Hello and welcome to our January Monthly Market Insight, bringing you the latest residential market data and industry news in one place.
As we work our way out of the January blues and ask ourselves whether those New Year's Resolutions are really worth it, we take a look at how the residential market performed to the end of 2018 and how it is fairing into 2019.
For a rundown of what commentators expect for the year ahead, please see our 2019 Market Forecast Review, coming soon.
A quick look at the latest UK-wide HPI releases...
|HMLR/ONS||Nov 2018||Oct 2018||Sep 2018|
The HM Land Registry UK House Price Index is a National Statistic, meeting the highest standards of trustworthiness. *Less timely data, based on completed sales.
|Nationwide||Dec 18||Nov 18||Oct 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
December marks a noticeable slowdown, however, is broadly in line with expectations as indicators suggested softening was likely as consumer confidence weakened. Looking forward, much will depend on broader economic conditions. If uncertainty lifts, there is scope for activity to pick-up through 2019.
Construction fell circa -60% following the financial crisis, however, recent pick up saw completions in England for 2017-18 just 3% below 2007-08 levels at 195,300. If conversions and ‘‘change of use’ are taken into account, net additions are just 0.6% shy of 2007 levels.
2014 introduces permitted development rights has seen circa 50% stock added via change of use.
‘Change of use’ slowed 2017-18, however, still saw circa 30,000 dwellings (+70% on 2007-08).
Total stock in England has risen 1.9 million dwellings in 10 years (+8.5% relative to 2007 stock).
A prominent 2018 trend was the narrowing north-south price divide in England. Growth in the south moderated, while northern regions stabilised at 3-4%, however, prices remain significantly higher in the south (averaging £329,240, almost double £166,642 in the north).
It is likely the recent slowdown is due to the impact of the uncertain economic outlook on buyer sentiment and near term prospects will be heavily dependent on how quickly this lifts.
If the economy continues to grow at a modest pace, we expect low single-digit pace rises in 2019.
|Halifax||Dec 2018||Nov 2018||Oct 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 November saw the lowest growth in 6 years, December picked up with overall 2018 price growth within the 0-3% forecast range. In 2019, we’re expecting stability with 2-4% inflation forecast. This is slightly stronger than 2018, but still subdued by modern comparison and will clearly be dependent on the Brexit outcome. However, as shortage of stock supports high prices, this will inhibit demand into 2019.
HMRC: 3 months to October saw sales +2.4% on the previous 3 months. November saw 100,930 (+1.8% on the previous 12 month average and +2.1% on previous 3 months). However, on a longer view less change is evident with sales just below the 5 year average of 101,587.
Bank of England: October Mortgage approvals for purchase were +2% on the month at 67,086 (3rd time in 18 months the figure exceeded 67,000 and above the 5 year average of 66,607). The year to November saw -1.7% to 63,700, however, not far below the 2018 average of 64,955.
RICS: The October UK Residential Market Survey showed a sales to stock ratio of 32.8% (lowest since September 2013). November results show a drop on nearly every measure; weaker sales activity (-15% from -10%), demand down (-21% from -15%) and supply edging more negative.
Rightmove House Price Index
Asking prices fell -1.5% (-£4,496) November to December, which is the lowest drop since 2012. Prices rose +0.4% (+£1,207) this month, the lowest January rise since 2012.
First 2019 indicators show continuing activity with Rightmove visits up +5% in first 2 weeks compared to 2018 (4.5 million per day), however, stock is broadly the same (-2.1%).
December asking prices fell -1.8% (-£11,275) on the month and stock was down -19% on the year. Inner London most hit with -24% drop in new listings, Outer London at -16%..
This month, average London asking prices drop -1.5% (-£9,024), putting the figure below £600,000 for first time since August 2015 and well below £650,000 peak of May 2016.
Slow start to 2019 for new listings with the first 2 weeks -10.0% on same in 2018.
