Posts with tag: house prices

How will the Value of your Property Change in 2019?

Published On: January 4, 2019 at 11:00 am

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Affordability was one of the main pressures in the UK housing market over the past year, even at low price points. So, how will the value of your property change in 2019?

In 2018, few buyers were searching for properties, particularly in big cities, while not many owners were putting their homes on the market, leading experts to regularly describe the industry as “subdued”.

Even when a property sale had been agreed, deals were “taking longer to get over the line”, according to Simon Rubinsohn, the Chief Economist at the Royal Institution of Chartered Surveyors (RICS).

A recent survey by the Centre for Economics and Business Research (Cebr) suggested that homes in cities and major towns were on the market for an average of 102 days before being sold or put under offer last year. This was six days longer than in 2017.

The expectation among industry commentators is that there will be more of the same in 2019; the market will keep moving, but slowly, reports the BBC.

Properties will go onto the market, partly the result of death, debt or divorce, while people will still have to move for work or schools, or because they are attracted by a discount.

Potential buyers, however, might struggle to get a new mortgage, owing to strict lending criteria, or might choose to renovate or extend their homes instead of relocating.

All of those factors, and more, mean that most of the commentators that the BBC spoke to are predicting relatively little change in the value of property in 2019.

“In short, the market will continue to tread water,” believes Capital Economics’ Andrew Burrell.

Property value predictions

  • Richard Donnell, the Property Market Analysis at Hometrack: +3%
  • Andrew Montlake, of mortgage broker Coreco: +1% to +2%
  • Henry Pryor, housing market expert: -5%
  • Miles Shipside, of Rightmove property portal: 0%
  • Andrew Burrell, of Capital Economics: +1%
  • Simon Rubinsohn, of the RICS: 0%
  • Russell Galley, of mortgage lender Halifax: +2% to +4%

These predictions show an average for UK house prices, but each expert pointed out that the picture could vary significantly in different parts of the country. It can even vary in different neighbourhoods of the same town.

“Trying to sum up the health of the UK’s 27m homes is impossible,” admits Pryor.

Donnell explains: “There are pockets where local economies are weak and this is acting as a drag on house prices.”

Burrell believes that property values in London could fall by an average of 5% this year, but rise everywhere else.

At a hyper-local level, the performance of a school or the prevalence of crime can affect house prices.

Nationally and internationally, there is one major issue that could have a huge impact on the housing market:

Brexit

In its most recent monthly survey, the RICS suggested that there was an unprecedented dominance in the commentary of surveyors on one single issue: Brexit.

“Uncertainty created by the Brexit process is causing buyers and sellers to sit tight in increasing numbers,” it says.

The Bank of England (BoE) believes that the impact of the UK leaving the EU on the housing market could be significant. Its various scenarios indicate what could happen, not necessarily what is most likely to happen, as a result of Brexit.

How will the Value of your Property Change in 2019?

House prices could decrease by up to 30% from their pre-Brexit levels if there is no deal, or a so-called disorderly Brexit, the Bank claims. That compares with a peak-to-trough drop of 17% on the average UK property value as a result of the financial crisis ten years ago.

“It is worth stressing that this modelling from the Bank was undertaken for financial stability purposes,” Rubinsohn points out. “Some of the assumptions behind the disorderly Brexit scenario seem implausible to us.”

If the UK’s exit is “disruptive”, then the BoE says that the fall in house prices could be up to 14%.

Clearly, it is tough to predict the outcome of Brexit, so the effect that it might have on property is even more difficult.

Pryor believes that the transition phase of Brexit will simply add to uncertainty: “If you think that the housing market foundations are shaky now, then I suspect we ain’t seen anything yet.”

Montlake feels that some certainty over an EU-UK deal could mean a steady outlook for the housing market: “Whichever way Brexit goes, the UK is still a stable country compared to many others, and an end to all the current uncertainty will make a huge difference.

“There is also potentially something to be said for buyers to have property investments outside the EU which could then go through a particularly bumpy time.”

2018 was as difficult as ever for many young people hoping to buy a home, due to strict lending controls, issues with affordability, and a lack of secure employment. However, these problems have been primarily seen in the big cities, especially London.

Nevertheless, first time buyers were still the most active group in the UK property market in 2018, according to Hometrack. The Government’s Help to Buy schemes have helped more than one in ten of them purchase newly built homes, in particular.

In contrast, existing homeowners with mortgages saw little reason to move last year. Sales among this group were at their lowest level for a decade. Owners took the safety-first approach, by deciding not to move and take on a larger mortgage, but to stay put, take advantage of historically low home loan rates, and reduce their overall level of debt.

