The current housing market outlook for the next three months
is the worst for 20 years, according to the latest study from the Royal
Institution of Chartered Surveyors (RICS).
A net balance of 28% of RICS members expect property sales
to fall in the next three months.
This is the most downbeat reading since the records began in
October 1998, with the pessimism blamed on the lack of clarity around Brexit.
A lack of housing supply and affordability also continued to
affect the market.
Sales expectations for the coming three months are now
either flat, with no change predicted, or negative, indicating a decline in
sales, across all parts of the UK, the report states.
Increasing numbers of surveyors reported seeing house prices
fall rather than rise in December, with a net balance of 19% witnessing
declines, rather than growth.
This is up from a balance of 11% in November, and marked the
fourth consecutive month of negative house price readings.
New buyer inquiries dropped for the fifth month in a row last
month, too.
The drop-off in interest from buyers was matched by a
decline in fresh properties coming onto the market.
The supply of new properties has been dwindling for six
months, Simon Rubinsohn, the Chief Economist at the RICS, says.
“It is hardly a surprise, with ongoing uncertainty about
the path to Brexit dominating the news agenda, that, even allowing for the
normal patterns around the Christmas holidays, buyer interest in purchasing
property in December was subdued.
“This is also very clearly reflected in a worsening trend
in near-term sales expectations.”
The latest official Office for National Statistics (ONS) house
price data suggests that housing activity has been muted recently, due to
Brexit uncertainty.
Looking further ahead, surveyors were a little more hopeful in
their sales expectations for 12 months’ time.
Rubinsohn says: “Looking a little further out, there is
some comfort provided by the suggestion that transactions nationally should
stabilise as some of the fog lifts, but that moment feels a way off for many
respondents to the survey.
“Meanwhile, it is hard to see
developers stepping up the supply pipeline in this environment.”
He added that getting close to Government
housebuilding targets would “require significantly greater input from
other delivery channels, including local authorities”.
A turbulent year for the UK property market ended on a high
note in December, due to an impressive month for mortgage approvals, according
to the latest Mortgage Monitor from e.surv.
The chartered surveyor found that 66,390 mortgages were
approved during the final month of 2018, on a seasonally adjusted basis.
December is often a quiet month for mortgage approvals,
given that fewer people purchase properties at that time of year. However, last
year, the number of approvals was 4.2% higher than November’s figure.
Even more impressively, December’s 2018 total was up by 7.8%
on an annual basis.
There are several reasons for this boost in activity. In a
year when homeowners had to contend with a further
rise in the Bank of England base rate, competition between banks and
building societies helped to keep rates at a historically low level.
The base rate rise in August 2018 was the catalyst for many
existing homeowners to remortgage to a cheaper deal, of which many were
available. By the end of the year, lenders were cutting rates to meet ambitious
end-of-year lending targets.
Lenders also became more receptive to first time buyers and
other purchasers with smaller deposits, with an increase in the number of 5%
deposit mortgage deals on the market.
By December, 25.2% of all loans went to borrowers with a
small deposit. This was down marginally on November’s 25.9% figure, but higher
than other recent months.
Richard Sexton, the Director of e.surv, says: “2018 saw the second base rate rise in
less than a year, continued uncertainty over Brexit and wider global economic
issues.
“Yet
the mortgage market demonstrated its resilience, with strong activity in most
segments of the market.”
2018 Ended on High Note for Mortgage Approvals
He
continues: “First time buyers, remortgage customers and second steppers all
jumped at the chance to bag a cheap mortgage rate while they last.
“The
outlook for 2019 is again one of uncertainty, but the figures from the final
few months of 2018 suggest that the mortgage market has the power to battle
through tough market conditions.”
Small deposit borrowers
After a strong performance in previous months, the proportion of loans going to small deposit borrowers fell back slightly in December, accounting for 25.2% of the overall mortgage market.
The
proportion of large deposit borrowers grew strongly on a monthly basis in
December, rising from 28.9% in November to 30.1%.