Rightmove Price Data for London
|Category||Average Asking Price (Dec 2018 - Jan 2019)||Monthly Change||Annual Change|
|By Market Sector in London|
|Second - Steppers||£671,112||-2.4%||-1.0%|
|Top of the Ladder||£1,324,108||+1.1%||+1.6%|
|National Average for Comparison|
|Top of the Ladder||£517,921||+0.6%||-0.4%|
|By London Borough (3 month rolling average)|
|Barking & Dagenham||£305,757||-1.3%||-3.3%|
|Hammersmith & Fulham||£885,433||-2.7%||-4.7%|
|Kensington & Chelsea||£1,529,412||-2.5%||-2.2%|
|Kingston upon Thames||£576,396||-3.4%||-7.5%|
|Richmond upon Thames||£800,066||-3.0%||-1.8%|
|Average Time to Sell (Days)||Avg Stock per Agent Branch|
Miles Shipside, Director and Housing Market Analyst, Rightmove
It’s usual for sellers to price lower in the run-up to Christmas, so we should not read too much into 2 consecutive monthly falls, however, these falls were larger than usual.
Into 2019, the Christmas slowdown came early and the hangover lasted longer than usual. However, agents report activity picking up and Rightmove visits are at a record for this time of year.
Mass-market movers have a track record of ignoring politics and continuing to satisfy housing needs, indeed, 2018 sales were only -3% on 2017 and better than many forecast.
Rightmove’s subdued 2018 forecast of +1% due to low wage growth and tighter lending will feed into a similar pattern for 2019, with the north forecast to outperform the south, and a muted UK average +0%.
There is a relative scarcity of property coming to market compared to a year ago. Some would-be sellers may be waiting for a pick-up following 2 years of re-adjustment. Others may postpone until there is more certainty around Brexit. However, it must not be forgotten that the seeds of London’s slowdown, including over-stretched affordability, were sewn before the B-word became so prevalent and relevant.
The time of year and continuing price re-adjustments have lead to the largest seasonal fall for 7 years. This is good news for prospective buyers with average asking prices at their cheapest for over 3 years.
RICS - UK Residential Market Survey
Supply & Demand
December new buyer enquiries fell for a 5th month, matched by a deterioration in stock for a 6th month. Looking back, instructions fell in 19 of 24 months.
Stock remains close to record lows, while a fall in appraisals sees the pipeline worsening.
In November, time taken to complete from initial listing was approximately 19 weeks (the longest since the series was introduced in February 2017).
In December, UK sales continued to dwindle (-11% compared to -15% in November).
Near term sales expectations are now either flat or negative across the UK at -28% (-23% in November) representing the poorest reading since the series was formed in 1999.
However, the 12 month outlook turned positive for the first time since May 2018 and sales are expected to improve across much of the UK.
In November, 3 month price expectations dipped to -25% (-17% in October).
December recorded the 4th consecutive negative result and weakest since August 2012.
Prices continue to soften in London and the South East, while the South West and North East report more modest falls. By contrast, all other areas continue to see prices rise.
The 12 month outlook is broadly flat, with the exception of London and the South East.
December demand held steady for a 3rd month as stock declined for the 12th month.
Rents are expected to rise modestly, with forecasts of roughly +2% nationally for 2019.
Rents are expected to outpace prices at +3.1% pa over the next 5 years (+2.3% for sales).
Simon Rubinsohn, Chief Economist, RICS
It is hardly a surprise with ongoing Brexit uncertainty dominating the news that, even allowing for normal Christmas patterns, buyer interest in December was subdued. This is also clearly reflected in worsening near term sales expectations. Further out, there is some comfort provided by the suggestion that transactions should stabilise as the fog lifts, but that moment feels a way off for many.
UK Finance Mortgage Statistics
|UK Mortgage Lending Data for November 2018|
|Type of Borrower||Volume / Value||Monthly Change||3 Month Change||Annual Change|
|First time buyers*||36,200||8.4%||1.4%||5.8%|
|BTL house purchasers||6,100||0.0%||1.7%||-9.0%|
|Borrower Basics||Age||Household Income||Loan Size||Loan to Value|
|* Average first-time buyer:||30||£41,700||£142,500||85.0%|
|** Average homemover:||39||£55,422||£180,000||72.9%|
Jackie Bennett, Director of Mortgages, UK Finance
In October, remortgaging reached its highest level in almost a decade as homeowners took advantage of a competitive market and attractive deals, reflecting the large number of fixed rate mortgages ending. Remortgaging steadied into November, however, the trend is expected to continue into 2019.
