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Average house prices still growing but at the lowest annual rate for six years

Annual house price inflation has fallen to its lowest rate for six years, Halifax has revealed.

The November Halifax House Price Index revealed that house prices grew just 0.3% annually, the slowest rate since December 2012 and down from 1.5% in October.

Prices also declined on a monthly basis by 1.4%, leaving the average at £224,578.

Russell Galley, managing director at Halifax, said: “While this is the lowest rate of growth in six years, it remains within our forecast range of 0% to 3% for 2018.

“High employment, wage growth and historically low mortgage rates continue to make home ownership more affordable for many, though the need to raise a significant deposit still acts as something of a restraint on the market.

“This is largely offset by relatively limited supply of new and existing properties for sale, which continues to sustain house prices nationally.”

Commenting on the figures, Sam Mitchell, chief executive of online agent Housesimple, said: “On first glance, these figures might set alarm bells ringing, but we need to put them into context before manning the panic stations.

“There’s an unprecedented level of political turbulence battering the country at the moment and that is inevitably feeding through to house prices.

“We didn’t see the traditional autumn bounce in transaction levels this year, but after a subdued summer and three months of Brexit wranglings, it was probably more hope than expectation that the housing market would just power through.

“All things considered, the property market is actually holding up incredibly well in extremely testing times. And there are areas of the country, such as the north-west and Yorkshire, which seemed to have brushed off Brexit fears.

“Transaction levels have been surprisingly strong and some impressive prices are being achieved, many close to asking price.

“While the affordability problem has caught up with the housing market in the south, the north is enjoying a mini boom thanks to cheaper property stock and a strong jobs market.

“Looking forward, a lot of buyers have probably decided early to wait until the New Year before making any decisions about purchasing so December is likely to be quiet. But that could all change depending on Brexit this week.”

Source: Property Industry Eye

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House prices fall across half of London

House price inflation in UK cities hit 3.2 per cent in September, down from 3.8 per cent a year ago. Latest figures from Hometrack showed that 54 per cent of London City postcodes are registering annual price falls.

This is more than the 45 per cent reported six months ago but less than in June as more areas start to register monthly price increases.

However it wasn’t all bad news across the country with house prices in five UK cities increasing by more than 6 per cent a year.

Liverpool recorded annual inflation at 6.9 per cent, followed by Birmingham (6.5 per cent) and Leicester (6.4 per cent).

Danny Belton, head of lender relationships at Legal & General Mortgage Club, said: “The North/South divide has truly been turned on its head, as more and more first-time buyers and homemovers turn towards regional cities for better value for money.

‘Strong economic hubs in the Northern powerhouses are making bricks and mortar in these locations particularly attractive to younger generations here and buy-to-let landlords.

“However, with rising living costs, saving for a deposit remains one of the biggest challenges for potential buyers. Affordability challenges remain, which means that speaking to a mortgage adviser is still a sensible first step.”

City Average price Trough-current Peak-current Last 12 months Last 3 months Last month
Aberdeen £163,200 6.50% -5.50% -4.40% 0.50% 0.30%
Belfast £129,700 28.40% -41.90% 3.80% 0.50% -0.90%
Birmingham £163,500 41.30% 19.40% 6.50% 2.60% 0.50%
Bournemouth £290,400 52.00% 25.00% 3.20% 0.00% -0.20%
Bristol £277,600 71.60% 39.20% 1.20% -0.50% -0.50%
Cambridge £435,500 88.30% 56.60% 0.40% 1.30% -0.30%
Cardiff £206,200 39.90% 16.80% 4.50% 1.00% 0.20%
Edinburgh £231,700 29.80% 9.10% 4.70% 1.60% -0.20%
Glasgow £122,800 22.60% -0.40% 6.20% 1.40% 0.20%
Leeds £164,900 31.40% 8.60% 4.30% 1.00% 0.10%
Leicester £174,800 46.60% 23.40% 6.40% 1.90% 0.50%
Liverpool £120,500 22.70% -3.80% 6.90% 2.80% 0.70%
London £484,400 84.80% 56.10% -0.40% 0.40% 0.10%
Manchester £167,800 39.60% 17.10% 6.20% 1.90% 0.40%
Newcastle £129,300 17.10% -2.20% 2.80% 1.30% 0.40%
Nottingham £152,300 41.50% 19.00% 5.40% 1.30% 0.00%
Oxford £423,300 75.70% 49.80% 5.50% 2.30% 0.60%
Portsmouth £240,600 53.20% 30.30% 2.90% 0.60% 0.30%
Sheffield £139,500 28.50% 10.10% 5.80% 3.30% 1.10%
Southampton £228,200 48.60% 24.50% 1.90% 0.40% 0.00%
UK £217,400 41.40% 20.20% 3.40% 1.40% 0.30%

