Homebuyers can expect to spend an average of 7.8 times their workplace-based annual earnings on purchasing a property, according to the latest housing affordability data in England and Wales from the Office for National Statistics (ONS).
In 2018, the ONS estimates that full-time employees could typically expect to spend around 7.8 times their workplace-based annual earnings on buying a home in England and Wales. This affordability ratio has increased by 0.8% since 2017, but the ONS claims that this change is not statistically significant.
This was the first time in five years that housing affordability remained at a similar level, following five years of decreasing affordability. While the 2017-18 change is not statistically significant, it is interesting to note that this is driven by the fact that median house prices increased faster than median gross annual full-time earnings (the price paid for properties rose by 3.3%, while earnings were up by 2.6%).
There were no significant changes in the ratio of median house prices to median annual earnings in either England or Wales between 2017-18. Housing remained significantly more affordable in Wales than in England, however. Despite this, the two countries had different changes in their house prices and estimated earnings over the year.
In Wales, house prices increased more than earnings in 2018. In England, house prices and earnings increased more than in Wales, but the difference between these was larger in Wales than in England. This suggests that affordability worsened more in Wales than in England.
The ONS reports that housing affordability has worsened since 1997. Housing affordability in local authority districts in the south of England has worsened quicker than those in the north and Wales.
Over the last two decades, affordability has worsened the most in London, which is driven largely by increasing house prices. Over the past five years, more local authorities in London and the surrounding regions have fallen into the least affordable category. In 2018, eight of the ten least affordable local authorities in England and Wales were in London, with two being in the surrounding South East region. The most affordable local authorities in 2018 were in the North West, Wales and the East Midlands.
London was the only region to show some evidence of improving estimated affordability between 2017-18, with properties becoming 1.0% more affordable. These signs of improving affordability contrast with the longer-term trend of worsening affordability over the previous two decades.
Outside of London, estimates for all other English regions and Wales showed signs of worsening affordability between 2017-18.Copeland, in the North West of England, remained the most affordable local
The average annual house price growth across the UK in January 2019 dropped to its lowest rate since June 2013, according to the latest House Price Index from the Office for National Statistics (ONS).
The average property value in the UK rose by 1.7% in the year to January, which is down from annual house price growth of 2.2% in December 2018. In June 2013, the average increase stood at 1.5%.
Over the past two-and-a-half years, a slowdown has been recorded in annual house price growth across the UK, driven mainly by declines in the south and east of England.
In January, the lowest annual house price growth was recorded in London, where the average property value fell by 1.6%, which is down from a decrease of 0.7% in the previous month. The East of England followed, with a drop of 0.2% over the 12 months to January.
The average UK house price in January was £228,000. This is £4,000 higher than in the same month of 2018. On a non-seasonally adjusted basis, the typical property value in the UK dropped by 0.8% between December 2018-January 2019, compared with a decline of 0.3% during the same period of the previous year. On a seasonally adjusted basis, the average house price in the UK fell by 0.2% between December and January.
By country
The average property value in England was £245,000 in January, which marks an increase of 1.5% over the year – down from 1.9% in December 2018. House prices in Scotland grew at a slower rate than other countries of the UK, rising by 1.3% in the 12 months to January, which has fallen from 2.0% in the year to December. The typical house price in Scotland was £149,000.
Annual house price growth in January was strongest in Wales, at an average of 4.6%, taking the typical property value in the country to £160,000. This continues to be driven be strong house price inflation in southeast Wales, which is likely linked to the abolition of the Severn Bridge tolls, reports the ONS.
House prices in Northern Ireland rose by an average of 5.5% in the year to the fourth quarter (Q4) of 2018. The country remains the cheapest in the UK to purchase a property, with an average house price of £137,000.
By region
Property values in southern England (London, the East of England, South East and South West) dropped by an average of 0.2% in the year to January, which compares to growth of 4.2% in the Midlands and 2.8% in northern England (the North East, North West, and Yorkshire and the Humber). While the annual growth rates of the Midlands and the north have slowed slightly over the past three years, southern England has experienced a sustained slowdown, with values in January marking a decrease over the year.
At a regional level, the East Midlands recorded the highest annual house price growth in January, at 4.4%. The West Midlands was close behind, at an average of 4.0%.
The lowest annual increase was in London, where the average house price dropped by 1.6% in the 12 months to January, which is down from a fall of 0.7% in December. The East of England followed, where the typical property value was down by 0.2% – its first decline since October 2011.
