Hello and welcome to our September Monthly Market Insight, bringing you the latest residential market data and industry news in one place.
September has historically been a time when the housing market picks up after the summer slumber and, while this year could get off to a slower start under the shadow of Brexit negotiations and a reported reduction in appraisals by valuers, there are signs of movement.
According to the Rightmove Price Index, ‘Back to school’ season offers greater choice for buyers, with 16% more stock coming to market in the first week of September compared to average of the final summer weeks.
The NAEA says the number of house hunters registered per branch fell in July to 303, which is the lowest number since December 2017, when it was 268). For the last three years, while demand has dipped in June and July, there has been more choice for those looking to buy and the level of stock per agent branch increased for the third consecutive month in July to 41, marking a 17% increase on the same month last year.
First-time buyers took full advantage of these conditions with 30% of all sales made to new homeowners. This is an increase of 1% from June and 7% from July 2017. Mark Hayward, Chief Executive, NAEA said “July was typical of summer when house hunters put plans on hold as the holiday season takes priority, demand dips as a result but we don’t usually see first-time buyers taking advantage of this environment. In September, buyers typically storm the market in a bid to complete in time for Christmas.”
Indeed, first-time buyers have been success story of the year so far, according to Halifax. Numbers have more than doubled since a record low of 72,700 in the first half of 2009 and are now just 8% lower than the 2006 peak of 190,900. First-time buyers now account for more than half of all mortgage financed house purchases, up from 38% in 2008.
Prices are still subdued, and the commentary is of the London market weighing down the rest of the country. The Savills UK Housing Market Update says the greatest price falls in the year to June were in London, with Kensington & Chelsea and Westminster showing annual drops of -8.5% and -6.8% respectively.
However, Knight Frank says that, despite the headline decline, recent data shows prices have risen in around half of the outer boroughs, some by up over 5% in the past 12 months). And the ratio of prospective buyers to new listings rose to 9.2 in July, which is the highest for more than two and a half years – indicating an upwards pressure on pricing.
But this positive sentiment continues to be tempered by the spectre of Brexit.
A Bank of England report into a worst-case scenario for house prices said that prices could potentially fall by up to 35%. This was a stress test of the worst case scenario and it naturally made its way to the front pages, with the subsequent wave of hysteria unfortunately drowning out some of the more positive noises from the market.
If the coming months bring more clarity around a future beyond Brexit, or even a review of the UK’s decision to leave the EU, there is indication that without political distraction the market is getting in shape to move forward again.
A quick look at this month’s UK-wide HPI releases...
|Nationwide||Aug 18||Jul 18||Jun 18|
The Nationwide is the world's largest building society, and one of UK's largest mortgage providers. *Seasonally adjusted.
Robert Gardner, Chief Economist, Nationwide
Annual growth remains within narrow 2-3% prevailing over the past 12 months.
Subdued economic activity and pressure on household budgets is likely to drag on activity and growth, though borrowing costs are likely to remain low. Overall, we expect prices to rise around 1% over 2018.
Help to Buy
There were circa 48,000 Help to Buy (HTB) Equity Loan completions in England the year to March 2018, +21% on March 2017, accounting for circa 8% of mortgages for purchase.
The vast majority (circa 80%) of HTB loans were to FTBs, although FTB activity remains relatively modest at 13% of total transactions.
It is unclear how much HTB activity represents additional demand and how much has simply replaced activity that would have taken place.
The scheme has been key to demand for newly built homes in recent years (37% of new build completions in past 12 months ) and is even higher in some regions (circa 50% in North West).
It is unclear whether HTB will be extended/amended beyond April 2021. However, given political consensus on the need to increase supply, it suggests the scheme will not come to an abrupt end.
|Halifax||Aug 2018||Jul 2018||Jun 2018|
The Halifax House Price Index is the UK's longest running monthly house price series. *Seasonally adjusted.
Russell Galley, Managing Director, Halifax Community Bank
While employment growth has recently slowed, low unemployment and a gradual pickup in wage growth are helping support household finances. This has been accompanied by interest rates remaining at historic lows and a constrained supply of new homes, further supporting house prices.
