Latest Land Registry Numbers: June 2014

The new Land Registry numbers, released at the end of June suggest that UK house prices continue to rise but that this may be starting to slow down.

The overall increase year on year across England and Wales was 6.7 per cent, including a rise of 0.4 per cent in May. The average house now costs just over 172 thousand pounds.

Overall transactions continue to increase, with recorded average monthly sales of 68,000 in the period December to March, which is 36% higher than the same period in 2013. There are however signs that this is starting to slow down, as predictions in interest rate rises and the recent mortgage market review start to curtail demand.

The summary statistics hide a considerable difference between London and the rest of the country. Prices in the capital rose 18.5 per cent in the 12 months to May, whereas the equivalent rise in the rest of England and Wales was just over 6 per cent.

A property in London now typically costs £439,179, more than two and half times the UK average, as demand continues to outstrip supply.

By comparison, five regions across England and Wales actually recorded price decreases of up to 1 per cent in the month. Nevertheless, the district of South Tyneside saw the biggest monthly increase in May of any metropolitan area at 3 per cent, showing that so called ‘hot spots’ exist across the country.

The wide monthly variations within small geographic areas are illustrated by the price increases recorded in May by the London boroughs, which varied between 3 per cent and 26 per cent.

All types of properties experienced rises of 6 per cent or more, but the fastest growing category is flats and maisonettes, with a 9.2 per cent year on year increase, influenced by the number of such properties selling in the capital.

So in summary, the outlook remains positive, but most leading economists are now predicting a slowdown in prices in the next 6 months, and a rise in interest rates either late this year or early in 2015, initially a quart of one percent.

Land Registry Data: March 2014

The latest statistics from the Land Registry, released at the end of April, show house prices overall down by 0.4 per cent, yet still 5.6 per cent higher than a year ago. The number of completed transactions was up by 35 per cent at almost 75,000 properties a month.

In London, the average house price was £414,000 compared to the UK average of £169,000, with prices up 0.6 per cent in March, and 12.6 per cent up year on year, showing a similar but more pronounced trend to the rest of the UK.

In terms of property type, the fastest growth was recorded for flats and maisonettes at 8.6 per cent; nevertheless, every other property type saw an annual increase of more than five per cent.

Some significant differences emerge when the data is segregated by region. London is the fastest growing region in terms of price at 12.6 per cent, while Wales saw a small decrease of 1.6 per cent year on year. Yorkshire & the Humber recorded the lowest regional increase at 1.8 per cent, and the East the highest at 7.1 per cent, all other areas falling between the two.

However, a further breakdown by county and unitary authority shows a much wider range of price movement from plus 12.4 per cent in Greater London to minus 15.7 per cent in Blaenau Gwent.
Of the metropolitan districts, the best performing area on price was Oldham, up 11.6 per cent annually, while its near neighbour, Salford, saw a movement of only 1.4 per cent. Newcastle and Knowsley both showed the largest increases for the month, while the greatest price reductions were in Wolverhampton and South Tyneside by month and year respectively. Within London, Waltham Forest saw the highest annual price rise at a remarkable 23.5 per cent, the lowest being Harrow at 4.4 per cent.

These significant variations, based as they are on completions, are the best guide to price and highlight the importance of obtaining expert advice and guidance from your estate agent.   

Finally, in terms of volumes sold by price of the property, all bands over £50,000 saw increases of more than 30 per cent. The top end of the market performed best, with volume for properties priced between £0.5 million and £1 million increasing by 70 per cent and those over a million pounds by more than 60 per cent. Overall, almost all price bands over £100,000 saw volume increases of more than 40 per cent, so the market is buoyant and dynamic across the range.

Bank of England Review

The latest Bank of England Summary Report, released in April, shows that the UK economy remains in mild recovery with consumer services and UK inflation remaining largely unchanged.

The report is based on feedback from thousands of businesses across the country, combined with broad economic data collected by the Government and its agencies. It shows that companies want to invest in plant and machinery and recruit additional staff, while wage levels are stable with some slight upward pressure in the service sector.

