A bit more of a mixed picture this month from the indices, some reporting on December, some stretching into January. I tend to ignore the monthly price/reported changes, they tend to be up and down like yoyos! However, overall, the indices agree that the huge demand and supply from the last six months of 2020 is starting to reduce and that’s not a surprise, as pent up demand from lockdown and demand created from the stamp duty holiday was never going to last forever. However, this doesn’t mean it’s ‘bad news’ or signs of a crash, in fact many of the indices and other moving services are still saying they are doing better than this time last year, both in December and January.
From a stats perspective, this year’s figures will continue to look better up until mid May 2021, post the stamp duty holiday ending (if it does!), and because of the low figures during lockdown. It will be from May that the statistics will be showing a real market slowdown based on year on year stats, so expect to see some ‘doom and gloom’ headlines for the second part of the year!
My report on regional performance is usually: ‘look how diverse the performance is’ but not this month. All regions have bounded back incredibly post lockdown and rather than forecasts of falls in the housing market, it’s clearly done the opposite.
And, some great news for the North East, finally, average prices have recovered to their 2007 peak – that’s taken a massive 13 years! Of course, taking into account that inflation has risen since this time by 42%, it still means in real terms prices are 40% lower than they were in 2007, but it’s good news for the region as we haven’t seen anything like this level of growth for over a decade. These stats also mean that the East, London and the South East are the only three regions where property prices (on average) have grown in real terms.
Yes, it’s likely that year on year the market won’t have a chance of retaining these one-off demand driven rises, so the good news for buyers this year is prices are likely to be stable or see small falls year on year and a much less frantic market post March 2021.
Source: UK HPI
Regional commentary from individual indices
"Despite the softer tone across the range of sales market activity indicators this month, house prices continue to be driven higher for the time being. Indeed, +50% of survey participants saw an increase in January, thereby still signalling a significant degree of upward pressure on prices (albeit this is down slightly on +63% posted in both November and December). The results show house prices continue to rise firmly in virtually all parts of the UK. London remains the sole exception, where -9% of respondents noted a fall in prices over the latest survey period. As such, this marks the first negative reading for the survey’s measure of price growth across the capital since July 2020.
“Back at the national level, +30% of respondents anticipate prices will increase over the year to come (up slightly from a figure of +24% beforehand). All UK regions/countries are expected to see prices rise to some degree in the next twelve months, with Wales, Northern Ireland and Scotland all exhibiting especially strong projections.”
“This is the third consecutive month in which all ten Government Office Regions (GOR) areas have simultaneously set a new record average house price. It is also the fifth month in a row in which all ten of the GOR areas have seen a positive movement in their annual growth rates.
“The South West retained its first place as the region with the highest house price growth, of 10.9%, and with areas within it such as Cornwall, Bournemouth, Bristol and Gloucestershire all experiencing price growth in excess of 15%. This month, the North West has moved up to second position, with growth of 9.0%, followed by the East Midlands at 7.4%. Interestingly, the South East and the East of England have both moved down the growth league table by three places compared to last month – perhaps suggesting that movement away from the capital to nearby suburbs is beginning to run its course, while the South West’s exceptional growth indicates demand for countryside and coastal locations remains strong.”
“House price growth is at a decade high across three regions – North East, North West, Yorkshire and the Humber – in fact growth is running at the highest since before the global financial crisis. The chart below compares current growth rate to the high-low range between 2010 and 2020. Affordability pressures are acting as a drag on price growth across southern England where, in 2014 London house price growth reached +20%. Decade high growth rates of c.5% are low by historic standards yet remain ahead of the growth in household incomes.”
As with the regional growth, most cities experienced extraordinary year on year growth across the UK, however, there are more differences at this lower geographical level. Glasgow shoots to the top of the year on year rises, with prices exceeding 10% growth for the Land Registry, while Liverpool is top for Hometrack’s Cities Index which although shows price growth of 6.3%, is reporting much more subdued price increases. Meanwhile a mix of good value and expensive areas haven’t seen price growth like everywhere else, such as Reading, Belfast, Peterborough, Lincoln, Newcastle and Oxford. Price growth to date is under 2%.