While London house prices have decreased over the year, the region remains the most expensive place in the UK to buy a property, with an average value of £472,000. The South East and East of England follow, at £321,000 and £288,000 respectively. The North East continues to record the lowest average house price, at £125,000, and is the only English region yet to surpass its pre-economic downturn peak.
Comments
Conor Murphy, the CEO of fintech mortgage platform Smartr365, says: “Slowing house price growth is no surprise – we remain without a solution to Brexit and only nine days to go. However, the fundamentals of the mortgage market remain solid. Lenders are developing more innovative products and near record low interest rates are attracting demand, despite wider uncertainty.
“Keeping up with this demand, while balancing existing client relationships, isn’t easy, though. Here is where end-to-end solutions can play a vital role. Not only do they improve a broker’s business, but the closer we can come to creating a frictionless mortgage journey for customers, brokers and lenders, the better the outlook for the market will be.”
Ewen Bunting, the Head of Sales at independent estate agent James Pendleton, also comments on the index: “The market is plumbing near six-year lows and Londoners are feeling the worst of it, with the gap between house price growth and inflation widening to more than 3%.
“This represents a substantial real terms annual loss. No one was expecting fireworks after New Year while the clock runs down on Brexit, but things appear to be coming to a head rather earlier than we had initially expected.
“It’s no surprise slowing house price growth is swayed in a large part by downward trending prices in London and the South East. Uncertainty and an element of caution among those who don’t strictly need to move remains the order of the day, though, on the capital’s doorsteps, we’re seeing those who are prepared to adjust expectations continue to transact quite well. This is despite volume of sales remaining a major problem nationally.”
Shaun Church, the Director of mortgage broker Private Finance, gives his thoughts: “Property prices have experienced their weakest growth in almost six years, with London the chief culprit for the national lag. It’s becoming ever more apparent that continued uncertainty around Brexit and the wider global economy is depressing the capital’s property market.
“For the millions of aspiring homeowners that have long been priced out of London, now marks a time of opportunity. Between December and January, buyers saved £1,344 on average when purchasing a property in the capital. While not a windfall, this saving on purchase price, combined with Stamp Duty exemptions, near record low mortgage rates and Government initiatives, such as Help to Buy, are all helping to make homeownership incrementally more affordable and attainable.
“While buyers can currently expect to purchase at a reduced price in London, the opposite can be said for the rest of the UK, with continued growth across the majority of regions, suggesting there are plenty of investment opportunities elsewhere. The Midlands, in particular, stands out as a region for investment, with house prices growing by around 4%. Amongst the headlines of falling house prices, it’s therefore important not to overlook the fact that significant pockets of the UK continued to be poised for growth.”
House prices across the UK rose by an average of 5.9% in the month to February, to reach £236,800, according to Halifax’s latest House Price Index.
On an annual basis, house prices in the three months to February were 2.8% higher on average than in the same three months of 2018, which is up from the 0.8% annual growth rate recorded in January.
In the latest quarter (December-February), house prices increased by an average of 1.8%, compared to the preceding three months (September-November).
Russell Galley, the Managing Director of Halifax, says: “House prices have grown on an annual, quarterly and monthly basis for the first time since October 2018, taking the average house price to £236,800.
“The shortage of houses for sale will certainly be playing a role in supporting prices. House price growth is now at 1.8% – an increase from the 0.6% fall last month, and back at the rate we saw from July-September 2018.”
He continues: “Annual house price growth at 2.8% is within our expectations, but is fairly subdued compared to 2015 and 2016, when the average growth rate was 8.3%.
“People are still facing challenges in raising a deposit, which means we continue to expect subdued price growth for the time being. However, the number of sales in January was right on the five-year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident.”
As part of its index, Halifax looked at data from across the housing industry.
HM Revenue & Customs (HMRC) reported that 101,170 home sales were recorded in January (for which the latest data is available), which, as in December, was very close to the five-year average of 101,291. This is the fifth consecutive month where more than 100,000 homes were sold, leading to a 0.9% quarterly rise when comparing transactions in November-January to August-November. Home sales in January were 2% higher than the previous 12-month average.
House Prices Rise by 5.9% over the Past Month, Halifax Reports
Bank of England (BoE) figures show that the number of mortgages approved to finance a home purchase – a leading indicator of completed sales – increased by 3.6% to 66,766 in January. This rate is marginally above the five-year average monthly approval rate of 66,366 and is 1,635 higher than the previous 12-month average.
