Economy Follows Property Prices into a Double Dip

publication date: Jun 18, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Introduction to the Designs on Property Market Report 

Month by month we hear from lots of different property price reports, some saying prices are rising, some falling. For anyone who's a first time buyer, looking to trade down or invest in property, conflicting headlines are confusing and generate additional stress at a time when there is already plenty to worry about. 

This property price report is unique in that it reviews all the different property price reports from the prospective of someone carrying out a property project, giving advice to help work out, from a market perspective, whether now is a good time to buy, sell, build, invest or even carry out a renovation project. 

When looking at any market, most economic indicators carry out comparisons from one year to the next and then from one month or quarter to the next, property price reports aren't any different. Unfortunately measuring the property market in this way doesn't help anyone carrying out a property project. Rarely does anyone buy a property for just a year or so, and even if they do, it tends to be to make money by adding valuing or flipping, so what happened last year versus the current year is completely irrelevant as reports look back not forward. 

This doesn't mean the property price information isn't useful to us - it's just the resulting headlines and key summaries that aren't helpful. 

We take all the data we can which we think will affect property prices and use this information to help advise consumers on the pros and cons of their project. To do this, we split our report into three parts:- 

To accompany these reports we have also written articles for consumers carrying out different property projects to help understand what impact the property market might have on their purchase, sale, investment or renovation. This month's articles include:- 

  • First Time Buyers Market Report & Analysis
  • For Sale and Sold Boards: How to find out what's happening in your local property market
  • Buying and Selling a Home Market Report & Analysis
  • Selling your Large Home and Buying a Smaller One Market Report & Analysis

Useful Property Price Indices for Past Indicators

Although there are lots of different indices, some track the market better than others over time. Some also only look at parts of the UK, such as England and Wales, whereas others don't include some purchases, such as cash deals, which can currently account for up to a third of transactions. When looking at these market reports, unless you know the details and differences between them, they are difficult to analyse correctly.

Although we look at all indices, the main ones we find useful for working out what's happened in the past, are the Land Registry, Nationwide and Acadametrics.

Economy Follows Property Prices into a Double Dip

Over the last few weeks, we have heard bad news with regards to the economy going into a double dip. The last time the economy went backwards was in 2007, when the credit crunch hit and the recession was first felt in the property market. Over the last six months, we have seen a similar picture in individual areas across the UK which have slipped into a double dip from a property price perspective.

The idea of property prices double dipping hasn't really been explained to date, as average property prices over the last 15 months (see the chart below) shows that despite a few ups and downs, average property prices haven't actually changed that much.

All three indices show that average property prices have just fluctuated only by up to 5% over the last 30 months.

Key facts about average property prices in England and Wales since January 2010:- 

  • An ‘average property' price for mortgaged properties has fluctuated between £161k - £170k for Nationwide
  • Average property prices, including cash sales, by the Land Registry have varied between £160k - £167k
  • Average property prices for all properties from Acadametrics shows a range between £218k and £224k

Chart showing average property prices since 2011 in England and Wales

Chart showing average property prices since 2011 in England and Wales

Other interesting statistics the indices show for people carrying out a property project during the year are:-

  • Property prices, on average, are approximately:-

    5% above the lows of 2009 according to the Land Registry
    11% above the lows of 2009 according to Nationwide
    10% above the lows of 2009 according to Acadametrics
  • Average property price performance varies dramatically from one area to another. Four regions, including North East and West, Yorkshire and Humber and Wales, have fallen below 2009 lows (source: Land Registry)
  • Only the London region has outperformed 2007 price heights, but even this area is recording prices 2.3% lower, albeit prices are still 15% above 2009 lows
  • Property prices for Nationwide and Acadametrics tend to increase over the first three to six months of the year, then fall back again to similar prices at the end of the year
  • Property prices for Land Registry tend to fall or be stable at the start of the year, grow over the summer and then fall towards the end of the year
  • Property transactions remain at 50% the level there were pre credit crunch

Nationwide data measures an ‘average house's price and their latest summary suggests "housing market activity is likely to remain subdued, with prices showing little growth or moving modestly lower over the next twelve months".

Acadametrics data is based on Land Registry data and as such, measures cash sales and their index smoothes out underlying trends by measuring all sales as opposed to the samples Land Registry data does. According to Acadametrics, volume was the main story for the property market in March 2012. "One of the notable features of the housing market in March 2012.... is for monthly transactions during 2011, as a whole, they accounted for 64% of the long term average's sales." March transactions however leapt to 75% of the long term average, a level of activity not seen since 2008. According to Acadametrics, "The reason for this high level of transactions was the stopping of the Stamp Duty relief for first time buyers who, during February and March, rushed to purchase their properties and an increase in buy to let purchases."

Moving forward, Acadametrics suggest to date, "A market which is fluctuating monthly, pushed up and down by government in interventions such as Stamp Duty Land Tax changes". With most of these changes in Stamp Duty now hopefully over, they believe it may be possible for a "clearer market driven price response over coming months. With inflation edging down we are beginning to see price falls, in real terms, beginning to moderate".

Chart showing Property Prices at their height, low and latest data (Land Registry)

Chart showing Property Prices at their height, low and latest data

Average House Prices don't reflect what's happening in YOUR Local Market

What we have learnt about the property market since the credit crunch is the ‘average property price' completely disguises what is happening at a local level across England and Wales. As the charts above and below show, five regions have been in double dip and across a range of UK cities, four are now in double dip - and have been some months. Ongoing research indicates a number of other cities are ‘seesawing' above and below 2009 lows on a month by month basis.

This means for the second time, the property market has fallen prior to the economy sliding into recession.

Chart showing Property Prices at their height, low and latest data (Land Registry)

Chart showing Property Prices at their height, low and latest data 

As the charts above show, some areas such as London have exceeded the heights of 2007 and within London itself, London's best performing area shows prices up by 11.9% year on year in the City of Westminster and over 11.6% in Kensington and Chelsea, where the average house price has just reached the £1 million mark, while Redbridge is down by 3.9%. In other areas across England and Wales, Bracknell Forest is up 3.9% while Ceredigion and Pembrokeshire are both down by 10.9% year on year.

As we can see from the analysis of the cities above, some areas are still 25% down versus the heights of 2007, although this doesn't mean every property is down by 25%, this will be made up of some areas being up, some staying the same, while others are clearly driving an overall downward trend in the region.

What does this mean if you are Buying or Selling a Property?

For anyone buying or selling that needs to make a decision of what to do, then it's vital to make sure you check out what's happening in your local area using the Land Registry Index, and speaking to your local property experts such as estate agents, surveyors and studying individual bought and sold prices of property types you are keen to buy or sell. To help you work out how to do this, read our article ‘How to spot the bottom of the market'.

If consumers are thinking of buying or selling, they can now secure independent, one to one help by purchasing our unique Selling a Property Service or First Time Buyer Service. Consumers receive an A4 ‘how to' guide, containing over 70 things you have to do to buy or sell a home, lots of dos and don'ts, factsheets, checklists, handy tips and forms.

The service also includes one to one help through access to Kate and her team, by phone and email, for any queries you might have during your project. All this for just £19.99 per service!


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