In chancellor Philip Hammond’s Budget on Monday (October 29) there was good news for first-time buyers.

The Help to Buy equity loan scheme was extended by two years, now running until 2023 rather than 2021.

Additionally, the new scheme will be for first-time buyers only and a new regional property price cap will be applied to the scheme from April 2021 onwards.

The chancellor also announced that stamp duty relief will be extended to those who purchase properties up to a value of £500,000 through the shared ownership scheme.

This policy will be backdated to the last budget so that anyone who has purchased a property through the scheme since 22 November 2017 will be entitled a refund.

Source: FT Adviser

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Insolvencies among millenials soar as housing costs shred ‘cash cushions’

The number of insolvencies among millenials has climbed rapidly in the past three years, as rising housing prices leave younger people without a “cash cushion” to fall back on.

House price inflation is partially driving the trend, which has seen the number of insolvencies among under 35s rise by nearly a fifth during the past year, according to professional services firm Moore Stephens.

Meanwhile, the number of insolvencies – which can often lead to bankruptcy – among over 55s has dropped, falling by 9 per cent among the baby-boomer category of over 65s.

“The rates that millennials are going insolvent is very worrying, and the problem is worsening,” said Jeremy Willmont, head of restructuring and insolvency at Moore Stephens. “Millennials have more than twice as much of a chance of insolvency than baby boomers; this is a major cause for concern.”

Last year, 4.3 in 10,000 over 65s and 9.6 in 10,000 under 25s went insolvent, the firm found, adding that millennials often have “little left to act as a cash cushion” if they suddenly lose an income stream.

Moore Stephens pointed to older people spending proportionately less on housing, and said many can rely on a partner for emergency money in the event of a job loss of illness. Recent figures from the Office for National statistics showed that 4 per cent of the UK’s net property wealth was held by under 25s, with over 65s holding 41 per cent.

“In addition to high rents and mortgage repayment costs, millennials can often find it difficult to save significant amounts,” said Willmont. “Millennials are at risk of falling into debt through using credit cards and loans to cover living costs such as buying and maintaining a car, which can easily be set up without taking financial advice.”

Source: City A.M.

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House prices fall again in September to four-month low

Halifax reported a steadying of house price inflation as last month’s prices dropped to their lowest since May. The latest Halifax house price index found annual growth slowed to 2.5 per cent in September from 3.7 per cent in August, as quarterly change – July to September – remained at 1.8 per cent for the second month.

On a monthly basis, house prices fell by 1.4 per cent in September to sit at an average of £225,995 – the second consecutive monthly fall and down from July’s year high of £229,776.

Russell Galley, managing director at Halifax, said the measures suggested house price inflation was steadying.

He said: “This is set amongst mortgage approvals and completed house sales remaining broadly unchanged, although a gradual pickup in wage growth has helped to support household finances.

“The annual rate of growth is near the top of our forecast range of 0-3 per cent for 2018, as a low supply of new homes and existing properties for sale, combined with historically low mortgage rates and a high employment rate, continue to support house prices.”

Kevin Roberts, director at Legal & General Mortgage Club, said limited housing supply was still hindering the ambitions of borrowers in the UK.

He said: “Whether it is first-time buyers, second steppers or people looking to downsize, a lack of suitable housing is still preventing many from making their first or next purchase.