For the third month in a row, the Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey showed a drop on nearly every measure reviewed. New buyer enquiries, new instructions to sell and sales were all lower than they were in the previous month. The national sales to stock level dropped to 31.5%, which is the lowest rate it has been since September 2013.
Comments
Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the data: “This market is rattling around like a ricocheting bullet. It’s an incredibly unusual shift, even for monthly prices, which are known to be more volatile.
“At first glance, this monthly surge could be a bout of pre-Brexit confidence, but nothing has changed. We have as much certainty over Britain’s exit from the EU as we did a year ago.
“The more likely answer is that, in key areas, low supply is squeezing those buyers who have a need, rather than just a desire, to move and just can’t put it off any longer.
“The difference between the Halifax index and the Land Registry figures is crucially important here, too. These numbers are based only on mortgages agreed, so these buyers know they are going to be able to pull out of the deal if Brexit goes bad and the economic outlook rapidly deteriorates.”
Conor Murphy, the CEO of fintech mortgage platform Smartr365, also comments: “Moderate house price growth is inevitable, as political and economic uncertainty persist with only 22 days left until Brexit. Despite this, the mortgage market continues to perform well, as homeowners capitalise on near-record low interest rates. Earlier this week marked the tenth anniversary of the UK interest rate cutto 0.5%, which set the scene for a decade of historic low rates. With the base rate now at 0.75%, borrowers are locking into long-term fixed rate deals before possible future rate rises.”
Annual house price growth remained sluggish in February, according to the latest House Price Index from Nationwide.
The building society found that the average house price in the UK increased by 0.4% in the year to February. On a month-on-month basis, property values experienced a marginal decline of 0.1%, taking the average house price to £211,304.
Robert Gardner, the Chief Economist at Nationwide, comments on the figures: “After almost grinding to a complete halt in January, annual house price growth remained subdued in February, with prices just 0.4% higher than the same time last year.
“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, but survey data suggests that sentiment has softened.”
He observes: “Measures of consumer confidence weakened around the turn of the year and surveyors reported a further fall in new buyer enquiries over the same period.
“While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.”
Homeownership
Gardner assesses homeownership levels: “The latest English Housing Surveyfrom the Ministry of Housing, Communities & Local Government (MHCLG) showed a slight rise in the homeownership rate in 2018 to 63.5% (from 62.6% in 2017).
“The rise in homeownership was driven by an increase in the number of people owning their home with a mortgage, which began to increase again after declining continuously since 2005. The number of people owning their own home with a mortgage rose by 5% over the year to 6.9m, though this is still 20% below the peak recorded in 2000.”
He reports: “Supportive labour market conditions and a number of policy changes, especially in the regulatory and tax system, have improved the bargaining position of homebuyers relative to investors. Government schemes, such as Help to Buy: Equity Loan, have also helped support first time buyer numbers.
Annual House Price Growth Remained Sluggish in February
“The biggest improvement in homeownership over the past year has been amongst those aged 35-44, helping to reverse some of the decline seen in the last few years. Nonetheless, at 57%, the homeownership rate amongst this age group is still well below its 2006 peak of 73%.”
Gardner adds: “The number of households owning their homes outright remained at a record high of 7.9m. This figure has increased by 1.2m over the past decade, almost entirely amongst homeowners aged 65 or above.”
Comments
Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the data: “It’s a pretty unremarkable start to the year, but, assuming there’s no delay to Article 50, this is going to be the mood music until we get through to April.
“February can be a mixed bag, but it’s generally a time of year when the market starts to really pick up in terms of post-Christmas activity. There are extenuating circumstances now, of course, that are affecting that typical pattern, and delivering us the first quarterly fall since the middle of 2018.
“The market is falling in real terms, but, in the more expensive parts of the country, particularly London, it’s going to take a more significant retreat in prices to pull first time buyers to the table in significantly greater numbers.”
Steve Seal, the Director of Sales and Marketing at Bluestone Mortgages, also comments: “Although modest house price growth will be welcomed by buyers, other financial obstacles are still blocking many from accessing affordable lending. High street lenders do not have the underwriting capacity to assess customers outside the traditional mainstream criteria, and this particularly affects those who have a blip in their credit score.
“However, there is support available for these customers, particularly within the specialist market. Bluestone Mortgages revealed that 37% of brokers believe the specialist market is set to grow by at least £1-£5 billion over the next six months – no doubt a result of the growing numbers unable to fit the vanilla mould. Specialist lenders can provide tailored solutions, and not simply basing this off a number on a computer screen.”
