Hello and welcome to our December Monthly Market Insight, bringing you the latest residential market data and industry news in one place.
The end of the year is nearly upon us and the mince pies and mulled wine are calling, however, in a month which has seen pertinent announcements in the Autumn Budget and inflation outstripping wage growth at its highest level in six years, what are the implications for the residential market and how has it performed?
A quick look at this month’s
UK-wide HPI releases
|Nationwide||Nov 2017||Oct 2017||Sep 2017|
The Nationwide is the world's largest building society, and one of the UK's largest mortgage providers.
Robert Gardner, Chief Economist, Nationwide:
Annual growth remains within the 2-4% range that has prevailed since March. Low mortgage rates, employment growth and a lack of homes on the market are providing support for demand, but this is being partly offset by pressure on household incomes.
(According to the Consumer Prices Index, the cost of living rose by 3% in the year to October, while the ONS reports wage rises of just 2.6% over the same period.)
|Halifax||Nov 2017||Oct 2017||Sep 2017|
The Halifax House Price Index is the UK's longest running monthly house price series.
Russell Galley, Managing Director, Halifax Community Bank
The imbalance between supply and demand continues to support house prices, however, increasing affordability issues are likely to curb demand. Despite this, home sales are at the highest level this year, up 2% to 105,260 in October. In the three months to November, sales were 7% higher year on year (seasonally adjusted HMRC figures).
The value of the UK's private housing stock in 2017 was estimated at £6 trillion. This compares with £4.1 trillion in 2007; an increase of 48% over the past decade.
The Budget – Headlines
Stamp duty abolished for first time buyers up to £300,000 (capped on property purchases up to £500,000) and providing the following savings:
SDLT Changes for FTBs
|Example Purchase Price||
|£500,000+||No change||No change||No change|
The change is likely to have only a modest impact on overall demand.
In many regions, first time buyers already paid little or no stamp duty as the price of the typical first time property was below the previous threshold of £125,000.
The potential savings are more substantial for borrowers where house prices are higher, especially in London and the South East.
We do expect the changes to provide some stimulus to demand, particularly in London and the South East where the impact is greatest.
The average UK house deposit is £32,899, compared to an average stamp duty charge of £1,654.
The Office for Budget Responsibility
The changes are likely to increase house prices by circa 0.3% over 2018 and result in an additional 3,500 first time buyer purchases.
This may result in a “cliff edge” situation where a first-time buyer paying £500,001 for a home will pay £5,000 more in Stamp Duty than someone paying £500,000.
Planning and construction
Increase new housing supply to 300,000 homes per year with £15.3bn in extra funding, and including policies for minimum densities in parts of urban areas, changes to retail to residential conversion processes and permitted development rights for commercial to residential developments and a confirmed extra £2bn for affordable housing.
Planning reforms to ensure more land is available for housing, reduce the build out times for planning permissions, increase support for compulsory purchase powers, revise developer CIL and S106 contributions, and create new “garden towns”.
More tax changes for landlords
Removal of some Capital Gains Tax advantages for limited company property holdings, freezing the indexation allowance.
Furthermore, local authorities will look to charge double council tax on empty homes.
RICS Market Survey
Sales continue to decline albeit at a more modest pace with a negative price balance for London, the South East and East Anglia offsetting growth elsewhere.
Activity continues to be stifled by a persistent shortage of new instructions along with economic uncertainty and the near term outlook for prices and sales is now broadly flat.
There were significant variations at a regional level. London continues to return the most negative sentiment as does downward pressure on house prices across the South East.
Over the twelve month horizon, price expectation is positive in virtually all areas, however, London stands as the sole exception, with sentiment remaining firmly negative.
New instructions to sell continued to deteriorate, extending a run of 22 negative months.
New buyer enquiries appeared a little more stable having declined in October / September.
In the lettings market, interest from prospective tenants fell for the first time since 2015. Landlord instructions also continued to decline, leading to a fall in near term expectations.
Simon Rubinsohn, Chief Economist, RICS:
Headline indicators for both prices and activity are subdued as Christmas approaches. It is clear from the results than the mood music in London and the South East is very much flatter than elsewhere and forward looking indicators suggest this is likely to persist into the new year.
It remains to be seen whether scrapping stamp duty for first time buyers in the Budget will provide much lift for the market. There was not much evidence of this in the latest survey, however, if the move does trigger a wider debate about how best to tax property, it will serve a useful role.
NAEA Housing Report
Sales to FTBs fell in October to 22% of total transactions, down from 23% in September and the lowest since February 2017.
Despite rising in September, buyers registered at estate agents fell 11% in October.
Sales agreed per branch remained stagnant at 8 on average since July.
Properties that sold over asking price rose for the first time since July, to 4%. The number which sold for less than asking price dropped to 78% in October from 82% in September.
Figures from Zoopla suggest the average property in London sold 4.09% under asking price in the year to September (down 2.13% on the year before).
Mark Hayward, Chief Executive, NAEA
Following the announcement of the abolishment of SDLT for some FTBs in the Autumn Budget, we hope to see more first-time buyers coming to the market. We do however need to realise that if we don’t have the supply to meet the increased demand from FTBs it’s likely we’ll see house prices increase.
Savills UK Cross Sector Outlook – Investment
Six trends for 2018
Development in demand – Continued reform of the planning system is likely to provide more opportunities for development.
Broader investment – To include joint ventures with housing associations, private-sector products aimed at struggling potential FTBs and retirement housing.