This
meant that the proportion of mid-market borrowers ticked down, from 45.2% to
44.7% month-on-month.
On an
absolute basis, the amount of small deposit borrowers dropped from 17,381 to
16,730.
Sexton
comments: “Following the outstanding
November figures for small deposit borrowers, some drop off was to be expected
in December.
“Even so, almost
17,000 first time buyers and other small deposit borrowers were able to get
onto the housing ladder this month.”
Yorkshire best for small deposits
In a year where the
northern regions of England and Northern Ireland competed for the title,
Yorkshire ended 2018 as the best location for first time buyers and others with
small deposits to purchase a property.
In Yorkshire, 32.3%
of all loans went to this type of borrower, ahead of its two major rivals.
In Northern Ireland,
31.5% of mortgage approvals were to small deposit borrowers, while the North
West recorded 31.4%.
This type of buyer
had a much tougher time in London and the surrounding regions.
In the capital, just
15.1% of loans went to small deposit borrowers, while, in the South East, this
figure was 21.6%.
Large deposit
borrowers enjoyed a much greater share of the London market, at 39.2%. The
South East was close behind, at 36.2%.
The North West,
Northern Ireland and Yorkshire were the only regions to see a greater
proportion of mortgages go to small deposit borrowers than their large deposit
counterparts.
Sexton concludes: “The
year ended much as it began when it comes to the regions of the UK. Those
borrowers in the north of England and Northern Ireland tended to have small
deposits when buying a home.
“By contrast, those
in London and the Home Counties usually require a significantly larger deposit
in order to buy their desired property.
“The New Year will
see a new batch of first time buyers trying to get onto the ladder, and those
existing homeowners look to move to their next home.”
With 2018 firmly behind us, it is time to reflect on the
events and figures that shaped the UK property market last year. Agency Express
has put together its property round-up for the past 12 months:
January
It was a robust
start to 2018, with Agency Express’ data showing buoyant month-on-month
increases across the UK in both new property listings (+104.9%) and the number
of properties sold (+41.2).
Looking back at the Property Activity Index’s historical
data, figures showed that this growth was the greatest for the month of January
since Agency Express’ first records in 2010.
January’s top performing regions were East Anglia and the North
West. Following several months of slumber activity, East Anglia recorded robust
growth in both the amount of properties for sale (+118.8%) and the number of
properties sold (+62.7%). These figures surpassed those recorded in the same
month of 2017.
The North West followed suit, with a surge of properties
coming onto the market. Monthly, new listings were up by 100.6%, marking the
region’s first increase in activity for six months.
February and March
January’s buoyant trend continued into February, as we
witnessed further
growth across the UK property market. Month-on-month, new listings rose by
2.7%, while the number of properties sold was up by 15.5%. The index also highlighted
annual increases in new listings, but a minor decline in the amount of
properties sold.
As we headed into March, the momentum
continued. Monthly data showed increases across the country in both new
listings (+14.6%) and the number of properties sold (+11.5%). March’s data also
found that all 12 regions included in the index saw growth in new listings,
while 11 experienced increases in property sales.
April and May
Moving into April, we witnessed the usual
downturn in activity, with the number of properties sold down by 1.4%,
while new listings fell by 1.9%. However, over a three-month rolling period,
the index’s statistics showed stability across the market, with new property
listings up by 4.8% and properties sold by 7.8%.
Looking back at Agency Express’ historical data, activity
was in fact slower 12 months previous, with properties sold down by 15.1%,
while new listings fell by 11.5%.
Agency Express’ Yearly Property Round-Up for 2018
May saw a spike in activity, with new property listings up
by 15.4%, while the number of properties sold rose by 8.1%. Again, looking back
at historical data, May 2018’s figures were, in fact, more robust than those
recorded in the same month of 2017.
June to September
June revealed further growth for the UK property market. Nationally, new listings increased by 9.4% on a monthly basis, while the amount of properties sold was up by 6.2%. Historical data again showed us that market activity was greater in 2018 than in the previous year. The increase in figures also appeared consistent with market commentary from UK Finance, which reported a 3% rise in mortgage approvals year-on-year.