This is going to make it hard to manage sellers’ expectations in areas where prices aren’t rising so fast and both the local media and home movers need to be alerted to the fact that prices haven’t exploded everywhere.
Source: UK HPI
Source: UK HPI
It’s not often we see London at the bottom of any charts when it comes to property, but this month, PropCast has 9/10 London postcodes in it’s coldest markets. According to Hometrack, there are two reasons for this. Firstly, they think people are selling flats and looking for houses and secondly, which is interesting, they believe investment landlords are selling up due to lower rents and fear of Capital Gains Tax rises to help pay for Covid. This will be an incredibly interesting development if landlords do sell, as this could put severe pressure on stock for tenants once the economy picks up and some rentals return to the short term accommodation market.
However elsewhere, the market is booming and potentially will continue to do so, even post lockdown based on insights from the indices. The NAEA are reporting sales agreed for agents falling from 13 to 8 (not a surprise considering the time of year) but this level hasn’t been seen since December 2006, showing just how much the market has performed price and transaction wise since it opened in May.
Hometrack’s analysis shows that January’s demand is up, while the number of properties coming onto the market to sell has been reduced during the third lockdown.
So, despite some worries and fears of the market slowing post the stamp duty holiday ending, it’s quite possible that there is pent up stock from sellers ready to come to the market along with pent up demand, which is especially likely if lower LTVs come back into the market which had frozen out FTBs in 2020.
Property transactions, demand and supply commentary from the indices
“The average number of sales agreed per estate agent branch stood at eight in December which is a decrease from 13 in November. This is the highest figure recorded for the month of December since 2006, when the number also stood at eight.
“The number of sales made to FTBs stood at 23 per cent in December, falling marginally from 24 per cent in November. Year-on-year this is a decrease of five percentage points from 29 per cent in December 2019.
“The number of properties available per member branch stood at 33 in December, falling from 40 in November.
“The average number of house hunters registered per estate agent branch stood at 348 in December, which is a decrease of 41 per cent from 580 in November. This is the lowest number recorded since May, when the property market first reopened following the government’s lockdown. However, it is the highest number recorded for December since 2016.”
“At the headline level, -28% of respondents reported a decline in new buyer enquiries over the month. This latest return brings to an end a run of seven consecutive positive monthly readings beforehand, and is consistent with a noticeable drop off in demand.
“Alongside this, there was also a decline in the number of fresh listings being brought onto the market, evidenced by -38% of respondents noting a fall. Prior to January, new instructions had increased, to a greater or lesser degree, in each report since May 2020. Looking ahead, the number of appraisals undertaken over the month was reportedly below that of the corresponding period last year (-26%) suggesting that the pipeline for new instructions has also softened of late.
“Meanwhile, nationally -18% of respondents cited a fall in agreed sales during January, down from a positive reading of +15% in December. In terms of the regional breakdown, contributors in the East Midlands, South West and Yorkshire & the Humber all returned particularly negative net balance readings this time out. At the other end of the spectrum, feedback has remained much more resilient regarding the sales picture across Northern Ireland.”
Fast start to 2021 as demand rebounds faster than 2020
"Despite the new lockdown, demand for homes has posted the usual seasonal rebound which has been stronger than last year. Demand for homes is up 13% on this time last year, with new sales agreed also up 8%. This rebound is broadly uniform across all regions and countries. It is a continuation of above average demand and market activity from 2020 H2. The ongoing impact of the pandemic continues to drive moving intent amongst homeowners.
"Some new buyers will be looking to beat the stamp duty deadline. In a normal year over 50% would make it, but far fewer are likely to complete a sale in time this year given the volume of business in the pipeline and longer completion times, unless they look to buy a new home."
TheAdvisory track current market conditions so buyers and sellers can gain an independent view of how easy it would be to buy and sell their home in their area. This makes it easier for good agents that are honest about market conditions to value and manage expectations. For example, in BN42 83% of the properties on the market are under offer.
From PropCast’s perspective, the hot markets from a postcode perspective don’t necessarily track the overall increases and decreases seen even at town and city levels, with Brighton, Bristol and Sheffield having some of the busiest markets, and London and Liverpool having some of the slower ones. View the House Selling Weather Forecast here.
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