London’s housing woes spread countrywide - March 2019

10 min read
Brexit or no Brexit - and at present no-one truly knows what will happen over the ensuing weeks and months - there are worrying signs that some of the dire issues hitting London's housing market are increasingly detectable in the wider property markets of England and Wales.

But on the subject of Brexit, it transpires that (for some) that holiest of grails, the hardest of Brexits might give much more power to landlords in landlord/tenant relationships

All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated. If you are buying or selling in London then get a free no obligation quote from our London Conveyancing Solicitors.

England & Wales’ prices fell last month by the largest percentage since October 2011 (1.0%)

Average house prices in England and Wales have fallen for the 5th month in a row month-on-month although over the same period, year-on-year the prices represent small increases. January’s £239,713 price of an average house is more than £4,000 off the recorded peak of £243,959 back in August 2018.

Volumes have seen a minor rally month-on-month however, having risen for the second month in a row, this time from 74,991 to 76,355 (for November). The year-on-year volume picture cannot be described with such optimism however: volumes have fallen in this way for the 12th month in a row.

One school of thought however would be that many potential first time buyers are waiting to pounce, assuming prices fall further... 

London volumes continue falling at historic levels

London’s declining sales volumes have been lamented frequently both on this site and in numerous parts of the press and November’s 6,888 represents no great improvement, representing year-on-year 15 months of declines, the longest period like this since the last property crash.

At £472,230 as the overall average price of a property in London, this is considerably below July 2017’s £488,527 peak however over the months since, prices have fluctuated considerably and there has been by no means steady falls. That said, year-on-year prices have fallen for 11 months in a row.

Wages beating inflation, but no-one’s getting rich quickly

Inflation (Consumer Price Index) has barely risen – by ½ of a per cent – between January and February and in fact, comparing like with like, inflation fell by ¾ of a per cent between December and January while wages rose 1/5 of a per cent over the same monthly period. Although hardly the stuff of legend, technically people on average are very slowly getting richer in terms of real wages.

Brexit affecting mortgage/remortgage applications?

Both mortgage and remortgage approvals were down month-on-month, 64,337 and 47,673 respectively, with remortgages falling more in percentage terms (5.2%) than mortgages (3.7%). Although something might be made of the lesser decline in mortgage approvals, collectively these figures still indicate a tentative market with Brexit indecision no doubt playing a factor. 

Did you know? According to one large lender's figures, in 2004, no more than a 1/3 of children were born in private rented accommodation in England. By 2018, this has risen to nearly 50%.

But is Brexit helping the US housing market?

Curiously according to one prominent financial news publisher, it is. Recent comment in one of its articles stated:

"Brexit as well as other economic troubles in Europe and Japan have kept interest rates in these regions so low that a flood of foreign money as arrived in the United States, driving down longer-term yields here including mortgage rates."

"American homebuyers have rushed to take advantage. This, more than anything else, explains the recent real estate turnaround."

A very hard Brexit could strongly tip the landlord/tenant balance in favour of the landlord

A recent media report examined various ways in which a very hard Brexit might affect landlord/tenant relations and, in sum, greatly favour the landlord.

Energy Efficiency

In the event of a very hard Brexit, in theory you would no longer have to have an Energy Performance Certificate (EPC) for a home. Additionally that means that the new requirement to have a minimum energy efficiency standard in residential rental property would also go, as would the requirement to serve an EPC in order to be able to serve a Section 21 Notice (to evict a tenant when their assured shorthold tenancy ends).

Consumer Protections and Rights

The Consumer Protection From Unfair Trading Regulations 2008 (CPRs) rely on EU legislation.

This would impact the entire sector as it is the CPRs which require that both estate and lettings agents do not provide misleading or inaccurate advertising of residential property, the Property Misdescriptions Act 1981 having been repealed some time ago on the basis that the CPRs were a complete and more substantial replacement.

Likewise the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which do not apply to tenancies but do apply to estate and letting agents’ terms of business, would also go, so rights to cancel these agreements at an early stage would disappear.

Heat Networks

This affects fewer people but the Heat Network (Metering and Billing) Regulations 2014 which require landlords who are engaged in the supply of energy to their tenants to give information about those costs and allow elements of control over that cost are based on EU law entirely. This will affect those residing in blocks with district heating schemes and some HMOs as well.

HMOs and Licensing

The EU Provision of Services Directive and the consequent Provision of Services Regulations 2009 would also not be relevant any more. This would mean that the decision in R(Gaskin) v Richmond would be largely irrelevant and local authorities would be less restricted in the charging of HMO licensing fees.