The BTL market saw a further increase in remortgaging and softening in purchase activity.
London Quarterly Update
|London Mortgage Lending Data for Q3 2018|
|Type of Borrower||Volume / Value||Quarterly Change||Annual Change||3 Year Change|
|First time buyers*||11,700||14.7%||2.6%||-4.1%|
|Borrower Basics||Age||Household Income||Loan Size||Loan to Value|
|* Average first-time buyer:||32||£69,700||£281,500||75.1%|
|** Average homemover:||37||£95,000||£370,547||68.1%|
Jackie Bennett, Director of Mortgages, UK Finance
London’s mortgage market remained resilient in Q3 2018, despite an uncertain economic environment.
FTBs in the capital reached its highest level in 3 years, boosted by schemes such as Help to Buy. Remortgaging remains strong, as a large number of fixed rate loans end amongst new competitive rates.
Bank of England Mortgage Statistics
On a month to month basis, mortgage activity has been broadly stable since 2016.
Households borrowed an extra £3.5 bn secured against their homes in November, slightly lower than £4.1 bn in October but broadly in line with the £3.6 bn average since 2016.
The annual growth rate of mortgage lending fell to 3.2% in November (3.3% in October). It has been around 3% since late 2016 and remains modest compared to pre-crisis levels.
Mortgages approved for purchase fell slightly to 63,700 in November (67,000 in October). Approvals for remortgaging were broadly unchanged at 48,600 (49,000 in October).
NAEA - Housing Report
Demand & Supply
House hunters per agent branch fell -4% in November to 282 (294 in October). This is the lowest November since 2012 at 263 and down -15% from 333 in November 2017.
Supply of housing fell -13% for the 2nd consecutive month – from an average 46 per agent branch in September to 40 in October, and 35 in November. Lowest since April 2018 at 33.
Proportion of properties sold to FTBs remained at 23% in November (2nd month running) increasing from 22% in September. Annual sales to the group are down from 27%.
Sales agreed per branch fell for 2nd month running from 8 in October to 7 in November.
In November, 7% sold over asking price (highest since April 2017). 81% sold under asking.
Mark Hayward, Chief Executive, NAEA
Last month it was clear Brexit uncertainty was having an impact and this month is no different. We usually see a seasonal slow-down, but it’s unlikely this was the sole cause of market conditions. It’s likely we’ll see people holding off until there’s clarity around Brexit and what it will mean for the economy.
Savills - UK Housing Market Update
Transaction volumes have stabilised, but house price growth has slowed:
Nationwide reported -0.7% on house prices in December (largest monthly fall since 2011), leaving growth for 2018 at +0.5% and marginally undershooting our forecast +1.0%.
Affordability constrained London fared worst, with values down -2.2% over 2018, the largest falls in Westminster (-9.0%) and Hammersmith & Fulham (-5.2%).
Meanwhile, London rentals gained +0.1% in November, although slightly down on the year.
|December 2018||House Price Changes *|
*Savills using HMLR (non-adjusted)
Knight Frank - Prime London Market Update
Prime London Sales
Buyers registering in PCL rose +7% the year to October, against a -12% decrease in sales. The ratio of buyers per new listing was 5.4 in October (2nd highest in 3 1/2 years).
As asking prices start to reflect higher transaction costs, November 2018 offers per office exceeded the figure in the same month 4 years ago, ahead of the SDLT hike.
Despite recent downwards pricing pressure in PCL, higher-value markets have better adjusted to higher transaction costs. This has driven activity at £20 million+ over H2 2018.
A similar trend in POL saw -4% at £5 million+ on the year against -6% at £2-3 million.
|PCL Prices||< £1m||> £10m||Flat||House||Average|
|POL Prices||< £1m||> £5m||Flat||House||Average|
Prime London Lettings
Prime listing numbers in October were the highest since January 2017, as landlords return after sales price expectations were not met. Despite this, PCL listings were -12% annually.
Lettings activity has been relatively resilient against the uncertain political backdrop, with new tenancies agreed in November +12.3% on 2017 and prospective tenants +2%.
Rental growth of +1.4% the year November marks a 3 year high, as POL declines moderate.
