Over the last few months, we have been checking and scrutinising house market statistics as many were still being influenced by lockdown as the market didn’t open until mid-May. However, we are starting to see similar trends emerging between the indices suggesting that the stats are being less affected. But I would still only take averages with a pinch of salt. What matters to home movers and investors is what’s happening to property prices/rents on a particular street as at a local level, we see huge variations versus the ‘average’.
I bet you are all shattered! The news from all the indices is that transactions are achieving levels we haven’t seen for a long time. Nationwide state “Mortgage approvals for house purchases rose from 66,000 in July to almost 85,000 in August - the highest since 2007, well above the monthly average of 66,000 prevailing in 2019.” while the NAEA figures show that the “average number of sales agreed per estate agent branch stood at 12 in August, a slight decrease from 13 in July [which is ] the highest figure recorded for the month of August since 2007” and that “year-on-year, the number of sales per branch has increased by 33 per cent, rising from nine in August 2019.”
It’s quite clear that the market volume wise is doing extremely well and we know that everyone is going to have to be patient while lenders and legal companies in particular are being put under huge amounts of unexpected stress and strain, albeit it is severely affecting all of the home moving industries with the removals industry struggling to keep pace too.
What’s interesting though is that we aren’t seeing double digit price growth as we would normally see during these ‘boom times’. Yes prices are rising, but at a much lower rate than we’ve seen in the past, and considering since 2005, the average increase year on year to date ranges across the indices from 2.7% to 3.6% (see the table), it’s not far off the current 2.5% to 5% (I’m ignoring the strange year on year stat that Halifax produces!).
According to Hometrack, the answer lies in stock. They explain “More buyers….bring more supply to the market and available sales inventory is 10% higher than a year ago. Greater supply increases choice for buyers and will keep the rate of house price inflation in check.”
As ever, each region is performing very differently, with the spread here in price growth ranging from 0.2% in the North East from e.surv through to a huge 8.8% in Scotland reported by Rightmove. Typically, regional highs and lows are reasonably in line, but the table shows that there are vastly different views from those indices which focus on marketing prices (Rightmove) and those which look at actual sold prices (e.surv).
This is likely to be an issue with data from the past and timing of the information, so it goes without saying that agent price data for individual properties will be much more useful over the coming months than confusing headlines of prices being up in their region from 0.2% to 6.4%!
Source: UK HPI
As with the regional data, what’s happening to individual towns and cities can only be described as ‘all over the place’! On our list, we track through the Land Registry areas such as Lincoln, which is being reported as down by 0.2% YoY while next door Nottingham is up by a staggering 8.7%. Areas such as Portsmouth, Reading and Tunbridge Wells are reporting downward movements while Bristol and Southampton are doing really well.
It’s clear Covid and the lockdown have vastly increased the differentials between areas of what’s happening to house prices, and therefore the industry, media and especially buyers and sellers, need to use much more information on a local level to understand the market than relying on large area ‘averages’.
Towns/cities commentary from the indices
The above table shows the relative movement in the rates of annual house price growth of 12 conurbation areas/cities in England and Wales, over the period June - August 2020. The simple average annual house price growth of the 12 conurbations amounted to +3.1% in June 2020 and +3.5% in both July and August 2020.
In August 2020, the City of Nottingham topped the league at 10.7%, having been in second position for the previous two months, with Bristol falling back into fourth place. Merseyside, which has been in third place for the last two months, climbed into second place in August, with a rise in all property type prices over the year, except for flats.
In August, seven of the twelve conurbation areas listed saw their annual rate of price change increase compared to June. So, the suggestion that all purchasers are moving out of cities to the country would appear to be erroneous. However, it would also appear that those who have moved, but have remained within a conurbation, have purchased a more expensive (and presumably larger) property.
With property transactions pretty much booming in most places, as with prices, the difference is very regional. Areas such as London, the South East and East are, according to Home.co.uk, seeing huge jumps in listings while Scotland and the North East are seeing little change. No doubt that this will vary from street to street, but it’s important to make buyers and sellers aware of what’s really happening in their area to make sure they understand they aren’t necessarily likely to be able to enjoy the boom some others are enjoying across the country.
Source: Agency Express
Transactions, demand and supply commentary from individual indices
Supply/demand imbalance supports upward pressure on prices
The impetus for price rises shows no signs of slowing as new buyers continue to enter the market. Since the start of the year, demand for housing is 39% higher than at this stage last year. More buyers also bring more supply to the market and available sales inventory is 10% higher than a year ago. Greater supply increases choice for buyers and will keep the rate of house price inflation in check.
The strength of the recovery so far is highlighted in new sales agreed which over the last 9 months are 3% higher than over the same period last year - and this with a 50-90 day closure of the housing market. The 3-4 month lag between sales agreed and legal completion means we will not make up all the ground lost during the market closure this calendar year.
Completed housing sales are set to be 15% lower than in 2019. A continuation of demand and sales over the autumn, albeit at a slower pace, will support sales volumes, and estate agency revenues, into the first quarter of 2021.
Further COVID restrictions to support demand in near term
We have previously highlighted how the strength of the housing market is being driven by a once in a lifetime re-evaluation of housing in response to COVID and the lockdown. Households are prioritising space and location as well as factoring in a shift in working patterns. Less time spent meeting friends and family in public locations will re-enforce the importance of the home.
We believe that a second spike in new cases and a tightening of restrictions announced by the Government will only serve to support this trend, primarily for those households in more secure financial positions. However, the housing market is not immune to any prolonged weakening in the economy and the impact of less Government support.
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 L16 81% 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 Liverpool, and Sheffield having some of the busiest markets, and London and Liverpool having some of the slower ones.
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