“There is good news – steadier house price growth, schemes like Help to Buy and a wider choice of mortgages are making it easier for some first-time buyers to take a step onto the ladder. However, more support from the government is needed.”

Steve Seal, director of sales and marketing at Bluestone Mortgages, said despite the steadying in price growth there were still “significant” barriers when it comes to securing funding.

He said: “Whilst the average growth of house prices remains steady, this does not necessarily mean all doors are open for aspiring homeowners.

“Lifestyle and financial habits are changing – and it is unfair that some potential buyers are turned away for not fitting an outdated computer scoring system.

“A missed phone or credit bill, or unforeseen costs for an accident shouldn’t mean you are barred from home ownership.”

Mr Seal said these customers instead need a personalised underwriting experience that ensures the nature of their situation is fully understood.

He said: “It is vital that specialist lenders continue to find the best solutions for all of their clients, based on a rounded and fair view of their individual financial situation.”

Source: FT Adviser

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Liverpool sees highest city property price inflation at 7.5% growth

The home of the Beatles, Liverpool, is outstripping any other city with property price inflation of 7.5% while cities including Aberdeen, Cambridge and London have seen no growth at all this year.
The fastest growing UK cities are the most affordable, with four cities including Liverpool, Newcastle, Aberdeen and Belfast, yet to recover to 2007 levels, data from Hometrack revealed.

Hometrack said: “Despite uncertainty around Brexit compounding the market slowdown in London, our analysis of income to buy indicates there is further scope for price growth in the most affordable cities, where prices are currently rising fastest.”

Overall, UK city house price inflation is running at 3.9%, up from 3.6% a year ago, largely driven by accelerating price growth in those affordable cities.

Struggling cities

The cities still in negative growth this year – Aberdeen at -3.8%, London at -0.3% and Cambridge at -0.1% – are suffering from both affordability and economic pressures.

Aberdeen has suffered as the oil industry has struggled, with house prices continuing to decline for the last three years. From a recent high of £198,000 in December 2014, average house prices have fallen back to £164,000, a decline of 17%, wiping out similar sized gains made between 2012-2014.

Two weeks ago, governor of the Bank of England Mark Carney said in the worst case scenario a chaotic no-deal Brexit could crash house prices by as much as 35% over three years and send another financial shock through the economy.

National data for housing sales and mortgage approvals for home purchase have remained broadly flat since 2015 and this slowdown has been focused on south eastern England, and primarily London.

Hometrack said: “In our view, the referendum result was a compounding factor for the slowdown in London house price growth since 2015. The primary drivers were stretched affordability, the impact of lending regulations and housing related tax changes, like stamp duty.”

Source: Your Money

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UK House Prices Creep Upwards

After turning negative in April, house price inflation reached a positive but subdued 1.5% in the month to May according to Halifax.

Thanks in part to the fall in prices in April, house price inflation in the three months to May remains low, at 0.2%. April’s monthly fall of -3.1% was the largest since 2010, but it came after a strong January.

Overall, house prices in May were 1.9% higher than they were a year ago, with various minor ups and downs in the market balancing out and amounting to overall sluggishness.

EY Item Club chief economist Howard Archer explained: “The Halifax house price index has been all over the place in recent months but the underlying performance has clearly been soft. The housing market is struggling to gain traction amid challenging conditions and we suspect that any meaningful upturn will remain elusive over the coming months.”

Prices continue to be propped up by persistent short supply of housing. The average stock of homes for sale per surveyor in the UK has been falling steadily since 2008, Halifax reports. 10 years ago, there more than 90 home for sale per surveyor, now there are just over 40.

Upwards pressure on prices is also coming from a continually strong labour market, with Halifax reporting that the number of people in full time employment went up by over 200,000 in the three months to May – “the biggest rise in three years”. Wages continue to rise, albeit slowly, but are beginning to overtake inflation for the first time in a while, reducing the overall squeeze on earnings.

Mortgages are being kept affordable by low interest rates, which also help to stoke the coals of demand. Despite this, however, the Bank of England reported a 0.6% month-on-month decrease in the number of mortgages approved for house purchase in April.