Halifax: The number of FTBs increased circa +3% in the first 6 months of 2018 to 175,500 (171,200 in the same of 2017). This is the sixth increase over a comparable period in the last seven years and the third consecutive year that first-time buyer numbers have topped 150,000. FTB numbers have more than doubled since a record low of 72,700 in the first half of 2009 (now just -8% lower than the 2006 peak of 190,900). FTBs have also increased as a proportion of all mortgage financed house purchases (38% in 2008 to 51% in 2018). This share has picked up since 2013 when HTB was introduced, assisting a total 128,317 FTBs on to the housing ladder.
HMRC: Sales remain near monthly average for the past year, falling -0.8% June to July to 99,270. 3 months to July sales increased +2.1% from the previous 3 months. The volume of residential transactions has been broadly flat the past year and is likely to remain so in coming months.
Bank of England: Mortgage approvals fell -0.9% June to July to 64,768. This is almost exactly at the monthly average for the previous 12 month period of 64,986.
RICS: The housing market was broadly stable last month across new instructions and new buyer enquiries. This is a continuation of a trend prevailing for most of this year.
HMLR/ONS: UK prices rose +3.1% the year to July 2018 (the lowest annual rate since August 2013 at +3.0%). Prices in London fell -0.7% in the year to July 2018, down from +0.3% the previous month. UK Property Transaction Statistics for July 2018 show the number of transactions of residential properties at £40,000+ was 99,270 (-3.2% on the year). June - July transactions fell -0.8%.
Rightmove House Price Index
Monthly rise of +0.7% matches September average since 2011.
‘Back to school’ season offers more choice for buyers (+16% more stock coming to market the first week of September against the average of the final summer weeks).
Parts of Inner London (upper end) are starting to come out of their lengthy price trough.
After years of price falls in parts of London there are signs of renewed buyer activity at the upper end (+6% rise in sales agreed for homes of £750,000+ compared to same of 2017).
Rightmove Price Data for London
Average Asking Price (September 2018)
By Market Sector in London
|Second - Steppers||£694,085||2.30%||0.60%|
|Top of the Ladder||£1,368,273||2.70%||7.50%|
National Average for Comparison
|Top of the Ladder||£536,983||0.90%||1.10%|
By Travel Zone
By London Borough (3 month rolling average)
|Barking & Dagenham||£316,247||-0.40%||2.40%|
|Kingston upon Thames||£621,069||0.60%||0.30%|
|Richmond upon Thames||£820,463||-1.40%||-3.10%|
|Kensington & Chelsea||£1,542,273||-2.90%||-3.70%|
|Hammersmith & Fulham||£878,089||-0.30%||-5.70%|
Miles Shipside, Director and Housing Market Analyst, Rightmove
Buyer affordability has been increasingly stretched by 7 years of price rises outstripping wage inflation, however, ratios were not stretched to the same degree in the Midlands and the North as in the South, with a comparatively modest increase of 21% since 2011. That’s left some price momentum in the regions and means current momentum may carry on into this Autumn. That compares to the 7 year 40%+ price binge seen in London and the commuter belt in the South East and East, the likely cause of current indigestion.
Substantial price reductions in parts of London over the past 2 years are now helping improve sentiment and momentum, with renewed activity at the upper end. Affordability has been increasingly stretched by price rises of over 50% 2011 to 2016, outstripping buyers’ willingness or ability to pay. However, parts are seeing evidence of recovery a 2 years of price falls suggest there is now some good value.
The recovery in the upper end is encouraging but price reductions have yet to run their course, especially in parts of Outer London and the commuter belt that saw sizeable and unsustainable price rises.
RICS - UK Residential Market Survey
Supply & Demand
Stock on agent books inched back towards historic lows (-15% in August). This was, to a degree, foreseeable as appraisals by valuers have been down on the year. Appraisals were again negative in August which does not bode well for the pipeline in coming months.
Buyer Enquiries (-6%) are consistent with more or less flat demand (previously 0% and +1%), although portray a slightly more cautious purchaser approach. Not entirely surprising in the wake of August’s rate rise and broader political and economic uncertainty.