July’s figures remained true to trend, with a slowdown at
the start of the summer holidays. Across the country, new property listings
fell by 17.6%, while the amount of properties sold was down by 9.1%.
This downturn continued into August, with new listings
decreasing by 6.0% and properties sold down by 3.6%. While a seasonal
adjustment was anticipated during this period, these monthly declines were
greater than those recorded in the same period of 2017.
As we entered September, activity bounced back, with
nationwide increases in both new property listings (+18.0%) and the number of
properties sold (+13.8%). All 12 regions included in the index saw growth
during this month.
October and November
Following strong activity in September, October’s data
revealed further
unexpected increases across the UK property market. While, traditionally,
we would see a slowdown in activity, the Property Activity Index showed
increases across the country in both new listings (+10.6%) and the amount of
properties sold (+20.7%). These were both record rises for the month of
October.
November’s data remained
true to trend, with the number of properties sold down by 11.4% and a
decline of 13.6% in the amount of property listings. However, Agency Express’
historical data shows that, year-on-year, activity continued to increase.
December
The latest data for the year of 2018 from Agency Express
has, as expected, revealed decreases in December’s property market. Sticking
with tradition, new listings fell by 50.8%, while the number of properties sold
was down by 41.1%.
Stephen Watson, the Managing Director of Agency Express,
comments: “As the UK’s largest estate agency board service
provider, we are the first to witness growth in the UK property market. The
services we deliver are closely tracked and monitored via our estate agency
board management system, Signmaster3. We collect board movement data 24 hours a
day, seven days a week, from a property being placed on the market to
completion of sale.
“As a result, we are able to share this
information with you, and compare what is happening on the streets to what is being
reported by financial institutions. Over the past 12 months, we’ve
witnessed a mixed property market, with some unseasonal peaks and throughs, but
figures have continued to increase year-on-year.”
The number of mortgages approved in November was flat compared to the previous month, but competitive remortgage and first time buyer markets mean that activity was actually up on the same month of last year.
The latest Mortgage Monitor from chartered surveyors e.surv found that 67,109 mortgages were approved during the month of November (on a seasonally-adjusted basis).
This is marginally higher than in October, when 67,011 approvals were recorded.
On an annual basis, November saw a healthy rise in activity, with approvals up by 4%.
Low mortgage rates continue to represent good value for those with an appetite to commit to remortgaging, e.surv found. But, in addition to these remortgages, first time buyers have continued to increase their market share.
In November, 25.9% of all loans went to borrowers with a small deposit. This is higher than the 24.6% recorded a month ago, as well as the 24.2% market share in September.
This has helped sustain activity towards the end of the year. Typically, the number of homebuyers searching for new properties tails off as the country heads into winter.
Richard Sexton, the Director at e.surv, comments: “Conventional wisdom suggests that, as we reach the end of the year, the number of people looking for houses drops away.
“But, while this is likely to be the case next month, the latest approval figures suggest that cheap mortgages are attracting a consistent level of borrowers into the market, regardless of the weather.”
He continues: “However, in December, mortgage lenders often look to secure their annual targets, sometimes resulting in keenly-priced deals on offer at the end of the year.
“We have already seen a number of cheap first time buyer deals launch in recent weeks, and other lenders could follow suit.”
Increase in small deposit borrowing
The number of mortgages approved for small deposit buyers rose once again in November, as the market share of mid-market and large deposit borrowers was squeezed.
Low Mortgage Rates Supported Housing Activity in November
Large deposit borrowers accounted for 28.9% of the market in November, which is lower than the 29.6% recorded in October.
Despite this fall, the proportion of loans to mid-market borrowers dropped back on a monthly basis. This was due to the rise in loans to small deposit customers.
Some 45.2% of all loans went to mid-market borrowers in November, which is lower than the 45.8% recorded in the previous month.
On an absolute basis, the amount of small deposit borrowers grew rapidly, from 16,485 to 17,381.