The average price for a property in the UK is currently £224,439 by Halifax’ estimate. The average price of a flat is currently £232,135, having increased by around 50% in the last five years.

Source: Money Expert

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UK House Price Inflation Eases For Second Month

Inflation in Britain unexpectedly fell in March, official figures showed Wednesday, suggesting that the Brexit vote’s boost to prices is running its course and raising questions in financial markets as to whether the Bank of England will raise interest rates again this month.

The consumer price index in March was up 2.5% compared to the same month a year ago, the Office for National Statistics revealed on Wednesday, down from 2.7% the month before, where it was expected to stay, and the third fall since hitting a peak of 3.1% last November.

Philip Smeaton, chief investment officer at Sanlam UK, adds: “With inflation falling back towards the 2% target and wage growth overtaking inflation for the first time in more than a year, it finally looks like the squeeze on living is easing”. “This rate hike does not signal the onset of a conventional tightening cycle”.

On a monthly basis, house prices edged down 0.1 percent in February. Alcohol and tobacco taxes also didn’t increase as usual after the government changed the timing of its annual budget announcement to the autumn.

At the pumps, motorists also faced lower costs, with petrol down by 1.6p per litre on the month to 119.2p per litre and diesel falling by 1.5p to 122.9p.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, says YES. Inflation looks to be falling back as predicted, but with wages picking up and unemployment still falling, it’s possible this tightness in the labour market could eventually push inflation back up.

Given yesterday’s wage growth data, coupled with today’s inflation rate figures, it means the Bank of England is less likely to raise interest rates next month.

Both sterling and United Kingdom gilt yields have initially moved down sharply in response to the data, which are seen as weakening the case for further interest rate rises from the Bank of England (BoE).

The pound tumbled after the data, sliding 0.5% to $1.4217.

Core CPI, which excludes more volatile prices such as for fuel and food, eased down to 2.3% from 2.4%, with the market having expected a slight pick-up to 2.5%. Services inflation was just 2.5 per cent in March, and on its current trend it won’t reach its 3.5 per cent pre-recession norm, required for at-target headline inflation, for another three years.

Source: Click Lancashire

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House Price Inflation – Government assessment of pressures

The Ministry of Housing, Communities and Local Government has released a short analysis illustrating the individual relationships between some important housing market pressures and house prices.

The report is not intended to be exhaustive and has limitations, but uses relationships estimated from the affordability model in the 2007 and 2008 reports by the National Housing and Planning Advice Unit (NHPAU). Click here to see the full report.

The analysis starts with the assumption that housing is a mature market and that Price is determined by the forces of Supply and Demand.

The 2008 NHPAU, ‘Affordability still matters’ report estimates the key drivers of house prices and their relationship with affordability sets out that holding all else equal:

  • If the number of households increases by 1% (Demand), house prices would increase by about 2%
  • A 1% rise in real incomes (Demand) would increase house prices by 2%
  • If interest rates increase by one percentage point (Demand) then house prices would fall by around 3%
  • If housing stock increases by 1% (Supply), house prices would fall by around 2%

House prices

From 1991 to 2016 the mix adjusted average house price in the UK increased from £54,000 to £206,000 (a 284 per cent increase). Deflating to 1991 prices using the Consumer Price Index, this is equivalent to a £70,000 increase over the same period in real terms.

Population Growth

In 1991, the population of England was 47.1 million. In 2016, the population of England was 54.5 million. This is equivalent to an increase of 16per cent over this period (1991 to 2016). As above a 1% increase in households should lead to a 2% increase in house prices meaning this population change should have led to a 32% price rise all else being equal.

The Immigration affect

Over the same period the non-UK born population of England increased from 3.5 million to 8.4 million. Therefore, the increase in the non-UK born population in England is expected to have led to a 21% of the overall 32% increase in house prices due to the Demands of an increasing population.

Real Income Growth

Over the 1991 to 2016 period there was a real term income growth of 75%. Applying the above ratios this demand led pressure should have raised house prices by 150%.