Agreed Sales came in at -10% (most negative for 5 months. After a sharp fall in activity at the end of 2017, trends are stabilising in the capital, though there is little positive impetus.
Near term expectations suggest regional divergence will persist, with the market remaining relatively stronger away from the South of England.
Weakness in London and the South East continue to offset the rest of the UK as prices dip to +2% (+4% in July). This is broadly consistent with no change in prices nationally.
Decline in fresh rental stock, a trend emerging on the back of tax changes on BTL properties, as new instructions drop -18% (23rd consecutive decline).
Meanwhile, tenant demand continues to rise with +22% the strongest since October 2016.
As a result of supply-demand imbalance, 3 month expectations point to rental growth, pushing up London rental projections for the year while further out rents are expected to outstrip house prices (+3% versus +2% per annum over 5 years).
UK Finance Mortgage Statistics
|UK Mortgage Lending Data for July 2018|
Type of Borrower
Volume / Value
3 Month Change
|First time buyers*||31,400||-9.2%||19.4%||1.0%|
|BTL house purchasers||5,500||1.9%||10.0%||-14.1%|
|Borrower Basics||Age||Household Income||Loan Size||Loan to Value|
|* Average first-time buyer:||30||£42,103||£145,000||85.0%|
|** Average homemover:||39||£56,570||£185,999||72.5%|
Jackie Bennett, Director of Mortgages, UK Finance
The remortgaging market saw its strongest July in over a decade, as homeowners pre-empted the latest rate rise by locking into fixed-rate deals. There was also considerable growth in BTL remortgaging.
FTB numbers returned to modest year-on-year growth, however, affordability remains a challenge, underlining the importance of clarity over the future of schemes such as Help to Buy.
|London Mortgage Lending Data for Q2 2018|
|Type of Borrower||Volume / Value||Quarterly Change||Annual Change||3 Year Change|
|First time buyers*||10,300||6.2%||-3.7%||-1.9%|
|Borrower Basics||Age||Household Income||Loan Size||Loan to Value|
|* Average first-time buyer:||32||£68,182||£274,749||74.5%|
|** Average homemover:||37||£92,200||£355,000||67.6%|
Jackie Bennett, Director of Mortgages, UK Finance:
Remortgaging in London reached its highest level in 9 years in Q2 2018 as homeowners locked into competitive deals amid anticipation of the recent rate rise.
Purchase activity slowed slightly, with affordability remaining a challenge for many would-be borrowers.
Bank of England Mortgage Statistics
Households borrowed an extra £3.2bn against homes in July. Net lending has been relatively stable over the past year, but this was the lowest since April 2017.
Annual growth for mortgage lending was unchanged at +3.2% in July (circa +3% since late 2016). Although above the rate from 2009-2013, it is modest compared to pre-crisis.
Mortgages approved for purchase fell a little in July to 65,000 (close to 6 month average).
Remortgaging approvals fell -5.5% in July to 45,000 (lowest since May 2017 but above levels in recent years). As a proportion of new lending, remortgaging declined -2.0% on Q1 2018 (now accounts for 30.8%). Total re-mortgage lending was £20.5 billion in Q2 2018.
Total outstanding residential loans rose to £1,417.2bn Q2 2018 (+3.8% on Q2 2017).
The share of BTL lending declined since Q1 2018, accounting for 13.1% of new lending.
NAEA - Housing Report
Demand & Supply
House hunters fell for the 2nd month with 303 registered per branch in July (lowest since December 2017 at 268). This is typical of July as hunters put their plans on hold while summer holiday season takes priority. For 3 years, demand has dipped June to July.
Stock per agent branch increased for the 3rd month in July to 41, rising from 33 in April to 37 in May, and 39 in June. Year-on-year this is a 17% increase from 35 in July 2017.
FTBs took advantage of July market conditions with 30% of all sales made to the group.
This is an increase of +1% from June and +7% from July 2017 when it was 23%.
Mark Hayward, Chief Executive, NAEA
July was typical of the summer. House hunters put plans on hold as the holiday season took priority, and demand dips as a result. We don’t usually see FTBs taking advantage of this environment. In September, buyers typically storm the market in a bid to complete in time for Christmas.
