Past Market Performance: Volumes down, Prices varying as much as the weather across the UK!

publication date: Oct 19, 2011
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

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Past Market Performance:  Volumes down, Prices varying as much as the weather across the UK

Latest price reports for June and July show the number of people buying and selling is falling this year, while prices this summer compared with the start of this year and last is pretty static. 

Key ‘past market performance' indicators show the Land Registry as the most accurate but also the most out of date, with their survey suggesting prices have hardly changed now versus January 2011. Up until August, this survey suggested the gap between property prices this year versus last was widening, but latest figures suggest prices are hardly any different now. This is partly because prices in 2010 rose for the first six months then started to slide back to December. According to the survey, prices are pretty much static now over the last six months.

Volume wise, a lead indicator of what happens to property prices show the number of properties being sold is less than 2010, suggesting a weaker market. Volumes are down by 8%, although they have been down as low as 13% year on year, suggesting prices will stay vulnerable for at least the rest of the year.

Average House Price

The Nationwide survey is more up to date than Land Registry (July data) and includes data to August. It is restricted to measuring property prices which require a mortgage. The index shows a similar, but slightly better property price performance than the Land Registry so far this year, with prices up 2.5% in August versus January 2011. Although, as with 2010, it shows August 2011 figures are slightly down versus August 2010, suggesting a similar slide in property prices to last year. 

The Nationwide survey suggests "the major risk for the housing market is weak economic growth could lead to a further deterioration in the labour market". They suggest this is a key measure to watch as increased unemployment could cause more forced sales and this could drive property prices down further.

Acadametrics data is different to Land Registry and Nationwide in that it measures cash sales as well as mortgaged property prices. Cash sales are made when someone buys a property without any funding and can be made at the top end of the market (for example multi million pound property sales in Central London or retirees trading down). It is estimated approximately one third of sales in the market at the moment are cash sales. 

Their index suggests a similar picture to the Land Registry with transactions falling, leading to a weakening in property prices. Prices are down just over 1% in August versus January 2011 and 2% down versus August 2010.  The only exception to this trend is London which has shown a consistent trend upwards over the last four years, thanks mainly to cash sales to international buyers in and around Central London. 

Acadametrics states their research "indicates the market is not falling off a cliff in the short-term, but it remains weak in the longer term." And "of all types of property, flats have shown the weakest growth in transactions." 

New Homes Market
Brand new homes have consistently performed slightly better price wise than the ‘second hand' market (ie properties previously lived in).  Measured on a quarterly basis by Nationwide, the average price of a new home has increased so far this year from £167,800 to £171,500, an increase of just less than 1.5%. This increase though is slightly false as these price levels were achieved in Q3 2010 and so far this year, prices are slightly weaker than last.

Summary of Past Property Prices
Overall, 2011 so far, is looking to be a fairly stable year, albeit with volumes and prices performing slightly lower than 2010. While London is likely to continue to recover to 2007 levels from a price perspective, sales volumes are even slipping there. 

As always, the national picture disguises large discrepancies across the UK with prices in the North East a massive 22% below 2007 heights, while London prices are just 2% away from their £350,000 average at the height of 2008.

*Effect of seasonal adjustment
Some of the reports produce data which is not seasonally adjusted and some adapt the data for seasonal adjustment. What this means is some months of the year house prices are typically higher than other times of the year and seasonally adjusting prices to account for this, in theory, negates these ‘artificial' highs and lows. For example, Nationwide state:-

"Seasonal adjustment shows that June is generally the strongest month for house prices (raw prices are 1.3% above their SA level) and January is the weakest (raw prices are 1.5% below their SA level)"

Seasonally adjusted price indices should in theory mean you can compare one month to another more accurately.

Statistically there are mixed views on whether this is required. Some say it makes comparisons throughout the year, some believe that the way they are calculated isn't accurate! For completeness, read the Nationwide explanation and the Ray Boulger article. 

From our perspective we look at trends over months and advise consumers on what to do whether markets are falling, rising or staying the same, so typically the indices we use are seasonally adjusted where possible.

For more information on seasonal adjusted figures visit:-

Nationwide Methodology

Query on Seasonal Adjustments by Ray Boulger

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