rent (19%) and secondly social rent (17%) have also remained relatively steady in the last 5 years.

Average private rents down 20% in a year

Notably, non-London average private rents, at £685 per month on average, have fallen greatly in a year, by 20%. In comparison, London's private rents rose marginally in a year, by just under 1%, to £1,352 per month.

Optimism about buying higher in the private sector

The English Housing Survey reinforced the different future housing expectations of renters, with 58% - almost double the number - of private sector renters expecting to buy a home at some stage compared to just 25% of social renters.

First time buyer findings

The English Housing Survey revealed that average first time buyer deposits, now at £44,635, have actually fallen year-on-year from £48,591, nearly 9%, however this has coincided with average prices falling in the capital and stalling in many parts of the rest of the country.

First time buyer numbers, at 785,000, are growing, and by 17% year-on-year. The average age of such a buyer, at 33, is the same as for last year and there has even been a slight decline – from 52% to 46% - in the percentage of these taking on mortgages of 30 years or more, however, perhaps of more significance is the medium term decline in the percentage of first time buyer owner occupiers aged 25 – 34 years. Some 38% of first time buyers in this age group were owner occupiers most recently: this compares to 62% in 2008/2009.

Buyers looking to complete sales pre-Brexit, concludes NAEA

The National Association of Estate Agents' monthly housing market report led with an inference that house hunters were observably on the rise because buyers were looking to complete sales pre-Brexit.

The report stated that house hunters rose from 305 to 316 per member branch in a month (cf. 303 house hunters in July 2018) and that the supply of available housing had – perhaps luckily (from 37 available for sale to 41) – also increased.

The number of sales agreed per branch remained high for the third month running and, something which most housing writers shout from the rooftops, the number of sales to first time buyers increased.

But for all that, 85% of properties sold for less than the original asking price. The discontinuity continues: we've been here before…



Andrew Boast, co-founder of SAM Conveyancing, said:


"It's curious that in these final stages of Brexit, the capital's prices have recovered somewhat and mortgage approvals have noticeably risen. In other circumstances, housing market stakeholder optimism would most likely rise at this news."

"Unfortunately, in current circumstances, it might be that people who've held off on purchases because of Brexit uncertainty have finally run out of patience and, with base rates still less than 1%, mortgages still remain comparatively cheap."

"It's particularly difficult this month to give further weightier forecasts given that, as October 31 approaches, there is still considerable room for constitutional machinations which might seriously affect housing market outcomes for the remainder of the year. If Prime Minister Johnson remains in post and is true to at least some of this word, we might be looking at a very different housing market environment in the New Year for better or for worse."

"It is undoubtedly encouraging to have first time buyer numbers rising and even their average deposit sums falling (although this might be in large part because of price falls in the capital) but the latest English Housing Survey rather concerningly shows that that age of ownership in general is rising. And curiously, non-London rental prices are falling, if anything, encouraging more potential first time buyers to stay put."

"Hopefully over the next month constitutional matters regarding Brexit will have played out to allow for a little more stability in the housing market and Government to raise the priority of solving the continuing housing crisis."


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