Interest Rate changes

Due to the wide range of interest rates pre-credit crisis from the period, 5-15%, and the subsequent levels below 0.5% there has been no estimated modelling of the effects interest rates have had on house prices whether inflationary or deflationary.

Housing Supply

From 1991 to 2016 housing stock in England has estimated to have risen approximately 20% from 19.7 to 23.7 million. Using the 2 to 1 ratio this Supply increase is thought to have had only a 40% deflationary pressure on house prices.

Therefore, from the government estimates and assumptions, it is real terms income growth that is showing as the highest inflationary pressure on house prices from 1991-2016 with this only being marginally dampened by deflationary supply pressures.

Interestingly the estimates are saying that Population and Immigration growth have proportionately had less of an inflationary affect than you would at first think. However, this is a very simplistic and crude modelling of the Housing Market with many other factors also in play. It also assumes that the Housing Market is still very ‘mature’ with little influences other than pure supply and demand on price.

Source: Property 118

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Connells predicts further house price growth in 2018

Connells ended 2017 with slowing sales but higher house prices, the agent has revealed.

The group – which spent much of last year battling Agents Mutual at the Competition Appeal Tribunal on behalf of Gascoigne Halman – hasn’t provided any hard figures but said sales activity dropped at the end of the fourth quarter of 2017 but overall house prices at completion were up by 4% across its 600 UK estate agency branches.

The agent is now predicting house price growth this year of up to 3%, which goes again the grain of other analysts such as Nationwide, which has forecast a flat market with growth at around 1% at best.

David Livesey, group chief executive of Connells Group, said: “At the start of 2017 we predicted that house prices would rise by 3.5% when most were predicting a year of lower increases, and some predicting that prices would fall.

“Despite a more challenging market, particularly during Q4 2017 where sales activity faltered, we ended the year with overall house prices at completion up by 4%.

“There is still a shortage of property for sale, low interest rates, lenders with appetite to lend, Stamp Duty that supports first-time buyers and a continued demand for homes.

“We therefore see a similar outlook for the market in 2018 and, with positive signs in the first three weeks of business, we predict that house price inflation will continue to increase and potentially up to 3%.”

Source: Property Industry Eye

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2018 for consumers: price rises, volatile pound and interest rate hikes

Looking back over the year that is gone, there were few signs of relief for the average household. The knock-on effects of the Brexit referendum resulted in price rises on everyday items from butter to electronics while the Bank of England increased interest rates for the first time in a decade, leaving the banks open to increase the mortgage repayments of homeowners.

While inflation is creeping up – it was 3.1% in November – wage growth has not matched the rise, resulting in a squeeze on the average household budget.

Even the family’s annual holiday in the sun is now more expensive as the weaker pound affects the price of travelling abroad.

With those grim developments behind us, what does 2018 hold for the average household, and are there any signs of relief?

More price rises

Weaker sterling meant that even everyday products such as butter and tea cost more this year. Apple, Sonos and Microsoft have also hiked their prices.

Unfortunately, it is expected that the hikes will continue in 2018, according to retail analyst Jonathan De Mello at Harper Dennis Hobbs. “Unless a ‘hard’ Brexit can be avoided, it is inevitable that UK consumers will face price rises for everyday goods in 2018 and beyond,” he said.

“ Inflation is high currently and the government is finding it difficult to keep it under control. The recent interest rate rise was an attempt to do so, but sterling is still very weak – meaning retailers that import their products (ie most of them) will face increased costs, which given tight margins will have to be passed on to the consumer.”

“The major additional downside risk to this is a hard Brexit – this would lead to tariffs on trade to and from the EU – increasing costs, inflation and therefore prices on the high street further.”

Sterling trouble

Families heading to the sun have been depressed when looking at the exchange rates for their two weeks on the continent. At its lowest point this year, £1 got just €1.08 – down from €1.31 in the month before the Brexit referendum in 2016.

What happens to the pound over the next year – and the subsequent knock-on costs for holidays – will again be largely dependent on how the Brexit talks progress, said David Lamb of Fexco, an Ireland-based financial services company.

