Every month different property price indices give their view on what is happening in the property market. The reason it’s important to understand these headlines, is that they will influence what the newspapers and media say is happening – and for those that don’t know the real story behind the numbers, it can affect whether they buy or sell property, which in turn impacts on the price you will pay or receive.
For investors, it also lets you know whether you are likely to get a good deal OR end up overpaying for a property which is often a ‘death knell’ for making money.
Rightmove “2020 forecast of 2% price rise as election gives window of certainty”
Home.co.uk “Election anxiety hobbles the market”
NAEA Propertymark “The housing market remains cautious amongst political uncertainty”
RICS “Market activity stagnant ahead of election”
Nationwide “Annual house price growth of 1.4% in 2019”
Halifax “Annual house price growth rises to 4%”
LSL Acadata HPI “House prices rise in November”
Hometrack “While the election result removes some uncertainty, market fundamentals set the context for city house price growth and market activity in 2020”
Most of these headlines were written before the election, so it’s important to understand that they are already ‘out of date’ with what’s happening ‘on the ground’, but they will still influence the media which in turn influences buyers, sellers and investors.
Prior to Xmas, property prices and sales were quite subdued, especially in London and the South East, so all the comments are pretty accurate – the only one I’d ignore is from the Halifax. Their figures are often different to the rest of the indices and in December, clearly overstated how much prices had risen versus the norm, so we’d pretty much ignore their headline and stats based upon year on year analysis.
Key facts: IGNORE THE AVERAGES!
Below we’ve captured the latest house price averages, but the actual numbers aren’t that useful to you, it’s more which direction they are going in and how well they are performing versus the ‘average’ growth/falls we’ve seen in the past.
What the indices show is that in the main, marketing prices (via Rightmove) fell from September to December with sellers keen to sell their properties prior to Xmas. Take the Nationwide, which is mortgaged sales only, and the market was pretty flat and this was a similar picture according to LSL and LCP Aca.
The Land Registry lags behind other indices, but still shows prices are pretty stagnant.
Performance wise, ignoring the Halifax year on year data, price growth has softened versus the average since 2005, so at the end of last year, price growth year on year was around 1%, while the last three months was fairly static.
So from a ‘media perspective’ we heard that prices were softening – falling slightly in some areas, and this tends to mean buyers and sellers are more likely to hold off, particularly when there is an election on the way!
As such, demand/supply towards the back of 2019 was pretty stagnant and sales as a result were pretty muted too.
UK, England and Wales data
Source: UK HPI
UK HPI Market analysis by country
The problem for the media is they may only have a few lines to comment on the property market, so they’ll create a big ‘headline’ to grab – even if there is little to say!
The other issue is that when you are tight on space, you can’t dig much deeper than ‘average’ property prices and behind this fairly flat and ‘stagnant market’ is a variety of property price rises and falls that the average just doesn’t show.
For example, I saw one press report where a reporter got extraordinarily excited over Northern Ireland having the ‘highest year on year price growth’. They weren’t wrong, as the table below shows, prices did rise faster – 4% year on year.
But as this journalist didn’t look beyond year on year prices, they missed two crucial pieces of information for their readers. Firstly, that this rise was much smaller than it’s been pre credit crunch, when prices rose, on average from 2000 to the credit crunch by 6-7% each year, and in actual fact, property prices for those that bought prior to 2007/8 are still a staggering -38% down!
What the reporter should have been asking, in my view, is:-
Will the property price bubble that burst in Northern Ireland ever recover?
Lots of journalists talk about the ‘property price bubble’ and when will it burst, few seem to realise it already has!
How do these country figures help? The honest answer is not much, but for those in Wales/Northern Ireland and Scotland you can see property prices are a little more robust than England, however, don’t be fooled by the England stats – they are made up of a huge variety of price rises and falls too!
Source: UK HPI
Rather than focus on national and country figures for property, from a buyer, seller and investor perspective, what’s much more useful is the regional and then more localised data by city and town.
The table and charts below show the enormous differential between property prices in London versus the North East.
Nationally for England, the average property price is nearly £250,000, which for many will feel ‘extortionate’. However, break this down and that’s made up of prices in London averaging at £472,000 while in the North East it’s just under £130,000. Don’t forget, these are the ‘average prices’ too – so plenty of properties are selling for less than this amount to.
What’s also interesting is that during the recession, most prices fell in each region by 20%, but not all areas have seen this loss during the credit crunch recover, even though it was 12 years ago. In fact, in the North East, the average price is still -7% lower than it was 12 years ago.
Because most of the media report what’s happening year on year, it is easy to be misled into thinking that a property market is doing ‘well’ for example, in Yorkshire and Humber where prices rose year on year in October by 3%, when in actual fact, they aren’t much higher than they were 12 years ago – so are actually good value.
Take London for example, it’s being reported that they are suffering falls in property prices, and indeed some have experienced this over the last few years, but not every property or area has, and in fact, these falls are off the back of prices being 58% higher than they were 12 years ago – the complete opposite to Yorkshire and Humber.
It’s worth noting though how well a region is doing as it will help you evaluate whether your property holds its price well while you own it, grows in value or indeed, may be a real risk if prices fall again.
Source: UK HPI
Below is the most useful analysis for anyone buying and selling. What it shows is what’s happening in the individual town or city you live or invest in.
Taking the average house price growth according to the indices is around 1%, what you can see is the huge spread of changes this is made up of. The highest rise is in Peterborough: 4.9% year on year, whereas the biggest fall is in Oxford which has seen falls of -4.8%.
If you go into a market thinking it is ‘on the up’ and it’s really ‘on the way down’ you may not be able to sell if you overprice, or if you are a buyer, you may be able to secure a better bargain than you thought.
You also need to know how well the market has performed over the last 12 years. If a market has risen fast and high like London, there probably isn’t much house price growth left, alternatively if it’s hardly risen at all like Newcastle, Bradford and Liverpool, if you are investor looking at these areas hoping for better returns than London, you may be disappointed as it just doesn’t appear they have a strong enough economy to deliver price growth in today’s market.
The other issue is that if you buy with cash, your property needs to grow in value at around 3% each year - just to maintain it’s real value, any less than that (and few areas are achieving it), even though your property may ‘seem’ to be going up in value, if it’s not going up by 3% each year, in reality it might actually be losing you money!
Source: UK HPI
The media very rarely talk about what’s happening to housing transactions, which is a shame as actually this is more helpful to you than what’s happening to property prices.
If you know whether transactions are rising or falling, you can have a very clear idea of whether this is a good time to buy, sell or invest, whereas prices differ from one road to another so much, they aren’t that helpful.
What the information below tells us, is that the amount of stock on the market is falling, so if buying it may be difficult to find a property you like, whereas if you are selling, this may well be a great time to put your property on the market as there just aren’t enough properties for buyers to purchase, so you may get one quickly and/or you might get a better price than you expected.
Source: NAEA Propertymark
This is great free tool to help you know what’s happening in your actual postcode. Jjust go onto the site and see whether your area is ‘hot’ or not – then you know whether you are going to have a tough time buying or it’s going to be quite easy as it’s a slow market.
Check out what’s happening in your market and if it’s fast moving, make sure you have a mortgage agreement in principle so you are ready to buy, and if selling, get your legals done from the day you put your house on the market – don’t wait until you get an offer as the market is moving too fast and you may lose your buyer or worst still, a property you want to purchase.
Source: The Advisory
The Advisory 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 BS7 78% of the properties on the market are under offer.
Source: The Advisory
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