Sexton says: “The market has continued to shift towards those first time buyers and others with smaller deposits, and away from those with large amounts of equity in their property.
“Almost 1,000 additional small deposit buyers achieved their dream of homeownership this month compared to October.”
Yorkshire: the small deposit hotspot
Northern regionsc ontinued to be the most attractive for small deposit homebuyers in November.
In Yorkshire, 34.8% of all loans were awarded to borrowers with smaller deposits, which is higher than any other region. This put the region ahead of the North West (31.0%) and Northern Ireland (29.2%).
These three regions all recorded a higher proportion of small deposit borrowers than their large deposit counterparts in November.
The fourth area where this was the case was the Midlands, where small deposits made up 28.5% of the region’s market.
At the other end of the scale, just 16.5% of borrowers in London were in this category. This put the capital ahead of the South East, where the figure was 20.9%.
London and the South East saw their respective markets dominated by those with cash to splash. Large deposit borrowers accounted for 38.2% of the market in the capital, while, in the South East, this figure was 35.0%.
Yorkshire (20.7%), the North West (22.8%) and the Midlands (24.9%) all saw less than a quarter of mortgage approvals go to this segment of the market.
In Northern Ireland, 27.8% of mortgages were to those with larger deposits.
Sexton explains: “While experts often talk about UK-wide averages, scratch underneath the surface and there are several distinct regional markets in the UK.
“People looking to buy in northern parts of England, as well as Northern Ireland, tend to have smaller deposits, while those closer to London must have a big amount of cash to put down.”
He concludes: “Buyers in the south of England should not be despondent, however, as there are great pockets of value in the capital and surrounding counties.”
Housing market activity continued to slow down in November, according to the latest Housing Report from NAEA Propertymark (the National Association of Estate Agents).
Housing demand
The number of home hunters registered per NAEA Propertymark member estate agent branch fell in November, from an average of 294 in October, to 282.
This is the lowest number of prospective buyers to be recorded for the month of November since 2012, when agents registered an average of 263.
Property supply
In November, the supply of available homes to buy on member estate agents’ books dropped by 13% for the second consecutive month, falling from an average of 40 in October to 35.
This is the lowest number recorded since earlier this year, when an average of 33 properties were available to buy per branch in April.
Agreed sales
The number of properties sold to first time buyers remained at 23% in November for the second month running, which was higher than the 20% recorded in August and 22% in September.
Year-on-year, the amount of sales made to this group is down, from 27% in November 2017.
The number of sales agreed per NAEA Propertymark member branch fell for the second consecutive month in November, from an average of nine in September, to eight in October, to seven last month.
Mark Hayward, the Chief Executive of NAEA Propertymark, assesses the figures: “Last month, it was clear that uncertainty surrounding Brexit was having an impact on the sector, and this month is no different. We usually see a seasonal slowdown, but it’s unlikely that the time of year is the sole cause of today’s market conditions.
“As we near the end of the year, we’d usually expect potential buyers and sellers to put their plans on hold until early next year, but it’s likely that this year we’ll just see people holding off until there’s some clarity around what the Brexit deal might look like and what it will mean for the economy.”
The UK property market is biding its time, according to the November House Price Index from Your Move.
House prices across the country largely continue to flatline, with the rate of annual growth falling consistently since August. It now stands at an average of 0.9%, which is well below the rate of inflation and the lowest since April 2012.
This leaves the average property value in England and Wales at £305,522, following a £2,724 increase on November 2017.
Despite weak price growth, property transaction levels rose slightly in November, by 2.5% on a seasonally adjusted basis. With an estimated 82,500 sales, they are at their highest for the month in three years.
Key insights
In the year to September, while the number of loans for first time buyers was up marginally (0.4%) on the same period last year, the amount for home movers was down by 3.6%.
Perhaps most tellingly, the number of buy-to-let mortgages fell by 13.0%. This could be an indication that a wait-and-see approach is now being adopted, particularly as the end of the year approaches and the nation waits with bated breath on the outcome of Brexit.