In normal circumstances, with the BoE expecting interest rates to rise only in small increments, the same might be expected in 2019.

But the current political situation is not normal, and that makes predicting the UK housing market particularly tough. The commentators that the BBC spoke to a year ago were generally accurate in forecasting house price growth in 2018. They may not have the same confidence in their expectations this time around.

Housing Market Set to Weaken Further Next Year

Published On: December 21, 2018 at 10:28 am

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The housing market is set to weaken further next year, with house prices expected to slip by around 1% across the UK, according to analysis by Home.co.uk.

Nationally, house price growth will be driven down by further falls in the value of homes in the three years that have already retreated into the red during 2018: Greater London, the South East and East of England, Home believes.

The latest asking price figures compiled by Home show that, in the 12 months to December 2018, values fell in the capital by an average of 2.5%. This figure is set to be 3.5% by the end of 2019, as sentiment worsens and homebuyers play wait-and-see, while the price of London properties slides further.

The capital’s tenants are also set for a torrid 2019, with a dramatic shortage of available rental homes causing rent prices to soar further. They have already climbed by an average of 6.3% in 2018, driven by scarcity. Over the past two years, the supply of rental accommodation has plunged by 34%.

House prices in the South East fell by an average of 0.8% this year, and the rate of decline is set to increase to 2% next year. The East of England’s 0.6% drop in 2018 is predicted to more than double to 1.5% over the next 12 months.

Meanwhile, the South West is set to join these regions in the red. In the 12 months to December this year, prices in this region rose modestly, by an average of 0.7%. However, Home expects the South West’s property market to see a price fall of 1% over the course of 2019.

Housing Market Set to Weaken Further Next Year

Some of 2018’s most successful regional property markets are also set for a hammering in 2019.

In the West Midlands, prices have shot up by an average of 5.2% in the 12 months to December, but are set to increase by a far lower rate of just 2% next year. And the East Midlands, which saw annual price inflation of 3.6% this year, should brace itself for zero growth during 2019.

By contrast, Home anticipates only a small drop-off in house price growth in the North West and Yorkshire and the Humber. The North West saw inflation of 4.8% this year, while prices in Yorkshire and the Humber have risen by 4.7%. Both should still see growth of 4% next year.

Wales’ remarkable price growth this year, of 7.4%, also looks set to continue. Five years ago, the principality’s property market was stagnating, due to oversupply, while prices rocketed towards the South East. Now the boot is on the other foot, as the Welsh market tops the growth chart, with prices set to increase by another 7% next year.

However, the prospects for Scotland’s property market look less favourable. While prices have risen by 2.2% during 2018, the increase next year is set to be a more modest figure, of around 1.5%.

Stagnation in the North East is also set to continue during 2019. Prices stalled this year, with just a 0.6% rise. Next year, prices are unlikely to lift much above 1%. This inactivity is a result of years of insufficient reinvestment in this former industrial powerhouse, Home reports.

Doug Shephard comments on the analysis: “Looking ahead to 2019, our trend indicators suggest that national price growth will likely be in the red by 1.0% towards the end of next year.

“We don’t expect London prices to pull out of their shallow dive until 2020, and, what’s more, other regions look set to slide into negativity in 2019.”

He believes: “Going forward, the major challenge for estate agents will be to manage the expectations of vendors in the growing number of regions where prices are sliding. Failing that, property auctions look well placed to profit from the increasing numbers of frustrated sellers in and around London.

“Brexit is not to blame. Sure, May’s mess is not helping, but the current post-boom hangover was baked into the cake when the Bank of England reduced rates to historic lows back in 2009.”

Annual House Price Growth at Lowest Rate for 5 Years

Published On: December 20, 2018 at 11:01 am

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Annual house price growth in October – for which the latest official data is available – was at the lowest rate for over five years, according to the most recent House Price Index from the Office for National Statistics (ONS).

The average house price in the UK rose by 2.7% in the year to October, which is down on September’s rate of 3.0%. This is the lowest annual growth rate since July 2013, when it was 2.3%.

Over the past two years, there has been a slowdown in UK house price growth, driven mainly by a decline in the south and east of England.

During the year to October, the lowest rate of growth was seen in London, where the average house price dropped by 1.7%. This is up, however, from the 1.8% decrease recorded in September.

The average UK house price in October was £231,000. This is £6,000 higher than in the same month of last year.

On a non-seasonally adjusted basis, the average property value in the UK fell by 0.2% between September and October this year, compared with a 0.1% rise during the same period of 2017.