Money laundering

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 apply to estate agents but not to letting agents. However, they are made in part based on EU law and rely heavily on EU guidance and the EU sanctions regime. Therefore their ongoing operation is open to some doubt.

Wheeler – tenant fees ban may be scrapped in future

Even before the ban on letting agents charging tenant fees comes on stream – 1 June 2019 – the Government has already mooted scrapping it in future.

Housing Minister Heather Wheeler, when asked at a recent conference if the Government would scrap the ban when it comes to review its impact if rents had risen as a result of the legislation, said that this would depend on the evidence but that the policy was about offering the best service and not intended to push out private landlords.

Housing shortage? What housing shortage?

The Ministry of Housing, Communities and Local Government recently released figures which contradict the widespread misconception that Britain’s housing crisis results from a lack of houses.

Official stats revealed that the number of long-term vacant properties in England rose by 5.3 per cent in the 12 months to October, to a total of 216,186.

In London, where housing supply is scarce, the growth of empty homes was double the national rate, increasing 11 per cent to 22,481. This complements other evidence showing that housing stock levels have consistently risen at a higher rate than population growth, even in the past couple of decades – even in London.

Help to Buy house prices rise 50% since 2013 launch (ONS)

In 2012, the year before then Chancellor George Osborne introduced the policy, the average new-build home in England and Wales cost £189,950. This has since risen hugely by £96,050, or 51 per cent, to £286,000, according to the ONS, which contrasts with an older house only rising £47,000, or 26 per cent, from £178,000 to £225,000.

Help to Buy has so far resulted in the building of 195,000 properties, but with the assistance of £10.7 billion of taxpayers’ cash and many have blamed it for pushing up prices because it effectively increases buyers’ budgets. Experts have also accused developers of taking advantage of this extra financial firepower, knowing families are so desperate to get on the ladder they will pay the maximum they can afford. Critics say this has allowed developers to pocket billions of pounds and give their bosses gigantic bonuses.

Persimmon became the first developer to make profits of more than £1 billion last year – helping fund a notorious bonus scheme which handed £85 million to former boss Jeff Fairburn, and £45 million to current chief executive Dave Jenkinson. Fellow builders Taylor Wimpey made an £811 million profit last year and Barratt Developments made £836million. All these large developers have additionally been tainted because of their choice to sell leasehold houses which has caused a massive - and continuing - scandal.

NAEA: sales to first time buyers at a 7-month high

The main headline findings in the NAEA's latest housing market report, for February, were as follows:
  • Demand from prospective buyers fell to a six-year low
  • Supply of available properties decreased marginally
  • Sales to first-time buyers (FTBs) hit a seven-month high and the number of sales agreed per branch remained the same
  • Nearly nine in 10 properties sold for less than the original asking price
The number of house hunters registered per estate agent branch, at 252, is the lowest figure since July 2013, when it was 250. Demand itself overall has fallen by a fifth year-on-year.

First time buyers take advantage of reduced competition

As demand generally fell in the housing market, first time buyers took up more sales and in total these reached a 7-month high of 30% of sales overall.

Nearly 90% of properties sold for less than the original asking price

The figure of 87% of properties eventually being sold for less than asking price is even higher than usual and while in normal terms the remedy of a price fall would be debated to increase sales volumes, the UK market, as it has done in numerous months previously, seems impervious to this course of action.

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

"March has proven to be a mixed bag in many ways for the UK housing market. Brexit uncertainty is almost a certainty paradoxically and many experts are now diverting more analysis to different resulting scenarios including [see above] Brexit's effects on the US housing market."

"Prices are starting to fall in England and Wales and first time buyers may well be making fine calculations as to the timings of their first purchases: price falls don't go on indefinitely after all.."

"But many other signs are far from positive. Mortgages and remortgages are down and wages are still recovering incredibly slowly, if at all. If the UK economy takes a serious knock resulting in job losses and lay-offs, there'll be a greatly-decreasing pool of potential buyers for cut-price housing."

"Brexit might also seriously unbalance the landlord/tenant relationship in the private rented sector in favour of the landlord. Given that the UK is in the main becoming a nation of renters again, this development would be highly unwelcome."

"Lastly, Help to Buy is once again in the spotlight - and for dubious reasons. If its lasting legacy, despite the creation of hundreds of thousands of new houses, is the stratospheric enrichment of a handful of personnel from a small number of very large developers mainly assisted by public funds, has the price been worth paying? The Government cannot take its eyes off the housing crisis over the next few months regardless of the UK's place in the EU or otherwise."

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