London rental yields seem to be improving, as the property market in the capital shows signs of bottoming out, reports estate agent Chestertons.
House prices in the capital have dropped in recent years, with property values in prime London experiencing the sharpest declines. They are now close to 20% below their peak in 2014, according to various indices.
However, there are now fresh signs that the London property market is finally bottoming out, as a substantial rise in people registering to buy homes is coupled with a significant decrease in the number of new properties coming onto the market.
Chestertons has witnessed a 35% increase in the amount of buyers registering to purchase properties in the capital since the start of this year, compared to the corresponding period of 2018.
In addition, the number of agreed sales has risen by 7% year-on-year, while property viewing appointments have increased by 12% over the same period. This further demonstrates the existing strong buyer demand in the market.
But the estate agent reports that the number of new properties coming onto the market during this period in London has fallen by 22% annually, adding to the widening supply-demand imbalance in the market, which has slowed the rate at which house prices have been declining in the capital.
London Rental Yields Improving as the Market Bottoms Out
The latest House Price Indexfrom the Office for National Statistics (ONS) shows that growth in London improved from an average of -1.4% in December 2017 to -0.6% in the same month last year.
Meanwhile, in Zone 1, Chestertons’ own data shows that, in the three months to December 2018, prices in prime locations dropped by an average of 1.2%, which is a considerable improvement on the -2.2% rate recorded in the previous quarter.
As house prices have fallen significantly since 2014 and rents have increased in many parts of the capital, due to a shortage of available rental homes, London rental yields are also picking up and supporting investor demand.
London rental yields in locations covered by Chestertons stood at an average of 3.2% at the end of December last year, compared to 3.0% at the same point in 2017.
In Zone 1, rental returns increased to an average of 2.8%, from 2.7% in the previous year.
Guy Gittins, the Managing Director of Chestertons, says: “Following two years of substantial price drops, the market is now bottoming out in London.
“Property values in the capital – particularly in prime locations – have now come down to a level that is proving increasingly attractive to potential buyers, driving a huge surge in the number of people registering with agents and buying property since January.”
He continues: “At the same time, the number of new properties being put up for sale has plummeted. This dramatic imbalance between supply and demand is starting to fuel small price increases in areas like Hyde Park and Putney, as competition ramps up – and we’re even seeing instances of buyers attempting to gazump others by offering to pay over asking price. The signs of recovery are there, with the prime market leading the way.
“It’s not just local buyers who are coming to the market in their droves now, but investors, too, who are seeing improved yields and good opportunities.”
Gittins adds: “With 29thMarch looming large in people’s minds, overseas buyers fear their window of opportunity is closing, and are moving fast to invest in the London property market while prices are low and sterling is weak.”
Nearly half (41%) of Britons do not expect house prices to rise in the next three years, according to research by home moving company AnyVan.
With Brexit now firmly on the horizon, uncertainty over the UK’s departure from the EU is weighing on property buyer and seller confidence. Many are waiting for the dust to settle, but there are many still expecting house prices to rise this year.
One in five homeowners are hoping that property values will increase over the next 12 months, rising to over a quarter (27%) next year and a third (32%) in 2021.
In London, the weak pound may have pushed international buyers in prime central London to its highest level for six years, but, for the majority of Londoners, very uncertain times are ahead. 40% of homeowners in the capital do not expect to see any property value growth in the next three years. However, many are more positive on the bounce back ability of the London property market, with a third (31%) expecting house price increases in 2020 and 2021.
Elsewhere in the UK, Scottish and Welsh residents predict tough times ahead for house prices. Over half (53%) of those in Wales do not expect to see values increase in the next three years, with over a quarter still forecasting price declines in 2021. In Scotland, 32% of people forecast a decrease in house prices this year, plus 29% in 2020 and 22% in 2021.
Leeds (29%), Bristol (24%) and Newcastle (27%) have the greatest proportion of homeowners predicting growth next year, while 35% of those in Birmingham and 34% in Southampton expect values to rise in 2021.
Angus Elphinstone, the CEO of AnyVan, says: “Our latest property research gives a good indicator of the sentiment of British homeowners. While there have been recent statistics about the slowdown of property transactions and areas experiencing falling values, it seems the country is still split on their view on property price growth in the years to come.
“Things will become a lot clearer once we leave Europe, but, with 41% of the nation not expecting property price increases in the next three years, it’s clear to see Theresa May and her Government have a lot of work to do.”