On a seasonally adjusted basis, the average house price in the UK increased by 0.2% between September and October 2018.

By country

House prices in England grew slower than other countries of the UK in the year to October, at an average of 2.4%, which is down slightly on the 2.6% recorded in September. The average property in England is now worth £248,000.

House prices in Wales rose by an average of 3.8% in the 12 months to October, to reach £161,000.

In Scotland, the average property value was up by 4.4% on an annual basis, to stand at £152,000 in October.

The average house price in Northern Ireland currently sits at £135,000, following an increase of 4.8% over the year to the third quarter (Q3) of 2018.

Regionally

Across the English regions, the North West showed the highest annual house price growth in October, at an average of 4.9%. This was followed by Yorkshire and the Humber, at 4.4%.

London had the slowest annual growth of all English regions, at -1.7% in the year to October. House prices in the capital have fallen every month this year since July.

While annual house price growth in London is slowing, it still remains the most expensive place to purchase a home, at an average value of £474,000, followed by the South East and East of England, at £327,000 and £295,000 respectively.

Annual House Price Growth at Lowest Rate for 5 Years

The North East continues to have the lowest average price, at £128,000, and is the only English region yet to surpass its pre-economic downturn peak.

Falling house prices in London are driven primarily by inner London, for which annual growth has been consistently negative since January this year. In the 12 months to October, house prices in outer London fell by an average of 0.2% – its first annual decrease since September 2011.

Both inner and outer London seem to follow similar trends in house price growth, with changes in outer London tending to appear slightly after those in inner London.

The Bank of England’s November inflation report highlights that the slowdown concentrated mainly in the London market since mid-2016 is probably due to the area being disproportionately affected by regulatory and tax changes, and also by lower net migration from the EU.

Comments

John Goodall, the CEO and Co-Founder of buy-to-let specialist Landbay, says: “Amidst a volatile political and economic landscape, the hesitance of buyers and sellers to act is completely understandable. Combine this with the traditional seasonal slowdown, alongside historically low levels of transactions, and stagnant house price growth really is no surprise. As we wait to see how Brexit uncertainty unravels, the private rental sector will play a more important economic role than ever, as it provides flexibility and value to renters and landlords alike.”

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, also comments: “House price growth is still bouncing around five-year lows, but it’s in London where the market is readying itself for a recovery in transaction numbers early next year.

“First time buyers are eagerly watching a contraction that, once you factor in the effect of inflation, is resulting in starter homes in the capital becoming much more affordable.

“London has posted a solid four months of annual price falls now, which is enough to begin to make a meaningful difference to the value proposition of these homes.

“The North East was the first to follow suit and post negative annual growth, but it won’t be the last. The regions are likely to continue to follow this trajectory as we head into early 2019.

“The fact that a correction in prices is unfolding now in London, where prices are highest and there is most competition, will let some pressure out of the market and inject some much-needed new blood into the volume of sales.”

Chris Sykes, the Mortgage Analyst at Private Finance, gives their thoughts on the capital: “London’s property market in 2018 has been a tale of two cities. While outer London house prices have remained relatively resilient over the course of the year, inner London – a hub for both foreign and domestic investment – has been hit hard. Punitive measures imposed on buy-to-let investors, combined with the prospect of the UK crashing out of the EU, has dissuaded potential property investors. Central London property prices have witnessed consistent decline over the course of the year, now down by 3% annually.

“While the rest of the UK may be enjoying positive growth for now, with the North West witnessing house price growth of nearly 5%, it’s important to remember the wider UK property market often takes its lead from London. With Brexit uncertainty likely to continue well beyond March 29th, UK house prices could be set to weaken nationwide in 2019.

“With property prices acting as an important barometer of strength for the broader UK economy, these figures will be a source of discomfort for some. However, for first time buyers that have long been priced out of the property market, this ongoing uncertainty marks a time of opportunity, as they gain some respite from soaring house prices.”

London Ends Year with Negative House Price Growth for Second Time in 23 Years

Published On: December 19, 2018 at 10:58 am

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London is ending the year with negative house price growth for only the second time in 23 years, according to the latest UK Cities HousePrice Index from Hometrack.

The report shows that house price growth across the largest cities in the UK has slowed to an average of 2.6% over the past year, which is the slowest rate of inflation since 2012, due to ongoing price declines in London and a sustained slowdown across areas in southern England.

House prices in London have dropped by an average of 0.1% over the last 12 months, making 2018 the second time in 23 years that the capital has ended the year with negative growth.

