MONTHLY MARKET REPORT – MARCH 2018

By Steven Goovaerts

Hello and welcome to our March Monthly Market Insight, bringing you the latest residential market data and industry news in one place.

In a month which has seen some London and South East based estate agents report slumping profits and the MHCLG housing delivery consultation put pressure firmly on developers to improve the supply of new homes, we take a look at how has the market has performed and whether the national picture reflects local performance.

 

A quick look at this month’s UK-wide HPI releases...

Nationwide Feb 2018 Jan 2018 Dec 2017
Annual +2.2% +3.2% +2.6%
Month* -0.3% 0.6% 0.6%
Avg Price £210,402 £211,756 £211,156

The Nationwide is the world's largest building society, and one of UK's largest mortgage providers. *Seasonally adjusted.

Robert Gardner, Chief Economist, Nationwide

“After picking up in January, growth fell back in February.  The slowdown is consistent with softening in the household sector in recent months as retail sales and key measures of consumer confidence remain soft and the squeeze on household incomes continues to take its toll.

Mortgage approvals declined to their weakest for 3 years in December at 61,000. This comes off the back of subdued activity in October and November as surveyors report new buyer enquiries remain soft.”

Halifax Feb 2018 Jan 2018 Dec 2017
Annual +1.8% +2.2% +2.7%
Quarter -0.7% 0% +1.3%
Month +0.4% -0.6% -0.6%
Avg Price £224,353 £223,285 £225,021

The Halifax House Price Index is the UK's longest running monthly house price series.

Russell Galley, Managing Director, Halifax Community Bank

“Prices remain broadly flat as annual growth slowed to the lowest rate since March 2013. The labour market continues to perform strongly with employment rising 88,000 over Q4 2017, almost entirely accounted for by full-time jobs.  Accordingly, annual wage growth accelerated from 2.3% in November to 2.8% in December. However, earnings are rising at a slower rate than consumer prices.
Historically low borrowing rates alongside a shortage of stock should support prices over coming months.”

HMRC: Sales exceeded 100,000 for the 13th successive month.  January’s 102,610 was the highest since April 2017. Sales in the 3 months to January were up 2% on the same a year earlier.

Bank of England: The number of mortgage approvals grew strongly by 9.4% month on month in January to 67,478. However, mortgage approvals in January were 2.4% lower than a year earlier.

RICS: Indicators of housing demand and supply remain weak. For the 10th successive month new buyer enquiries have fallen. The lack of new instructions continues to impede activity and new instructions have now fallen for 23 consecutive months – the worst sequence since 2007-2009.

 

Rightmove House Price Index

National

  • Asking prices up 0.8% (+£2,414) on average, with cautious optimism among new sellers.
  • January 2018 busiest month ever on Rightmove with visits hitting over 141 million.
  • More sellers, with number of properties coming to market up by 2% on February 2017.
  • Year-on-year sales agreed recovers from -5.5% in Q4 2017 to -1.6% in January 2018.

London

  • Usual New Year price jump with average asking prices up 4.4% (+£26,665) in February.
  • Overall price drop of -1.0% shows London still in period of adjustment.
  • Average time to sell in London in January 2018 was 83 days - 5 days longer than December 2017, 10 days longer than January 2017 and 11 days longer than the national average.

Rightmove Asking Price Data for London

Category Average Asking Price (February 2018) Monthly Change Annual Change
By Travel Zone
Zone 1 £1,373,384 +6.0% -4.4%
Zone 2 £745,819 +5.9% -1.7%
Zone 3 £601,992 +6.7% -0.2%
Zone 4 £482,071 +1.8% -0.2%
Zone 5 £480,897 +3.3% -0.1%
Zone 6 £491,609 +0.2% +1.8%
By Area
Greater London £627,591 +1.3% -1.3%
Inner London £779,261 +5.6% -2.1%
Outer London £520,042 +3.9% +0.2%
By Market Sector
First-Time Buyers £489,518 +1.3% -1.3%
Second - Steppers £697,862 +2.9% -1.4%
Top of the Ladder £1,407,866 +8.0% +2.2%
National Average for Comparison
National Average £300,001 +0.8% +1.5%
By London Borough (3 month average)
Bexley £408,466 1.3% 4.2%
Hackney £654,695 0.2% 3.6%
Barking & Dagenham £317,065 0.2% 3.0%
Havering £409,814 0.4% 2.8%
Redbridge £453,600 0.1% 1.3%
Haringey £607,736 1.4% 1.0%
Croydon £440,521 -0.2% 0.8%
Greenwich £446,158 1.1% 0.5%
Hillingdon £493,167 1.6% 0.2%
Hounslow £542,843 -0.8% 0.1%
Newham £421,531 0.4% 0.0%
Kingston upon Thames £623,312 0.1% -0.1%
Bromley £526,006 0.4% -0.5%
Southwark £645,955 0.3% -0.8%
Sutton £464,682 0.7% -0.9%
Hammersmith & Fulham £940,159 1.2% -1.7%
Kensington & Chelsea £1,602,713 2.5% -1.9%
Lewisham £470,403 0.7% -2.4%
Westminster £1,461,101 3.8% -2.4%
Waltham Forest £470,284 -0.4% -2.4%
Ealing £552,044 0.6% -2.7%
Wandsworth £796,096 -0.2% -2.8%
Enfield £446,688 0.4% -2.9%
Tower Hamlets £588,847 -1.2% -2.9%
Barnet £637,757 0.1% -3.3%
Harrow £549,413 0.0% -3.3%
Brent £571,722 -0.6% -3.5%
Islington £743,566 0.2% -3.8%
Richmond upon Thames £811,377 -0.4% -4.1%
Merton £621,033 -0.2% -5.7%
Camden £978,381 0.1% -5.8%
Lambeth £635,376 -1.4% -7.3%

