The housing market remains subdued with little change in monthly house prices between January and February 2018, ranging from -0.3 per cent from Nationwide to +0.4 per cent from the Halifax.
Enquiries from new buyers are down as are the number of new properties coming on to the market and newly agreed sales, according to RICS UK Residential Market Survey for February 2018.
Over the next five years, RICS predicts growth of around 15 per cent in both sales and rents.
When it comes to completed transactions, the latest UK House Price Index (UK HPI) for January reports that these fell by 0.3 per cent between December 2017 and January 2018.
In contrast, Rightmove – which looks at asking prices of properties coming on to the market rather than mortgage lending or completed transactions – reveals that properties are coming on to the market at an average of £4,503 more than in February 2018 – though it has seen a drop in the number of newly marketed properties.
Key stats at a glance
- UK House Price Index for January 2018: House prices up by 4.9 per cent annually. Average price of a UK property: £225,621. Monthly change: -0.3 per cent.
- Halifax House Price Index, February 2018: House prices up by 1,8 per cent annually. Average price of a UK property: £224,353. Monthly change: +0.4 per cent.
- Nationwide House Price Index, February 2018: House prices up by 2.2 per cent annually. Average price of a UK property: £210,402. Monthly change: -0.3 per cent.
- Rightmove House Price Index, March 2018: Asking prices up by 2.1 per cent annually. Average asking price of a UK property: £304,504. Monthly change: 1.5 per cent.
‘Substantial jump’ in asking prices
Rightmove’s House Price Index for March reports that average monthly asking prices were up by 1.5 per cent, or by £4,503, between February and March 2018. Over the year, asking prices rose by 2.1 per cent. The 1.5 per cent monthly increase is the largest seen in March since 2007.
Asking prices for homes (two bedrooms or fewer) for first-time buyers hit an all-time high of £189,840, as did properties of second-steppers (three or four bedrooms excluding four-bedroom detached), which were being marketed, on average, at £272,031.
Rightmove reports that average prices hit record highs in four out of 11 regions – in the East and West Midlands, Wales and the North West.
It puts these price hikes down to a dip in supply, with 5 per cent fewer properties coming to market compared to March 2017.
Miles Shipside, Rightmove director and housing market analyst, says: ‘The first two months of 2018 saw Rightmove traffic at its highest ever levels, and this demand appears to be now feeding through to fuel the substantial £4,503 jump in average new seller asking prices this month.
‘It remains to be seen if this month’s 11-year price rise high for March is a catch-up anomaly after two more subdued price rise months, or an early sign of price pressure building up a real head of steam as we enter the spring market.
‘Either way, sellers need to be mindful of increasingly stretched buyer affordability, and the more they increase prices the more buyers will hit their ceiling on the amount they are able to save for a deposit and borrow for a mortgage.’
Rightmove found that there were 112,693 properties coming to market in the past four weeks – down by 5.2 per cent on the same period in 2017. It suggests this drop was partly due to the heavy snow delaying some agents and sellers from putting properties on the market.
Mr Shipside suggests that the stamp duty tax break for first-time buyers is starting to take effect.
‘Upwards price pressure is being driven by savings in stamp duty for the vast majority of first-time buyers, keen to purchase before those savings are swallowed up by price rises,’ he says.
‘Ironically, a sense of urgency to buy is also present from the speculation that another interest rate rise from the Bank of England is on the cards soon. Buyers who apply for a mortgage before interest rates rise should be able to borrow more cheaply.’
House prices plummet in the North East
The latest figures from the UK House Price Index for January reveal that property prices went up by 4.9 per cent over the year. It puts the average property in the UK at £225,621.
Property prices fell between December 2017 and January 2018 in every region except for London, where prices went up by 1 per cent, the South West (1.4 per cent) and the South East (0.2 per cent).
The biggest drop was in the North East, where prices fell by -5.5 per cent, followed by the West Midlands (-2 per cent) and the East of England (-0.7 per cent).
Prices have risen annually by 4.6 per cent in England, with an average property price of £242,286. Wales witnessed a similar annual price rise of 4.5 per cent, but the average property price is much lower at £153,034.
London had an annual price rise of 2.1 per cent, putting the average property value at £485,830.
Commenting on the UK HPI, Jonathan Hopper, managing director of Garrington Property Finders, says: ‘Prices in the North East are stagnating as the region faces up to falling levels of buyer confidence and demand.
‘The picture in London is similar, even if years of softening prices at the top end of the market have encouraged more strategic buyers to return to the fold. Despite the shortage of stock, sellers are trimming prices in an effort to woo back domestic buyers, many of whom have been searching for better value beyond the M25.’
Lee James Pendleton, founder director at independent London estate agent James Pendleton, puts falling transaction levels down to sellers being unrealistic about asking prices.
‘The property market, particularly in London, is being hobbled by time wasters who refuse to accept good advice.
‘These sellers have no realistic prospect of finding a buyer because their expectations are so out of this world. They have done very well out of the housing market, but they haven’t earned that money – they’ve just lived in those homes and watched the magic money tree grow. Now they think prices can only go up.
‘The result is that transactions levels drop, the speed of chains slows down and life is made more difficult for everyone involved. No one wins.’
Market will remain ‘broadly flat’
Halifax reports annual house growth to February of 1.8 per cent, a monthly rise of 0.4 per cent between January 2018 and February 2018, with the average price now £224,353.
Russell Galley, managing director of Halifax Community Bank, says: ‘House prices continue to remain broadly flat, as they have since the end of last year. The annual rate of growth has slowed from 2.2 per cent in January to 1.8 per cent in February - the lowest rate of growth since March 2013.’
He adds that low mortgage rates and a shortage of housing should continue to prop up the housing market.
Sam Mitchell, chief executive of online estate agent House Simple, says: ‘Although house price growth is flat, there is nothing to suggest there is a major price correction on the horizon.
‘On the ground, buyers know they're in a strong position and are making lower offers and negotiating harder with sellers. And there are plenty of sellers who are recognising that prices have cooled a little and are willing to negotiate with buyers.
‘That's a much healthier position than having a stand off between buyers and sellers because no one wants to budge on price.’
Nationwide reports that the annual rate of house price growth went up by 2.2 per cent in February 2018, while prices were down by 0.3 per cent between January and February 2018. It puts the average house price at £210,402.
Commenting on the figures, Robert Gardner, Nationwide's chief economist, says: ‘Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months.
‘How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rates. Brexit developments will remain a key factor, though these remain hard to foresee. We continue to expect the UK economy to grow at modest pace, with annual growth of 1 per cent to 1.5 per cent in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.
‘Nevertheless, housing market activity is anticipated to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the lack of properties on the market is likely to provide ongoing support for house prices. Overall, we expect house prices to be broadly flat, with a marginal gain of around 1 per cent over the course of 2018.’
Richard Sexton, director, at chartered surveyor e.surv, comments: ‘While it’s good news to see house price inflation rising at a more sustainable level, limited supply continues to act as a bottleneck, squeezing many potential buyers out of the market.
‘Saving for a deposit is one of the biggest challenges would-be homeowners face, particularly for those in the capital. Our most recent mortgage monitor showed that only 17 per cent of loan approvals went to borrowers with small deposits in London.
‘Although we have seen a commitment from the government to address our housing crisis with an exemption of stamp duty for first-time buyers, only time will tell if this has been enough to fully support them.’
Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.
Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.
Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90 per cent of the market.
UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.
This article was orignally written by our sister publication Moneywise.
Keep up to date with all the latest financial news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.