Property values are falling across two-thirds of local authority areas across London, by up to 3.5% (in Camden), while prices are rising in a third of markets, by up to 2.0% (in Barking and Dagenham).

Nevertheless, recent house price declines are doing little to materially change the affordability picture in London. The house price to earnings ratio peaked at 14x in 2016 and has started to fall, but remains stretched, at 13.3x.

Edinburgh currently has the fastest growing house prices of all UK cities (at an average of 6.6%), with increases in Manchester and Birmingham also running at more than 6.0%.

However, just four cities are recording higher levels of house price growth than this time last year – Manchester, Liverpool, Cardiff and Newcastle.

The cities that have seen the greatest slowdowns in property values over the past year are all located in the south of England: Bournemouth, Portsmouth and Bristol.

Affordability pressures have increased in these cities over the last 12 months, and they now record the highest house price to earnings ratios outside of London, Oxford and Cambridge.

Over the course of 2019, Hometrack expects UK city house prices to rise by an average of 2.0%, as above average growth in large regional cities offsets price falls in London.

Property values in the capital are forecast to register decreases of up to 2.0%, while, in more affordable cities, such as Liverpool and Glasgow, prices could rise by another 5.0% next year.

Richard Donnell, the Insight Director at Hometrack, says: “The diversity of London’s housing markets is shown by the clear divide between low house price growth in outer London and commuter areas, and nominal price falls concentrated in high-value inner areas of the capital. In 2019, we expect prices to continue to fall most in central areas of London. Our projection for a 2% fall in overall London prices will reduce the price to earnings ratio to 12.8x, in line with levels last recorded in mid-2015.

“Outside of London and the south, affordability levels in regional cities remain attractive, but this is changing. House price growth has run well ahead of earnings growth for the last five years and, together with small increases in mortgage rates, as well as growing economic uncertainty, the speed at which households bid up the cost of housing is reducing.”

He adds: “The fundamentals of housing affordability will shape the prospects for city house prices in 2019. This is already the case, with flat to falling prices in the most unaffordable cities, and above average growth in the more affordable areas. Ultimately, the speed at which affordability translates into price changes depends on economic factors, changes to mortgage rates and household sentiment. Brexit is the greatest driver of uncertainty in the near term and the prospects are for a slow start for the housing market in 2019.”

The Property Market is Biding its Time, According to Your Move

Published On: December 17, 2018 at 10:31 am

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The UK property market is biding its time, according to the November House Price Index from Your Move.

House prices across the country largely continue to flatline, with the rate of annual growth falling consistently since August. It now stands at an average of 0.9%, which is well below the rate of inflation and the lowest since April 2012.

This leaves the average property value in England and Wales at £305,522, following a £2,724 increase on November 2017.

Despite weak price growth, property transaction levels rose slightly in November, by 2.5% on a seasonally adjusted basis. With an estimated 82,500 sales, they are at their highest for the month in three years.

Key insights

In the year to September, while the number of loans for first time buyers was up marginally (0.4%) on the same period last year, the amount for home movers was down by 3.6%.

Perhaps most tellingly, the number of buy-to-let mortgages fell by 13.0%. This could be an indication that a wait-and-see approach is now being adopted, particularly as the end of the year approaches and the nation waits with bated breath on the outcome of Brexit.

Longer-term issues also play a role, however, and affordability remains a key concern. The greatest growth in transactions has been in the cheapest region in England – the North East – with sales in the three months to October up by 7% on the same period of 2017.

By contrast, the South East (the most expensive region outside of London) saw transactions fall by 4%. The capital bucks the trend, with sales up by 2%, but it also saw price falls earlier than other regions.

More widely, the Resolution Foundation’s report on the bank of mum and dad earlier this month shows the continuing difficulty that the young have funding their own home purchases. It showed that those without parental property wealth are, at the age of 30, roughly 60% less likely to be homeowners than those whose parents are homeowners.

Region-by-region

The top three regions for house price growth remained unchanged in November. The West Midlands still lead the way, with annual growth of an average of 3.7%, supported by a strong performance in the West Midlands combined authority, which includes Birmingham. With prices up by an average of 5.3% over the year, it’s among 13 areas to set a new peak in the month.

The Property Market is Biding its Time, According to Your Move

Neighbouring East Midlands, meanwhile, is also growing strongly, with prices up by an average of 3.5% annually. Rutland saw growth of 10.8% over the 12 months to November, while Derby (6.1%), Leicester (5.7%), Nottinghamshire (3.9%) and Nottingham (2.0%) all set new peak average property values.