 

Miles Shipside,  Director and Housing Market Analyst, Rightmove

“London is a myriad of markets under-pinned by a historical shortage of affordable stock.  Rapid price rises in recent years resulted in a re-adjusting market, with overall year-on-year price falls of 1%.
End of boom prices normally re-adjust more quickly if there is an over-supply of sellers trying to exit their investments.  However, the lack of stock in typically pricier central locations indicates some would-be sellers are holding back as cash-rich owners are able to sit tight and await a hoped-for price recovery.”

 

RICS –  UK Residential Market Survey

The Market

  • Continuing the trend, new buyer enquiries fell for an 11th successive month in February and agreed sales remain negative, similar to figures seen over the last 6 months.
  • Instructions fell to the lowest since July 2016, with average stock per agent branch at 42.
  • Regional variation continues with declines in London, the South East and East Midlands.
  • Available stock looks unlikely to improve, with 15% more respondents indicating the number of valuation appraisals being undertaken in February were lower year on year.

House Prices

  • The national price balance was reported as flat in February which is the 9th month in a row.
  • Regional data continues to show significant divergence as prices remain strong in Wales, the North West, Northern Ireland and the East Midlands. By contrast, prices remain negative to a greater or lesser degree in London, East Anglia, the South East and the North.
  • The longer 5-year indicator continues to suggest prices will increase at a slightly slower pace than rents, however, both point to growth of circa 15% over this period.

The New Build Market

  • The key factor driving demand for new build properties nationally is lack  of second-hand stock, followed by Help to Buy, developer incentives and quality of new homes.
  • The one region where results differ is London; the shortage of stock is viewed as a major influence but Help to Buy is even more important for driving demand for new builds.

Simon Rubinsohn, RICS Chief Economist, RICS

“The consultation on housing delivery puts the onus squarely on developers and planning departments to lift supply, but there is doubt as to whether this will be sufficient to address the challenge.
Longer term national house price indicators have begun to improve recently and private rents remain firm, both cases pointing to increases of at least 15% over the next 5 years. A divergent regional picture is becoming increasingly pronounced with key indicators across much of the country showing resilience but data for London, the South East and East Anglia rather more subdued.”

 

UK Finance Press Release

Remortgages across the UK reached a 9 year high in January 2018 while the number of first-time buyers and home movers both increased compared to the same period in the previous year

UK Data for January 2018
Type of Borrower Value of Loans Monthly Change Annual Change Number of Loans Monthly Change Annual Change
First time buyers* £4.0bn -21.6% +11.1% 24,500 -20.5% +7.0%
Home movers** £5.4bn -18.2% +10.2% 25,000 -18.8% +6.4%
BTL house purchasers £0.8bn Nil Nil 5,600 +5.7% -5.1%
Homeowner remortgage £8.9bn +61.8% +20.3% 49,800 +58.1% +19.1%
BTL remortgage £2.6bn +62.5% +18.2% 16,500 +66.7% +17.9%

*The average first-time buyer is 30 and has an  income of £41,000 (Same as December).

**The average home mover is 39 and has an income of £55,000 (Same as December).

London remortgagers at 8 year high but flat growth in first-time buyers

London Data for Q4 2017
Type of Borrower Value of Loans Quarter Change Annual Change Number of Loans Quarter Change Annual Change
First time buyers* £3.05bn -8.7% +2.7% 10,700 -5.3% Nil
Home movers** £3.07bn -11.5% +12.5% 7,700 -9.4% +8.5%
Homeowner remortgage £4.41bn -2.9% +16.4% 14,500 -1.4% +9.8%

*The average first-time buyer is 32 and has an  income of £66,000.

