Kate Faulkner's price summary tracks key reports on property prices produced on a monthly basis. It summarises crucial numbers and what experts are saying about the market and includes Kate’s comments on what this means, primarily for the general public, but also for the industry, market and economy. This summary report includes data from the Hometrack and the Land Registry.
Kate Faulkner comments on national property market predictions for 2016:
“The property market used to be relatively easy to predict from a business perspective. Things were often quiet for the first few weeks of January then the rush began towards the end of May. Summers were relatively quiet before a flurry of activity after the holiday season and a quietening down towards Christmas. Not any more! Since the credit crunch, from one month to the next, we are never quite sure what is going to happen.
“This difficulty in forecasting the short and long term future of the property market from an industry perspective is now being exacerbated by one government housing announcement after another, many of which are being done at too short notice, causing mayhem in the market!
“Moving forward, though, the main game-changer is that both Chancellor George Osborne and Mark Carney, the Governor of the Bank of England, are keen to stop the huge hikes we’ve seen in property prices in the past and their efforts appear to be gaining momentum. The property price analysis we have done from the Land Registry shows that annual property price growth since the credit crunch is lower than the levels previously seen.
“And the forecasters seem to agree. The predictions for the next five years (2016-2020) from the likes of Savills (17%) and Knight Frank (20.3%) are showing that price increases in many areas will be half that of growth in the past. Lower capital growth and an ageing population is holding stock turnover down and Savills forecasts that annual property sales in England and Wales will be around 20% lower than they have been in the past.
“Never mind, though, as there’s always the private rented sector to fall back on…. well, maybe not now! Government policy raising taxes on existing and new landlords is sending a clear signal that they don’t want people buying one or two properties to rent out privately. Instead, they want to support large landlords or those investing via a company. The problem with this is the one we’ve had for the last 30 years: who will supply the increased stock required by buyers and renters? Unfortunately, although plans are afoot to boost housing supply, it’s not going to happen any time soon.
“My main fear for 2016 is that it may end up in a real ‘freezing’ of the property market from a stock perspective, with little to sell and little to rent, leading to fewer people being able to move, or wanting to risk moving, if there isn’t much choice. In some areas, especially north of the Midlands, if buy-to-let sales are choked off by increased taxes, we may even see properties simply not selling and potentially lying empty, while social renters in the private sector end up with nowhere to live.
“As ever, national policies for a hugely diverse regional market with extremely localised supply and demand issues will mean some areas could thrive while others end up getting hit pretty hard.”
Actual Report Headlines
Rightmove “Home-owner confidence sets the scene for higher prices in 2016.”
NAEA “Sales to first time buyers highest in six years.”
RICS “No easing in supply constraint.”
Nationwide “Slight softening in house price growth in November.”
Home.co.uk “Stock of property for sale hits new low.”
Hometrack “Prices accelerate in large regional cities.”
Land Registry “The October data shows a monthly price increase of 0.4%.”
Kate Faulkner comments on regional property market changes for 2016:
“London and much of the South either is experiencing, or has had, double-digit growth following the recession. But the big question for 2016 is this: Will the Government and the Bank of England’s efforts to curb price growth through increased mortgage regulation and harsher taxation on buy-to-let investors prevent the rest of the country from benefiting from similar growth?
“After the 1990s recession, double-digit growth in London was experienced in 2000 and it took until 2003 before this really spread to the regions. So in theory, with London seeing great growth from 2013 to 2015, 2016 should be the year that the rest of the country catches up, but this doesn’t seem to be happening yet and certainly isn’t forecast, so we’ll have to wait until around March to see if growth has been prevented nationally.
“If the growth doesn’t come, the biggest problem for many of the city centres such as Belfast, Cardiff, Glasgow, Birmingham, Nottingham, Leeds, Manchester, Newcastle and beyond is that the boom in flat prices – fuelled over-inflated prices paid by buy-to-let investors (many of whom are now selling out at half price) – means we may have experienced the first ever true property price bubble.
“In addition, if growth doesn’t kick in, it will widen the wealth gap between the north and south and reduce people’s ability to move from one area to another, restricting work mobility.
With regards to the talk of ‘powerhouses’ in the Midlands and ‘up North’ and the impact on economic growth, lessons learnt from the past certainly suggest that growth in these areas this time around will be accompanied with higher levels of new housing stock along with regeneration. Again, if achieved, this may remove the spikes in price gains that we’ve seen in the past.
“Whatever happens to capital growth, at least the good news is that more stock would be available for the industry as a whole, essential for future growth if the existing homes market begins to freeze.”
What are the indices saying?
Home.co.uk: “North of the border, Scottish home prices are rising more quickly: up 4.7% over the last year and 6.4% since November 2010. The Edinburgh market is experiencing a boom, with prices driven up 13% over the last year. Further south, the northern English regions show relatively poor home price growth. Of those, the North East property market has suffered the most over the last five years. Prices are falling in many towns in the region, such as Billingham, mainly due to the downturn in the petrochemical industries. However, pockets of significant growth do exist, such as prosperous market towns like Yarm. (Oct 15)”
RICS: “Respondents in all parts of the country are reporting rising prices for the third consecutive month. East Anglia has consistently seen the firmest price momentum during this period and [most] contributors reported prices to have risen during October. Looking ahead, respondents in all parts expect prices to continue rising at both the three and 12-month time horizons. Once again, the outlook is particularly buoyant for East Anglia with respondents expecting prices to rise over the year to come. (Oct 15)”
Hometrack: “As predicted earlier this year, city level house price inflation looks set to reach 10% by the year end. Large regional cities outside southern England are recording an acceleration in growth off a low base. Glasgow, Manchester and Liverpool are registering the highest rates of annual house price growth since 2007. Improving consumer confidence and low mortgage rates are boosting demand in cities where the housing recovery is in its infancy. Glasgow house prices currently average £110,000, less than half the £229,300 average price across all the 20 cities measured by the Hometrack UK Cities index.
“In a similar vein, Manchester house prices have been recovering since 2012 and average house prices have risen by 17% over this time to £141,200. In the last 12 months house prices across Manchester have grown by 7.0%, the highest rate of growth since July 2007. Liverpool has registered the weakest house price performance of all the British cities covered by the index since the global financial crisis. House prices declined between 2007 and early 2013 and have since increased by just 10.5%. In the last 12 months, year-on-year growth has risen to 5.1%, the highest since August 2007. Despite this modest recovery, the average price of £109,800 is still 13% lower than the 2007 peak. (Oct 15)”
Land Registry “The region with the most significant annual price increase is London with a movement of 10.6%. Yorkshire & The Humber saw the smallest annual price increase of 1.4%. The North East experienced the greatest monthly price rise with a movement of 1.9%. Yorkshire & The Humber also saw the most significant monthly price decrease with a fall of 1.8%. (Oct 15)”