Despite the performance of Rutland and others in the Midlands, it is Torfaen in Wales that has recorded the highest growth over the last year, at an average of 15.6%. This was helped by the recent sale of the highest priced property in the area, for £620,000, where the average home costs just £171,708. It is also supported by demand for properties from those working in the Bristol and Gloucestershire areas.

More generally, Wales also continues to be the only area outside the Midlands that is outpacing inflation (2.2% in October), with the average price up by 2.7% annually.

As well as Torfaen, it has seen strong growth in Caerphilly (8.8%), Carmarthenshire (7.2%) and Powys (6.4%), all of which set new peak average prices in November. The big cities of Newport (6.2%) and Swansea (3.7%) also show above average growth for the region, although prices in Cardiff were only up by 2.2% annually.

At the other end of the scale, prices in the East of England are now down on an annual basis for the first time since March 2012. While Southend-on-Sea and Thurrock still show good growth (4.1% annually for both, with the latter recording a new peak), that’s more than offset by falls in Suffolk (-0.8%), Luton (-1.0%), Bedfordshire (-1.3%) and, most significantly, Cambridgeshire (-4.6%).

It is, however, the only region to see prices falling on an annual basis, and the majority of unitary authorities continue to see growth, with prices up in 74 of the 108 areas in England and Wales outside of London.

London

The average house price in London increased by 1.3% in October – nominal growth, but a real fall compared to inflation. The average property in the capital was priced at £622,508.

On an annual basis, prices fell in 21 of the 33 London boroughs, with the City of London (7.8%) leading those that bucked the trend. Three of the top five priced boroughs recorded double-digit declines: in Kensington and Chelsea – the most expensive borough – prices fell by 16.5%; in the City of Westminster, they were down by 8.0%; while Hammersmith & Fulham saw declines of 10.5%.

On the other hand, prices continue to grow strongly in both Merton and Lambeth (7.5% and 7.6% respectively).

Overall, there are pockets of strength and weakness across London. Prices in Tower Hamlets fell by an average of 13.7%, while, in Hackney, they’re up by 5.6%, with both areas roughly mid-table in terms of property values.

At the lower end of the market, Bexley, and Barking and Dagenham still show nominal growth (1.7% and 0.7% respectively), while Newham has seen prices drop by 6.7%. Largely, however, areas to the east of the capital, where properties tend to be more affordable, are most likely to be seeing modest growth.

Oliver Blake, the Managing Director of Your Move and Reeds Rains, comments: “Despite the current economic uncertainty, it’s encouraging to see that there is still some increase in transaction levels and that, whilst house price growth is relatively flat, it means for first time buyers, for example, the news remains positive.”

2018 has been a Year of Mixed Fortunes for House Prices

Published On: December 14, 2018 at 11:03 am

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2018 has been a year of mixed fortunes for house prices across the UK, according to the latest Asking Price Index from Home.co.uk, which covers December.

House prices fell in England’s three most populous and expensive regions in December, the report reveals.

2018 saw the South East and East of England property markets slide into the red, following in the footsteps of long-suffering Greater London. House prices in the capital have now been on a downward trend for 31 months, and, during this time, the mix-adjusted average property value has fallen by 6.3%.

The impact of the downturn on both the South East and East of England on the national average has been dramatic, taking annual growth from“just about keeping pace with inflation” to “seriously sub-inflation” during the course of the year.

In fact, when compared to the Retail Price Index (RPI) growth in England and Wales, house price inflation has been negative in real terms for 22 months.

The South West looks like the next region to slip into the red. House prices have dropped in five out of the last six months, with the current average annual growth standing at just 0.7%.

Similarly, Home.co.uk expects the East and West Midlands markets to cool off during 2019, with consequential price erosion to follow; nothing catastrophic, nor a consequence of Brexit, merely a natural post-boom rebalancing of supply and demand.

A far cry from the doom and gloom in the South East and East of England, 2018 has been a good year for the North, West and Wales. Inflation-beating price growth is still evident in Yorkshire (+4.7%), the North West (+4.8%) andWest Midlands (+5.2%), as their respective regional property markets continue to thrive.

Wales remains the leader of house price growth, with annual gains amounting to an average of 7.4%.

For the time being, property marketing times are still falling rapidly, and Home.co.uk expects this late-cycle boom to roll on throughout 2019.

Overall, the supply of properties for sale in the UK has risen by 3%, while the total stock has increased by 10.8% year-on-year.

In December last year, house price growth across the UK stood at an average of 2.6%. The same measure today is just 0.8% and continues to trend downwards.