This year has already been dictated more by government and Bank of England policy changes than it has by normal supply, demand and economic changes.
First we had the huge impact of people racing to buy a second property to beat the additional 3% stamp duty imposed by the government. The most interesting analysis of this comes from the Nationwide report which shows which buyer type increased their purchases:
This chart shows the enormous amount of cash being poured into property, taking away the impact of wages versus house price averages. Buy-to-let certainly increased dramatically but then so did cash purchases and everything else.
Read - How to Analyse a Buy to Let
According to Rightmove, the whole rush to buy property has, for those trying to buy smaller properties, led to a drought of supply now in the market, unfortunately pushing prices up for first-time buyers.
Not one but hundreds of property markets!
The LSL’s Heat Map shows how vastly different the property markets are performing across the UK. It is now without a doubt that it is local economic factors, together with supply versus demand, which dictate house price growth and make the difference between hardly any growth (North East) and lots of it (South).
LSL Acadata HPI - Heat Map of the annual change in the average house price, analysed by region, April 2016
Loss of Land Registry, but Hometrack comes to the rescue for city prices!
With the changes to the way the government reports property prices happening this week, we don’t have an update from Land Registry yet, so instead looked at the Hometrack data.
Aberdeen beautifully shows how much the impact of a fall in the price of oil has on the local economy and, therefore, on property prices. During the credit crunch, Aberdeen didn’t seem to feel the pain of falls in prices and rents, experienced in every other area around the country. Now the country is broadly doing OK - or brilliantly - economically, except Aberdeen, where they are experiencing serious price falls of 6%.
In comparison, Cambridge is topping the charts with a huge increase in property prices of 15.8% year on year according to Hometrack. That’s no surprise; they have a hugely successful economy and are just an hour away from London, while also having a shortage of homes versus their population. This is a recipe for fabulous property price growth – if you are already on the ladder of course.
The rest of the data shows that prices in our city are:
Growing at double digits, fully recovered from the recession
Growing above annual averages over time, but still statistically good value compared to the recession
Growing year on year BUT prices still not fully recovered from the pre credit crunch highs.
So what of the future? Brexit – good or bad?
Most reports and forecasts are suggesting property price growth will slow for the second half of the year.
Read - First Time Buyer Quick Guide
Fear of Brexit is holding people back, with some hoping prices will crash
Purchases brought forward due to 3% stamp duty hike and fewer people piling into buy-to-let
Affordability tightening due to mortgage restraints and prices rising much faster than wages in the South and areas such as Cambridge.
Whose view is right on Brexit?
Personally, I’d stick with Hometrack’s analysis:
A really interesting and helpful chart from Hometrack shows the impact of economic shocks on property transactions (which actually dictate property price changes). What they conclude is that London tends to be more susceptible to shocks than the rest of the UK, which is less reliant on global purchases.
They believe a vote to leave will cause a 5-10% fall in turnover in London, causing a further slowdown, but NOT a price fall.
If we remain, they think it will be good for the regions, with Manchester, Leeds and Birmingham benefiting most due to higher demand and where affordability is still plausible for all.