Average gross yields in PCL rose over 2018 , with 3.35% in December (highest since April 2012). Similar trends in POL saw 3.5% in December (highest since March 2015).
* Rent per Week
In other news…
Sizing Up the Competition - RICS
RICS has launched a new Measurement Matters guide to help ensure homes are measured consistently for sales or letting and drive down inconsistent and inaccurate practices.
Phil Spencer, TV personality and property expert backs the guide: The size of a home can often make the difference in what a buyer or renter will pay. Yet many companies measure differently and can notch up square footage by 10%, resulting in hiked prices or rent.
The guide says a residential floor plan must include accurate wall-to-wall and window-to-window measurements of internal rooms. External areas such as decking, detached garages, outbuildings, or uninhabitable basements/lofts should not be included.
Alexander Aronsohn, Director Technical Standards, RICS: [The] Standard aims to ensure anyone who purchases or rents is doing so based on accurate information. This is particularly important [...] in urban areas where space is limited and at a premium.
Prison Break - BBC
The FCA is planning a change of rules for thousands of so-called "mortgage prisoners".
Some 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal.
The FCA is considering a change to its affordability checks, allowing these people to switch to preferable deals. At present, they are stuck on high default rates due to a 2014 FCA requirement of strict affordability criteria for new fixed deal applicants.
Andrew Bailey, Chief Executive, FCA: The planned changes would apply only to those in this situation who are not seeking to borrow more, but just want to get the cost down. The test would be whether the new mortgage costs are more affordable than the current.
Jackie Bennett, Director of Mortgages, UK Finance: We will continue to work constructively with our members [banks] and the FCA to help ensure those customers who want a like-for-like mortgage can switch lenders more easily.
The FCA identified about 150,000 such customers, of which about 30,000 were with authorised mortgage lenders, and 120,000 had mortgages held by non-regulated firms.
Social Solution - BBC
A report by housing charity, Shelter, claims 3 million new social homes must be built in England over 20 years to solve the "housing crisis".
The government said providing fair social housing was a priority, and plans to build 250,000 homes by 2022, including homes for social rent.
Shelter claims 1.3 million homes are needed to house those in greatest need, estimating 277,000 are homeless in England, most commonly due to loss of privately rented homes.
The report was authored by 16 independent commissioners, including former Labour leader Ed Miliband, Baroness Sayeeda Warsi, Baroness Doreen Lawrence, and others.
Ed Miliband: In the years after WWII, governments [...] built about 120,000 social homes every year. In the last 20 years or so - we've built 20,000 per year.
Capital Economics: 3.1 million new social homes would cost an average £10.7bn a year.
Shelter claims the government would save £60bn over 30 years as the housing benefit system is kept unnecessarily expensive with people renting privately at higher costs.
MHCLG: A further £2bn was committed as part of a 10-year home building programme.
New Lease of Life - BBC
The government's law reform adviser, The Law Commission, is reviewing the commonhold system of home ownership in England and Wales, as an alternative to leasehold.
4 million people in England own leasehold properties. Since the Commonhold Act came into force in 2004, only 20 developments have been created.
The Law Commission says low take-up is due to a range of reasons, including shortcomings in the law, mortgage lenders' unwillingness to lend on such properties, a lack of awareness of the system; and existing financial incentives for developers to use leasehold.
What is Commonhold?
Commonhold allows people to own homes without an expiring lease.
What is Leasehold?
Someone who owns a property outright, including the land it is built on, is a freeholder.
With a leasehold, a person owns a lease which gives them the right to use the property for a number of years, but a freeholder will own the land it sits on and sometimes parts of the property itself. Leaseholders therefore have to pay their freeholders ground rent and maybe fees such as service charges for block maintenance.
The lease expires over time and, if it runs to zero, the property returns to the freeholder. However, the leaseholder can pay a premium to extend the lease.
What are the problems with Leaseholds?
Leaseholders typically complain about being over-charged by managing agents and freeholders for repairs to common areas and about punitive ground rents.
Non-payment means a freeholder can seek to forfeit the lease and take back the property.
It can be expensive to extend a lease, and in some cases they are sold on at inflated prices.
What are the benefits of Commonhold?