Pressure on BTL – Mortgage regulation, rising interest rates and progressive cuts to tax relief will limit the ability of investors to expand their portfolios.
Cash remains king – Investment will be led by cash-rich private buyers and institutional investment. Overseas wealth will be pointed at prime central London.
Subdued price growth – Short-term prospects will be limited as economic uncertainty feeds into buyer caution. Medium-term prospects in London and parts of the South East will be constrained as buyers hit up against debt ceilings.
Rise in North West – Investment will shift towards regions offering higher yields. The North West is expected to deliver the strongest growth over the next 5 years.
Lucian Cook, Head of Residential Research, Savills
According to UK Finance, BTL mortgages granted for purchase was 75,300 in the year to August 2017 – 47% lower than the year to March 2016 when it was over 140,000.
Cash investors remain far more active. Quarterly SDLT statistics suggest in the year to September 2017 the additional 3% surcharge was paid on 245,000 purchases, the majority of which will have been investment buys.
Knight Frank Prime Central London Market Update
Average values edged up 0.1% in October, taking the annual price change to -3.6%.
There has been increased activity with both transaction levels and viewings rising year-on-year.
Average rents for existing homes fell 2.5% year-on-year in October, however, a slowing in new rental stock coming onto the market amid continuing strong demand is underpinning current rental performance.
UK Finance Press Release
Non-seasonally adjusted data shows the number and value of loans for remortgaging and house purchases rose in October, both month-on-month and year-on-year, with remortgaging now accounting for just over 70% of all buy-to-let lending:
|Type of Borrower||Value of Loans||Monthly Change||Annual Change||Number of Loans||Monthly Change||Annual Change|
|First time buyers||£5.1bn||+2.0%||+13.3%||31,700||+3.6%||+10.5%|
|BTL house purchasers||£0.9bn||Nil||Nil||6,600||Nil||Nil|
June Deasy, Head of Mortgage Policy, UK Finance
Over the last year, loans for remortgaging have been at record levels; this trend looks set to continue as we head towards the end of 2017 and borrowers seek to take advantage of low interest rates.
Mortgage repayments as a proportion of income still remain at or close to their historic low point, and despite the recent base rate rise we can expect monthly mortgage payments to remain affordable for the vast majority of borrowers.
In other news
Renting a home:
How much space will £100 buy you?
Research by OpenRent has found that for an average two bedroom property, £100pcm secures 3.91sqm of floor space (equivalent to a small garden shed) in London, or almost four times that at 14.83sqm in Bradford.
Outside London, Oxford and Bristol were most expensive, achieving 5.03sqm and 6.98sqm per £100pcm respectively. Meanwhile, an average two-bed home in rural Lincolnshire costs £200pcm, compared with £1,691 in central London.
This is reflective of property values, with figures from the ONS suggesting 1sqm of floor space (about the size of a red phone box) costs £19,439 in Kensington and Chelsea, while the same in Blaenau Gwent costs £777.
We hope you find this market insight informative, however, should you have any queries or recommendations on this or any of our other articles, please contact us
Sources & Further Reading
|Article Title||Source||Release Date||Link|
|Halifax House Price Index||Halifax||07/11/2017||Find out more|
|Nationwide House Price Index||Nationwide||November 2017||Find out more|
|UK Residential Market Survey November 2017||Royal Institution of Chartered Surveyors||14/12/2017||Find out more|
|Monthly UK Housing Report - October 2017||National Association of Estate Agents||October 2017||Find out more|
|Remortgaging boost continued in October||UK Finance / CML||12/12/2017||Find out more|
|UK Cross Sector Outlook - Residential: Market movers||Savills||05/12/2017||Find out more|
|Policy Response: Budget 2017||Savills||07/12/2017||Find out more|
|UK Residential Market Update - November 2017||Knight Frank||November 2017||Find out more|
|UK Housing Market Forecast - December 2017||Knight Frank||December 2017||Find out more|
|Analysis of real earnings: December 2017||Office for National Statistics||December 2017||Find out more|
|Autumn Budget 2017: Property Tax||Kingston Smith||22/11/2017||Find out more|
|London set to be among the worst UK regions for house price growth||
City AM (Emma Haslett
|05/12/2017||Find out more|
|London homes sell for four per cent less than asking price||
City AM (Robyn Wilson
|04/12/2017||Find out more|
|Renting a home: How much space will £100 buy you?||
BBC News (Daniel Wainwright
|12/12/2017||Find out more|
|UK house price growth slowing, says Halifax||
BBC News (Brian Milligan)
|07/12/2017||Find out more|
|Renting in retirement: How feasible is it?||
BBC News (Brian Milligan)
|03/12/2017||Find out more|
|How much of your salary is spent on rent?||
BBC News (Kevin Peachey)
|01/12/2017||Find out more|
|Stamp duty giveaway will have limited impact, says Nationwide||
BBC News (Kevin Peachey
|30/11/2017||Find out more|
Budget 2017: How will stamp duty cut help first-time buyers?
BBC News (Reality Check Team)
|23/11/2017||Find out more
|Budget targets buy-to-let - again||
BBC News (Simon Jack)
|23/11/2017||Find out more|
|Budget 2017: What does the stamp duty change mean?||
BBC News (Brian Milligan
|22/11/2017||Find out more|
|Wage squeeze continues for British households||BBC News - Business||13/12/2017||Find out more|
|Sadiq Khan's radical plans to build homes in back gardens to tackle London's housing crisis||
Evening Standard (Pippa Crerar)
|29/11/2017||Find out more|