Also on the positive side, there has been notable growth in turnover for business services, largely due to rising activity among professional and financial services firms. Growth in manufacturing output also picked up further, both for the domestic market and for export.

However, the most notable element of the report is the acceleration in house building and the optimistic outlook for the residential housing market in general.

Sales volumes have continued to rise strongly in the UK property market, with many participants reporting double-digit percentage increases on a year ago, leading to continuing growth in activity for estate agents, residential conveyancers and mortgage brokers.

Estate agents in particular reported that new instructions are rising slightly, but are significantly lagging behind the increase in home sales. The Guild’s own market analysis supports this, showing that residential stock levels in many areas are significantly below those of a year ago with an average of 12 potential applicants for every property available on the market.

Reports of double-digit annual rises in house prices have been restricted to London, where a major driving factor is overseas investment, and to particular towns, such as Brighton, Cambridge and Oxford where property is in exceptionally strong demand. Elsewhere, residential price inflation has remained more modest.

Our own outlook for the next three months expects the situation to remain much the same with potential buyers eager to purchase before prices rise further, and to take advantage of the current highly competitive mortgage rates. We see evidence of lending rates starting to harden slightly, especially for buy-to-let and longer-term fixed deals. Nevertheless, the overall picture is one of a recovering market, a slight upward movement in prices for most areas, a strong market for motivated vendors and strong incentives for able and ready purchasers.

Help to Buy Creates 35,000 New Homeowners

Recent figures reporting on the progress of the Help to Buy scheme indicate that it has helped 35,000 people to buy their own home.  Those numbers are spread across all the different parts of the scheme, although the Help to Buy equity loan, sometimes referred to as Help to Buy 1, accounts for the lion’s share.

The equity loan is only available on new build property and the Government department responsible for Help to Buy, Communities and Local Government, says that 22,831 people have used the scheme since it launched just over a year ago.

The mortgage guarantee, sometimes dubbed Help to buy 2, is available on open market property to help those with only a small deposit.  This part of the scheme accounted for more than 7,300 sales, with the remainder being made up of Newbuy sales to the tune of 5,173.

It’s hoped that the success of the equity loan scheme will help to drive more house building, something that is crucial in an effort to address the imbalance between housing demand and supply.  However, some have suggested that Government support for housing should be pegged back in light of some of the rapid price rises, particularly in London and the South East.

The official Help to Buy stats show that it’s unlikely to be the root cause of these price rises and actually the scheme seems to be hitting the intended target.  Nationally, 86% of equity loan sales were to first time buyers and the average house price under Help to Buy was lower than the national average house price.

With Help to Buy accounting for only 3% of overall house sales and 94% of all equity loan sales being outside London it looks like a move to radically pare back the scheme may have little effect on the London market.   At the same time it could remove what remains a very helpful option for those looking to get on the ladder but have a direct bearing on those in the regions where house prices may be moving at a very different rate.

Fixed Rates Rising

The Bank of England Base Rate has been at a record low for 5 years now, at just 0.50%.  That has seen mortgage borrowers enjoying some extremely low rates, especially as competition in the mortgage market has improved.

Although that has been good news for many homeowners the question remains when will Base Rate rise and not if.  In fact the Governor of the Bank of England recently hinted that there was a chance it could rise sooner than many were anticipating.

That has led many to consider if interest rates could rise before the end of the year.  The exact timing is still up for debate and some argue that it will still be next year before a change comes.  Even then the Bank of England has been consistent in its message that interest rate rises will be gradual and relatively slow – likely to increase in ‘baby steps’ to coin one description.

Mortgage borrowers have been opting for fixed rates, attracted by the stability that they offer when costs are likely to head only one way.  In addition fixed rates remain very competitive so there is little price advantage in the variable deals on offer.

However, fixed rates do fluctuate whether Base Rate is moving or not.  As the point when a rate rise looks more likely the cost of funds increases and so the trend has been for fixed rates to drift upwards.  In fact looking back to last summer the very lowest 5 year fixed rates were about half a per cent lower than they are today.

Anyone keen on locking into a low fixed rate would therefore be better to act quickly as the trend for fixed rates to get gradually more expensive only looks likely to continue.