Savills - UK Housing Market Update - September 2018
Positive Sentiment, But Transaction Numbers Are Falling
Despite August’s rise in base rate, there was no run-up surge in remortgaging activity (as there had been with the November 2017 hike). This is because fixed rate mortgages are currently shielding 90% of new borrowers from rate rises.
The greatest price falls the year to June remain in London, with Kensington & Chelsea and Westminster showing annual drops of -8.5% and -6.8% respectively.
ONS: Annual rental growth slowed slightly the year to June to +0.9%. London rents have continued to fall, with rents -0.3% than this time last year.
|Region||House Price Changes *|
|Region||5 Year Forecasts|
*Savills using HMLR (non-adjusted)
Knight Frank - Residential & Prime London Market Update
Average House Prices: -0.5% in August, taking annual growth to +2.0%.
Average Rents: +0.9% in the year to July, down from +1.0% year to June.
Price growth continues to slow, although regional differences persist, underlining different dynamics across markets (economic growth, employment, supply and affordability).
This differentiation in markets is also evident on a more localised level within Greater London. Despite the headline decline, recent data shows prices rising in around half of boroughs (some over +5% in the past 12 months).
Prime London Sales
|PCL Prices||< £1m||> £10m||Flat||House||Overall|
The volume of sales in London’s highest-value boroughs is rising as asking prices adjust. Combined sales in Kensington & Chelsea and Westminster at £2 million+ rose +9% the year to April 2018 against the previous 12 months (equivalent at £1 million+ was +4%).
Ratio of new prospective buyers to new listings rose to 5.9 in July, the highest in over 18 months. A higher ratio can signify future upwards pressure on pricing.
|POL Prices||< £1m||> £5m||Flat||House||Overall|
Higher value markets have more quickly adjusted to higher rates of SDLT.
The ratio of new prospective buyers to new listings rose to 9.2 in July, the highest in over 2 ½ years. A higher ratio can signify future upwards pressure on pricing.
Prime London Lettings
|PCL Rents*||£250-£500||£2,000 +||Flat||House||Overall|
* Rent per Week
Average tenancy length in PCL has risen to over 16 months the past 2 years. Uncertainty in sales price growth means tenants are more prepared to commit to longer tenancies.
Annual rental value growth in Mayfair was 5% in July, the strongest performer in PCL.
|POL Rents*||£250-£500||£2,000 +||Flat||House||Overall|
* Rent per Week
Tenancies agreed per Knight Frank office in POL rose to a 3 year high in July. Strengthening demand among corporate tenants has underpinned activity.
In other news…
Carney Carnage Warning - BBC
The Bank of England's governor has warned the cabinet a chaotic no-deal Brexit could crash house prices, with a worst-case scenario for prices to fall up to -35% over 3 years.
The BoE routinely carries out "stress tests" to check the banking system can withstand extreme shocks, the latest one in November suggesting a -33% fall in prices as worst-case.
Several reports say governor also said mortgage rates could spiral, the pound could fall and inflation would rise, and countless homeowners could be left in negative equity.
Mr Carney has since said the stress test is aimed at ensuring the largest UK banks could continue to meet the needs of the country through a disorderly Brexit - not to hope for the best, but to plan for the worst.
Ongoing Tenure Trouble - BBC
Over the past decade, 94% of leasehold house buyers regretted buying a leasehold while 62% felt they were mis-sold. It follows controversy which led the government to crackdown last December, stopping the sale of new leasehold houses in England.
The report found leaseholders paid an average £277 per year in ground rent when they moved in, and are currently paying £319, having been in their properties 3 or 4 years.
It also said freeholders typically charge home owners £1,422 to install double glazing, £887 to change kitchen units, and £689 to replace flooring. Other instances saw some face bills of £527 for changing blinds and £411 for installing a new front door.
Mark Hayward, Chief Executive, NAEA: "In most instances, the freehold is sold onto a third party within a few years of the initial sale. This means the terms in the contracts homeowners have signed will change, and any negotiations are made more difficult".