“The ongoing uncertainty over how Britain will extricate itself from the EU will continue to drive both the news agenda, and by extension, sterling sentiment,” he said. “We should expect a volatile ride for the pound throughout the next stages of Britain’s negotiations with the EU. Any signs of significant progress will see the value … soar, while hints that talks are running into trouble will cause it to fall.

“In that respect 2018 won’t differ that greatly from this year. During 2017, sterling has traded in a range that has taken it both 5% higher and 5% lower, pivoting around a midpoint of €1.14. Nevertheless, year-on-year sterling is only down by about 3% versus the euro, which given how far it fell in the immediate aftermath of the EU referendum, is pretty stable.

“If we do see some movement in trade talks next year there is no reason sterling couldn’t test this year’s April high of €1.20 – but for that to happen, investors will want to see evidence of real, substantive progress.”

Another rate rise?

November saw the first interest rate rise in 10 years, resulting in millions of homeowners facing higher mortgage payments. Bank of England governor Mark Carney said the move was not part of a sustained trend but it is anticipated that there will be two further quarter-point rises by the turn of the decade. The move last month brought the interest rate from 0.25% to 0.5%, adding £22 to the cost of the average variable rate mortgage.

Ray Boulger of mortgage broker John Charcol has predicted that the interest rate will go up by one quarter by the end of 2018, bringing it to 0.75%.

“There is likely to be one 0.25% bank rate increase in 2018, or possibly two, but as for several years much larger increases have been factored in to the mortgage affordability assessment, this should not put those who have obtained a mortgage recently under financial pressure,” he said.

“However, an immediate impact of any bank rate increase is likely to be the maximum amount available to new borrowers. The financial policy committee mandates that lenders assess affordability in most cases on the basis of a 3% increase in the revert-to rate, normally a lender’s standard variable rate (SVR), and so any increase in the bank rate automatically reduces the maximum mortgage available unless lenders don’t pass on the increase in their SVR even if, as with November’s increase, the cost of fixed rate mortgages doesn’t increase.”

Energy prices

Government plans for a cap on electricity bills and gas prices would affect some 11 million households from 2019 at the earliest and apply to those on a standard variable tariff, the expensive plans that customers are moved to when cheaper, fixed deals end.

This planned legislation could result in energy suppliers putting up prices in advance of it being introduced, according to Emma Bush from comparison website

“The threat of a widespread price cap could see some suppliers removing their cheaper deals and pricing up towards the level of an anticipated cap, although if it is introduced it’s not expected to happen before 2019,” she said. “A cap could lull consumers into a false sense of security whereby they think they are on a competitive tariff. If energy companies don’t fear losing their customers they won’t feel the pressure of competition to keep their prices and their costs low, resulting in a lose-lose situation for consumers.”

“With savings of up to £491 available for households switching away from expensive standard variable tariffs, our advice is always to run a comparison and protect yourself against potential price rises by switching to a cheaper fixed-term deal.”

House prices

Recent reports have speculated that while the price of houses nationwide will probably increase marginally over the coming year, there will be drops in London, continuing a trend seen in the last few months.

Rightmove has predicted that prices will rise across England and Wales by 1% in 2018 but that there will be a 2% drop in the capital. Such a rise in overall prices would be the lowest annual increase since 2011. A report from Savills predicts that house price growth in London will lag behind other regions for the next five years.

A separate report last week, this time from the Royal Institution of Chartered Surveyors, predicted that house prices across the south-east will drop as well as those in the capital. Again, the Rics said that higher prices in areas such as Scotland, Wales, Northern Ireland and north-west England would stop an overall nationwide drop.

And finally … pricier pop

The sugar tax is expected to come into force in April. Under the new rules, producers or importers of soft drinks will have to pay a sugar tax of 18p per litre on drinks containing 5g or more of sugar per 100ml and 24p per litre more if their products contain 8g or more per 100ml. The Treasury expects the levy to raise £385m a year. The move has been opposed by the industry, which says it will disproportionately affect poor people.

The money gathered from the new tax is earmarked to be used on increasing the funding for sports in schools.

Source: The Guardian