Longer-term issues also play a role, however, and affordability remains a key concern. The greatest growth in transactions has been in the cheapest region in England – the North East – with sales in the three months to October up by 7% on the same period of 2017.
By contrast, the South East (the most expensive region outside of London) saw transactions fall by 4%. The capital bucks the trend, with sales up by 2%, but it also saw price falls earlier than other regions.
More widely, the Resolution Foundation’s report on the bank of mum and dad earlier this month shows the continuing difficulty that the young have funding their own home purchases. It showed that those without parental property wealth are, at the age of 30, roughly 60% less likely to be homeowners than those whose parents are homeowners.
Region-by-region
The top three regions for house price growth remained unchanged in November. The West Midlands still lead the way, with annual growth of an average of 3.7%, supported by a strong performance in the West Midlands combined authority, which includes Birmingham. With prices up by an average of 5.3% over the year, it’s among 13 areas to set a new peak in the month.
The Property Market is Biding its Time, According to Your Move
Neighbouring East Midlands, meanwhile, is also growing strongly, with prices up by an average of 3.5% annually. Rutland saw growth of 10.8% over the 12 months to November, while Derby (6.1%), Leicester (5.7%), Nottinghamshire (3.9%) and Nottingham (2.0%) all set new peak average property values.
Despite the performance of Rutland and others in the Midlands, it is Torfaen in Wales that has recorded the highest growth over the last year, at an average of 15.6%. This was helped by the recent sale of the highest priced property in the area, for £620,000, where the average home costs just £171,708. It is also supported by demand for properties from those working in the Bristol and Gloucestershire areas.
More generally, Wales also continues to be the only area outside the Midlands that is outpacing inflation (2.2% in October), with the average price up by 2.7% annually.
As well as Torfaen, it has seen strong growth in Caerphilly (8.8%), Carmarthenshire (7.2%) and Powys (6.4%), all of which set new peak average prices in November. The big cities of Newport (6.2%) and Swansea (3.7%) also show above average growth for the region, although prices in Cardiff were only up by 2.2% annually.
At the other end of the scale, prices in the East of England are now down on an annual basis for the first time since March 2012. While Southend-on-Sea and Thurrock still show good growth (4.1% annually for both, with the latter recording a new peak), that’s more than offset by falls in Suffolk (-0.8%), Luton (-1.0%), Bedfordshire (-1.3%) and, most significantly, Cambridgeshire (-4.6%).
It is, however, the only region to see prices falling on an annual basis, and the majority of unitary authorities continue to see growth, with prices up in 74 of the 108 areas in England and Wales outside of London.
London
The average house price in London increased by 1.3% in October – nominal growth, but a real fall compared to inflation. The average property in the capital was priced at £622,508.
On an annual basis, prices fell in 21 of the 33 London boroughs, with the City of London (7.8%) leading those that bucked the trend. Three of the top five priced boroughs recorded double-digit declines: in Kensington and Chelsea – the most expensive borough – prices fell by 16.5%; in the City of Westminster, they were down by 8.0%; while Hammersmith & Fulham saw declines of 10.5%.
On the other hand, prices continue to grow strongly in both Merton and Lambeth (7.5% and 7.6% respectively).
Overall, there are pockets of strength and weakness across London. Prices in Tower Hamlets fell by an average of 13.7%, while, in Hackney, they’re up by 5.6%, with both areas roughly mid-table in terms of property values.
At the lower end of the market, Bexley, and Barking and Dagenham still show nominal growth (1.7% and 0.7% respectively), while Newham has seen prices drop by 6.7%. Largely, however, areas to the east of the capital, where properties tend to be more affordable, are most likely to be seeing modest growth.
Oliver Blake, the Managing Director of Your Move and Reeds Rains, comments: “Despite the current economic uncertainty, it’s encouraging to see that there is still some increase in transaction levels and that, whilst house price growth is relatively flat, it means for first time buyers, for example, the news remains positive.”