Of No Benefit - BBC
Shelter and the National Housing Federation: Letting agents are discriminating against tenants on housing benefit with 1 in 10 in England refusing to let to those on the benefit.
The investigation found the policy was enforced even if tenants could afford the rent.
The investigation into 149 regional letting agent branches found 5 of England's leading letting agents were discriminating against tenants on housing benefit.
Beyond Bricks - RICS
The RICS have released a paper calling on government and the construction industry to embrace Modern Methods of Construction (MMC), examining benefits of embracing off-site modular housing and PropTech to aid housing delivery.
Current government targets are to build 300,000 new homes a year to help drive home ownership. However, there is a shortfall and other methods may help speed up delivery.
The paper also highlights the skills crisis. 1 in 8 of the construction workforce comes from the EU and more people are leaving the sector than entering, with builders and others citing skill shortages hampering housing delivery. MMC is said to offer the opportunity to use new and innovative technologies and techniques and take advantage of different skills sets, materials, and production techniques.
The paper puts forward recommendations and calls to action including specific training, upskilling the existing workforce, investment, regulation, standards and professionalism.
Taxing Times - RICS
A housing tax overhaul could rebalance the UK housing market and reignite activity, to help fix the broken housing market.
Nearly half of RICS Residential Market Survey respondents suggest tax incentives to encourage downsizing and changing SDLT and Council Tax to help people onto the ladder.
20% suggested tax incentives to encourage downsizing could see existing stock distributed more efficiently, better matching housing needs and addressing the housing shortage.
20% see removing SDLT altogether and adjusting Council Tax to account for lost revenue as a viable option. Anecdotal responses suggest scrapping SDLT would shift the burden away from the transactional phase and onto occupation, freeing up funds for buying.
Further recommendations include:
Extending the Help-to-Buy scheme past the 2021 deadline, but only for FTBs.
Government to provide more funding to extend the supply of sub-market tenures.
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
|Halifax House Price Index||Halifax||07/09/2018||Find out more|
|Nationwide House Price Index||Nationwide||September 2018||Find out more|
|Rightmove - House Price Index||Rightmove||September 2018||Find out more|
|HMLR - House Price Index (July 2018)||HMLR||19/09/2018||Find out more|
|RICS UK Residential Market Survey||RICS||09/08/2018||Find out more|
|Residential Remortgaging market sees strongest July in a decade||UK Finance||12/09/2018||Find out more|
|London remortgaging activity reaches nine-year high as house purchase activity slows||UK Finance||22/08/2018||Find out more|
|Money and Credit (Mortgage lending) - July 2018||Bank of England||30/08/2018||Find out more|
|Mortgage Lenders and Administrators Statistics - 2018 Q2||Bank of England||11/09/2018||Find out more|
|Housing Report - July 2018||NAEA||September 2018||Find out more|
|Prime Central London Sales Index - August 2018||Knight Frank||September 2018||Find out more|
|Prime Central London Rental Index - August 2018||Knight Frank||September 2018||Find out more|
|UK Residential Market Update - August 2018||Knight Frank||September 2018||Find out more|
|UK Housing Market Update - September 2018||Savills||07/09/2018||Find out more|
|Government must stamp out outdated housing taxes to help young people buy||RICS||19/09/2018||Find out more|
|Beyond bricks: RICS paper calls for industry to embrace alternatives||RICS||18/09/2018||Find out more|
|The market for additional homes: a decade of change||Savills||17/09/2018||Find out more|
|Brexit: Carney warns no-deal could see house prices plunge||BBC - Business||14/09/2018||Find out more|
|Annual house price growth at nine-month high, Halifax says||BBC - Business||07/09/2018||Find out more|
|House owners rue leasehold purchases||BBC - Business||07/09/2018||Find out more|
|House price calculator: Where can I afford to rent or buy?||BBC - Business||05/09/2018||Find out more|
|House prices see summer slowdown, says Nationwide||BBC - Business||31/08/2018||Find out more|
|Letting agents turn away tenants on housing benefits||BBC - Business||22/08/2018||Find out more|