The Law Commission says commonhold gives control of blocks to flat owners who are members of the management company, allowing them to vote on matters.
Properties are owned outright and forever, with no landlord and no leases to expire.
What would the reforms mean?
The reforms would make it easier to convert leasehold to commonhold and help increase lender confidence in the tenure to increase the choice of mortgage lenders available.
Bad Debt - BBC
FCA: Mortgage lenders are failing to support some vulnerable people in arrears.
Report findings show lenders are generally treating those with long-term arrears well, however, found examples when customers had been left to complete detailed forms on their own. There was also inconsistent treatment of those deemed as vulnerable.
Low interest rates mean those in mortgage arrears are not seeing their debt soar. However, there is an expectation rates will rise, which would add pressure.
Despite being heavily regulated, the FCA said it was disappointed some lenders held incomplete records on borrowers and offered inaccurate information to customers.
Anyone falling behind on mortgage repayments is urged to contact their lender as soon as possible. They can receive independent help via the Money Advice Service.
Family Fortunes - BBC
A report by think tank, the Resolution Foundation, found parental wealth is almost as crucial as earnings when it comes to buying a home, with results showing ownership rates for 30-year-olds in the mid-1990s and early 2000s with parental property wealth were 2x that of young people with non-home owning parents. That has grown to almost 3x.
The report says having a society where young people's housing aspirations are so dependent on what their parents own is undesirable. It goes on to claim while building more homes will help, policymakers will need to be more radical if they want to see real change, with high house prices also being driven by long term declines in interest rates.
Mark Harris, Chief Executive, SPF Private Clients (mortgage brokers): The majority of FTBs who come to us have significant financial assistance from the bank of mum and dad.
Helping Hands - BBC
Research suggests it can take a young person 18 years to put together a deposit. So, what help is available from the government for FTBs in the UK?
1. Help-to-Buy ISA
Since December 2015, FTBs in the UK have been able to save up to £200 a month in a Help-to-Buy ISA, receiving a 25% bonus on savings when they withdraw to buy a first home to a maximum price of £250,000 (£450,000 in London), with a maximum bonus of £3,000.
The scheme supported nearly 170,000 buyers from December 2015 - June 2018 at an average purchase price of £172,787, compared to the national FTB average of £193,006.
For some, the ISA was a groundbreaking product boosting FTBs. For others, it was a giveaway for those who could already afford deposits, pushing up demand and prices.
2. Help-to-Buy Loans
The government lends up to 20% on a new build (40% in Greater London) so buyers only need a 5% deposit and 75% mortgage. Buyers aren't charged interest for the first 5 years.
The MHCLG claim £9.9bn in equity loans has been provided since April 2013, facilitating purchases of 183,947 properties in England. FTBs accounted for 81% of this total.
In the year to 30 June 2018, FTBs using the scheme increased +16%, however, the average Help-to-Buy purchase costs £58,000 more than the average FTB in England.
Paula Higgins, Chief Executive, Homeowners' Alliance: The difficulty with the scheme is no thought was put into the next step. Buyers can't sell their homes to first-timers when they want to move because the first-timers still need the equity loan, which are only available on new-builds. We need to think about how Help-to-Buy is dampening second-hand sales.
Morgan Stanley: 2017 research suggests increased demand for new-builds due to the scheme has pushed up prices. The price of new-builds outstripped second-hand sales 15% since 2013, leading critics to say house builders benefited significantly from the scheme.
3. Shared ownership
The shared-ownership scheme allows borrowers to purchase 25%-75% of a property and pay rent on the remainder. Occupiers can "staircase" to buy a bigger share up to 100%.
The homes are usually new-builds or those being resold by housing associations in England.
In England, an eligible purchaser is a FTB, or someone who used to own but can't afford to now, with an annual household income below £80,000 (£90,000 in London).
MHCLG: Average users of the scheme are 35 years old - and the Council of Mortgage Lenders estimates 200,000 UK households live in shared-ownership properties.
In 2017, SDLT was scrapped for FTBs below a certain value. This was extended to include shared-ownership in 2018 and HMRC says over 180,500 buyers have used the relief so far.
Critics say that as you're treated as a tenant in law until you own 100% of the property, this could mean you lose the property if you don't keep up rental payments. Also, a service charge is usually payable on the whole of the property and staircasing can be expensive.
