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Price growth and new buyer demand declines in UK housing market
House price growth and new buyer demand in the UK both tailed off in December 2014 but stamp duty reforms are still expected to support market activity in the months ahead. Overall, the number of potential new house buyers dipped for the sixth consecutive month in December and price growth fell to its slowest pace since May 2013, the latest residential survey from the Royal Institution of Chartered Surveyors shows. Across the UK, 10% more surveyors saw the number of potential new buyers decrease in December and London saw the weakest demand, with 45% more surveyors reporting a decline in enquiries, the eighth consecutive monthly decline. The North of England and the South West saw strong rebounds in demand, albeit the underlying picture remains most upbeat in Northern Ireland and Scotland. Despite the slowdown, there is optimism that the stamp duty reforms will deliver a 2% to 5% boost in both sales and prices over the next 12 months, despite members in London expecting sales to decrease by between 5% and 10% and prices to decrease by 2% to 5%, with larger properties and/or those in prime areas expected to see the biggest price decreases. Nationally, as a result of the weaker trend in buyer interest, sales expectations slipped to a net balance of 21%,down from 27% in November, and just 11% more surveyors saw prices rise in December, rather than fall. The volume of agreed sales during December was little changed, while the average number of sales per chartered surveyor slipped to 19 compared to 21.2 in the preceding December. In the month that also saw mortgage approvals fall to their lowest in 18 months, December’s data showed that perceived Loan to Value ratios across properties for first time buyers and existing home owners remained stable at 84.9% and 77.6%, although they are lower compared with the early part of 2014 following the adoption of a more cautious approach to lending as a result of the introduction of the recommendations of the Mortgage Market Review. ‘The changes to stamp duty are expected to provide a timely boost to activity in the housing market across most of the country but there remain significant challenges particularly for first time buyers seeking to take an initial step onto the property ladder,’ said Simon Rubinsohn, RICS chief economist. ‘Critically, the stock of property on the market continues to hover close to historic lows with new instructions to agents falling in ten of the last twelve months. Indeed, there is a risk that with so little housing available any pick-up in demand could rapidly feed through into higher prices rather higher sales,’ he explained. He pointed out that the RICS lead indicators do provide some encouragement that the level of housebuilding will continue to increase over the course of this year but even with further growth, the volume of home starts will still fall well short of the number of new household being formed… Continue reading
Asking prices still rising in many parts of UK, latest index suggests
Prices are rising in more regions in the UK than might be expected for the time of year and price discounting is at a four year low, according to the latest asking price index. The current mix-adjusted average asking price for England and Wales shows that properties on the market are valued 7.8% higher than they were in January 2014, the data from Home.co.uk shows. The biggest price growth was in Greater London over the last month with a rise of 0.6%, despite falling prices in the prime central London market. Prices also rose in the North East during the last month by 0.4%, which the firm says is encouraging given that the recovery has not yet been evident in the most northerly English region. Asking prices increased in seven English regions and in Wales with prices up 0.1% overall in England and Wales during the last month. Only Scotland and East Anglia showed significant month on month falls of 0.6% and 0.8% respectively. The index report suggests that the positive momentum gained through the course of 2014 has clearly been carried through into 2015. Demand remains ahead of supply in most parts of the UK and looks set to stay that way as mortgage deals seemingly get better and better. The only dark clouds on the current property horizon would seem to be the price falls in prime central London and various potential housing policy changes that will be debated in the run-up to this year's election. Flat prices have fallen by an average of 9% over the last 12 months in central London. Over the same time, the number of flats for sale in central London has increased by 64%. ‘We consider that there is a significant risk that the same price correction will be perpetuated throughout Greater London and the South East over the course of 2015/2016,’ said Doug Shephard, home.co.uk director. ‘Possible changes in property taxes and rent capping also carry uncertainty and risk for the market in a year that will be coloured by political policy change,’ he added. The firm’s analysis of the situation in London shows that Belgravia was the first area to see prices fall. Prices peaked in November 2013 and since then, the typical price for a flat has fallen from £1,995,000 to £1,600,000, a drop of 20% and much more than the price of the average UK home. Shephard says this causes concern as history indicates that booms and busts always start in central London and then, quite slowly, emanate out to the rest of the country. He also pointed out that prices peaked for flats in Islington in March 2014. Since then, the typical asking price has dropped 11%, which represents a 10 month loss of £85,000. Over the same period, the typical time on market for flats in Islington has risen 220% from a frantic 35 days to a lethargic 112 days. Further out, Holloway flat prices peaked in May 2014… Continue reading
Prime central London rental values flat for second month in a row
Rental values in prime central London were flat for the second consecutive month in December as a seasonal year end slowdown and the impact of global economic uncertainty dampened demand. Though monthly growth slowed to zero by the end of the year, the annual increase in rental values was 3.3%, which was the highest rate in three years, the rental index from Knight Frank shows. It points out that annual growth has been climbing steadily since July as the UK economy improved and some buyers switched to the rental market while political uncertainty surrounds the outcome of the general election in May and the prospect of further property taxes remains. ‘However, while the UK’s economic indicators have improved, caution surrounded the world economy in the last quarter of the year, including falling oil prices and the economic outlook in China and the euro zone,’ said Tom Bill, head of London residential research at Knight Frank. ‘The result is that companies or individuals are more likely to postpone decision making while they wait for clarity,’ he added. The report points out that other factors affecting the market include the falling price of oil, events in Syria and Hong Kong, the Ebola outbreak and concerns the Federal Reserve in the United States was going to raise interest rates sooner than expected. ‘Despite this uncertain global economic and political backdrop, prime central London residential property remained a sound investment in 2014,’ said Bill. ‘Total returns, which include rental income and capital value growth, outperformed a series of other asset classes in the year to November, proving its resilience as an investment. For example, while commodity prices have fallen markedly, partly due to concerns over the Chinese economy, demand among Chinese tenants and buyers for prime central London property has increased, buoyed by its safe haven appeal,’ he explained. ‘This is underlined by the fact the number of Chinese tenants increased by almost fourfold in 2014 compared to 2013,’ he added. Continue reading