**The average home mover is 37 and has an income of £89,000.

Jackie Bennett, Director of Mortgages, UK Finance

“Remortgaging reached a 9 year high in January as borrowers locked into attractive deals amid expectations of further rate rises.  This strong growth is above normal seasonal fluctuations.

Lending to both first-time buyers and home-movers increased compared to the same period in 2017, however, buy-to-let growth remains subdued, reflecting the impact of tax and regulatory changes.

London remains competitive, with strong growth in home movers and remortgaging at an 8 year high.  However, subdued growth in the number of first-time buyers shows affordability remains a challenge.” Moneyfacts: 95% loan-to-value mortgage products have increased in popularity with 307 on the UK market, up from 253 a year ago.  This is the first time since 2008 the number had surpassed 300.

Savills

Oxford Economics amended forecasts for two interest rate rises in 2018. The November 2017 rise did not significantly impact mortgage rates, but two more may drive up borrowing costs and dampen demand.

 

Knight Frank – Prime Central London (PCL) Residential Market Update

Sales

  • Average prices in PCL fell circa 1% in the year to February 2018.
  • This is the third consecutive marginal fall, providing evidence of a stabilising market following steeper declines of -7.9% between the peak in August 2015 and February 2017.  
  • LonRes: 12 month sales volumes have stabilised and are now growing on an annual basis.
  • Homes at £10m+ grew 0.2% in the year to January, while the £5m-£10m range grew 1.7%.
  • As stamp duty changes are still being absorbed, Knight Frank forecasts are flat over 2018.

Rentals

  • Rental values in fell -2.1% in the year to February, marking 2 years of annual declines.
  • New lettings stock fell -6.4% in the year to January 2018 on the previous year while demand increased 17.6% over the same period, with a 14% increase in viewings.
  • As stock moderates alongside rising demand, upwards pressure will be exerted on values.
  • However, data shows weaker growth in demand for properties priced between £1,000-£5,000 per week, up 8%.  In comparison a 20% increase in new tenant demand was recorded below £1,000 and a 19% increase above £5,000 in the year to January.
  • Even within this middle band, average rents between £1,000-£1,500 per week fell -4.6% on an annual basis, compared to -0.9% between £750-£1,000 and -1.8% above £2,000.

ONS

Annual rental growth was 1.1% in January, marginally down on December’s 1.2%. Annual growth in London was 0.2% in January, significantly lower than at the same in 2017 when it was 2.1%.

 

NAEA – Housing Report - January 2018

Demand

Prospective purchasers increased 37% from 268 registered per branch in December to 367 in January.  This is down 14% from 425 in January 2017.

Supply

In line with rising demand, January’s supply of stock increased to 36 per branch on average, from 33 in December.  This is marginally lower than the 38 per branch in January 2017.

Activity

  • Sales agreed per branch increased from an average of 5 in December to 7 in January.
  • 4% of sales achieved above asking price, down from 7% in January 2017.  20% sold at asking and 76% under asking.
  • UK Finance reported sales to FTBs in 2017 were highest since the financial crisis, however, the start of 2018 saw sales to the group fall to 27% in January, from 32% in December.

Mark Hayward, Chief Executive, NAEA

“As we usually see in January, buyers and sellers have re-entered the market and triggered an uplift in sales agreed.  While this is good news for the market generally, increased competition seems to have affected FTBs who appear to be holding off on making purchases and saving for longer to maximise the full stamp duty relief.  They’re skipping the ‘first time home’ and moving straight onto their second homes, to avoid growing out of their property in four or five years and facing the cost of stamp duty. This is a smart move and an example of how FTBs are making legislation work to their advantage.”

 

Savills – Valuing Britain 2018

UK Housing stock worth £7.14 trillion - this could buy you: Google, the International space station, the top 20 UK housebuilders, all the oil left in the North Sea, all bitcoin in circulation, Amazon, Apple, Coca-Cola, McDonald’s all companies in the FTSE100 and FTSE250, the top 15 mortgage lenders and the English Premier League.

2007-2017

  • Total value growth circa £1.82 trillion.
  • 81% of value growth due to house price rises while 19% due to housebuilding.
  • 87% of growth came from London (42%) and the South of England (45%).
  • London housing stock value increased 75.3% while the FTSE 100 grew 16.3%.
  • The private rented sector doubled and in 2016, for the first time, private landlords owned more housing equity than mortgaged owner occupiers at £1.27 trillion to £1.21 trillion.
  • Annual growth from 2016 to 2017 in London fell from £143bn to £37bn  and in the South East fell from £120bn to £58bn.