4. Starter homes
The 2014 announced starter-homes initiative plans to build and sell homes 20% discount.
Eligible FTBs must be 23-40 with a combined income below £80,000 (£90,000 in London).
The homes will generally be built on brownfield sites, although construction hasn't begun.
Old News BBC
A couple are still waiting to move in to their new home 2 years after buying it for £325,000 from developers Bovis, having discovered it was riddled with defects.
An independent firm identified nearly 150 problems initially. A later inspection by Bovis identified 156 issues - structural. Since then, more snags have taken the total to 354.
The family agreed with Bovis they needed to move out so repairs could be carried out.
The New Homes Review, an independent survey of 687 new home buyers within the past 12 months, shows 9/10 found defects when they moved in, 25% say issues weren't dealt with promptly, while 30% report delays to the house being built on time.
The government have announced plans to introduce a New Homes Ombudsman.
Bovis has apologised and say they are focussed on putting things right.
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 get in touch.
Sources & Further Reading
|Halifax House Price Index||Halifax||07/12/2018 / 08/01/2019||Find out more|
|Nationwide House Price Index||Nationwide||December / January 2018||Find out more|
|Rightmove - House Price Index Dec 2018 - Jan 2019||Rightmove||17/12/2018 / 21/01/2019||Find out more|
|HMLR - House Price Index October / November 2018||HMLR||16/01/2019 / 19/12/2018||Find out more|
|RICS UK Residential Market Survey||RICS||13/12/2018 / 17/01/2019||Find out more|
|Mortgage Trends Update||UK Finance||12/12/2018 / 17/01/2019||Find out more|
|First-time buyers in London reach highest level since 2015||UK Finance||21/11/2018||Find out more|
|Money and Credit (Mortgage lending)||Bank of England||29/11/2018 / 04/01/2019||Find out more|
|Housing Report November 2018||NAEA||December 2018||Find out more|
|Prime Central London Sales Index December 2018||Knight Frank||January 2019||Find out more|
|Prime Central London Rental Index December 2018||Knight Frank||January 2019||Find out more|
|UK Residential Investment – Yield Guide January 2019||Knight Frank||January 2019||Find out more|
|UK Res Dev Land Index Q4 2018||Knight Frank||January 2019||Find out more|
|UK Housing Market Update||Savills||06/12/2018 / 08/01/2019||Find out more|
|London Supply Update Q3 2018||Savills||07/12/2018||Find out more|
|Shelter Report: RICS backs findings as starting point||RICS||08/01/2019||Find out more|
|Negative trends in UK housing market hinge on Brexit||RICS||13/12/2018||Find out more|
|RICS expands approval of The Property Ombudsman service||RICS||13/12/2018||Find out more|
|Measurement matters||RICS||16/11/2018||Find out more|
|Housing market outlook worst 'for 20 years'||BBC - Business||17/01/2019||Find out more|
|Plan to free 'mortgage prisoners' revealed by FCA||BBC - Business||10/01/2019||Find out more|
|England 'needs millions of homes to solve housing crisis'||BBC - Business||08/01/2019||Find out more|
|Deposit demands 'tough for young buyers'||BBC - Business||08/01/2019||Find out more|
|House price growth slowest for almost six years, says Nationwide||BBC - Business||04/01/2019||Find out more|
|Reality Check: How does the government help first-time buyers?||BBC - Business||30/12/2018||Find out more|
|Brexit gloom to hit housing market into 2019, says RICS||BBC - Business||13/12/2018||Find out more|
|Push for alternative to leasehold system||BBC - UK||10/12/2018||Find out more|
|UK house price rise 'slowest for six years'||BBC - Business||07/12/2018||Find out more|
|Mortgage arrears: Flaws found in support for the vulnerable||BBC - Business||06/12/2018||Find out more|
|How I bought a house without mum and dad||BBC - Business||04/12/2018||Find out more|
|Want your own home? Have wealthy parent||BBC - Business||04/12/2018||Find out more|
|'Subdued' demand from house buyers||BBC - Business||30/10/2018||Find out more|
|'Our new-build home has 354 defects'||BBC - Business||23/11/2018||Find out more|