 

ONS Wealth and Asset Survey

Nationwide

  • Total household net wealth after deducting outstanding debt amounted to almost £12.8 trillion between July 2014 to June 2016.  Property accounts for over a third of this.
  • Net property wealth is the second largest store of household wealth after private pensions and amounted to £4.6 trillion, excluding £1.1 trillion gross mortgage debt.
  • The wealthiest 10% of households held around 44% of total wealth, 46% of private pension wealth, 40% of net property wealth and 60% of other financial wealth.
  • The lowest 50% of households held less than 10% of total wealth, property wealth and private pension wealth, and just 2% of other financial wealth.

 

Minimum Energy Efficiency Standards (MEES) – 1st April 2018

Matt Lown, Head of Sustainability, Tuffin Ferraby Taylor

  • On 1 April, the Minimum Energy Efficiency Standards (MEES) come into force in England and Wales, making it unlawful to let or renew a lease on a property if the energy performance certificate (EPC) rating is F or G. This includes sublettings.
  • Penalties for non-compliance can range from £2,000 to £150,000.
  • Although MEES do not apply to sales, prospective purchasers are increasingly paying close attention to EPC ratings given the potential financial implications of the standards.
  • Exemptions arise when
    • All relevant energy efficiency improvement works to the building fabric and services that have a payback period of seven years or sooner have been undertaken
    • A landlord is unable to obtain third-party consent for improvements
    • An independent surveyor determines that energy efficiency improvements would devalue the property by more than 5%.
  • Exemptions last for five years, and to qualify a landlord must list the property on the public Private Rented Sector (PRS) Exemptions Register.  This is under development.

For further information, see government guidance on MEES

 

In other news…

Anyone for Jenga?

A Japanese company is planning to build the world's tallest wooden skyscraper complete with circa 8,000 homes and trees and foliage on balconies at every level.

At circa 350m (1,150ft), the structure is proposed to be some 40m, or 10 stories, taller than The Shard.

A "braced tube structure" with steel braces at the centre of a wood and steel column are designed to protect against Tokyo's regular earthquakes.

The projected cost is about £4.02bn - twice the cost of a conventional skyscraper of the same size.  However, costs are expected to fall before the 2041 scheduled completion due to technological advances.

Other wooden skyscrapers include an 18-storey office in Minneapolis and a 53m-high block of student flats in Vancouver that currently holds the title of world's tallest wooden skyscraper.

Concrete and steel buildings leave behind a carbon footprint, and are estimated to be responsible for about 8% and 5% of global emissions respectively.  Wood, on the other hand, stores carbon.

Fire-resistance is a concern, however, cross-laminated timber (CLT) is designed to be fire resistant and, unlike steel, remains more structurally stable when subjected to high temperatures.  

 

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 Source Release Date Link
Halifax House Price Index Halifax 07/03/2018 Find out more
Nationwide House Price Index Nationwide March 2018 Find out more
Rightmove - House Price Index Rightmove March 2018 Find out more  
HMLR - House Price Index (December 2017) HMLR 13/02/2018 Find out more
RICS UK Residential Market Survey - February 2018 Royal Institution of Chartered Surveyors 08/03/2018 Find out more
London remortgagers at eight-year high but flat growth in first-time buyers UK Finance 21/02/ 2018 Find out more
Remortgages reach nine-year high in January 2018 UK Finance 14/03/2018 Find out more
Prime Central London Sales Index - February 2018 Knight Frank 02/03/2018 Find out more   
Prime Central London Rental Index - February 2018 Knight Frank 02/03/2018 Find out more
UK Residential Market Update - February 2018 Knight Frank February 2018 Find out more  
London Residential Review - Spring 2018 Knight Frank February 2018 Find out more
UK Housing Market Update Savills March 2018 Find out more
Valuing Britain 2018 Savills February 2018 Find out more
Housing Report - January 2018 NAEA February 2018 Find out more
MEES: The challenges that lie ahead for valuers RICS - Sarah Sayce - Professor of Sustainable Real Estate at the University of Reading 20/02/2018 Find out more  
How to avoid the MEES trap RICS - Matt Lown - (Head of Sustainability at Tuffin Ferraby Taylor) 01/03/2018 Find out more
Plans drawn up for world's tallest wooden skyscraper BBC - Technology 20/02/2018 Find out more 
UK house prices fell in February, Nationwide says BBC - Business 01/03/2018 Find out more
UK house price growth lowest for 5 years, says Halifax BBC - Business 07/03/2018 Find out more
Low-deposit mortgages make a comeback BBC - Business 12/03/2018 Find out more
Landlords who sold up last year made an average £87,000 profit The Telegraph - Money - Sophie Christie 12/03/2018 Find out more
Landlords in these UK regions made the biggest profits on property sales City AM -  Shruti Tripathi Chopra 12/03/2018 Find out more


 

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Steven Goovaerts

Steven is a Graduate Surveyor and versatile member of the team, currently undertaking an MSc in Real Estate Management at the University of the West of England and enrolled on the Assessment of Professional Competence.

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