Has the residential property market finally turned the corner?

publication date: Apr 2, 2013
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Has the residential property market finally turned the corner?

Sold House Prices UK

We track most of the monthly reports on property prices produced on a monthly basis. This report summarises what’s being said about the market and includes Kate Faulkner’s comments on what this means for the industry, the market and consumers.

Report Headlines:-

Nationwide xx “Homeownership rates still trending down”
Hometrack “A clear North-South divide as London and the South East account for 74% of postcodes
registering price rises”
RICS “Flat February masks greater medium term optimism”
Acadametrics “Sales soar 15% in February as mortgage availability rises and bank funding conditions improve
Smart New Homes “New homes market sees strong start to year”

Kate Faulkner comments:

“There remains some renewed optimism for the housing market in 2013, however, over the last few years, the market has always done quite well in the first part of the year, then tended to flatten or fall towards the second part of the year. What will be interesting this year is to see if the ‘Help to Buy’ scheme and the ‘Funding for Lending’ investment by the government will help to boost the market throughout the year and potentially help it pick up in 2014.”

New Home Property Prices 

Smart New Homes xx “The average price of a new home in January was £232,022, compared to £229,571 at the
end of last year. This represents an increase of 1.1% over the month. Annual growth stood
at 1.4% in January, an increase on December’s 1.1%. This means the average new home now
costs £3,113 more than at the same time last year. Prices in the new homes market have
remained relatively stable in the last 12 months, fluctuating just £9,940 compared to £22,175
in the wider market. Demand for new homes has pushed prices slightly higher than those in
the wider market, driving a return of the new home ‘premium’.”

Kate Faulkner comments:

“The new homes industry has received a huge amount of support from the government in the last few years. Changes to planning laws, the new homes bonus to incentivise local authorities to back building programmes, FirstBuy last year and now the ‘Help to Buy’ fun, this help has all been given to the industry despite the fact that new build prices have, in the main, been very stable for developers since 2009. As yet, none of this appears to have helped deliver too many more new homes, so it remains to be seen in 2013 if whether any of these incentives will actually boost the number of new homes sold or just end up subsidising current demand and building levels.”

Regional Property Price Differences

Hometrack xx “Across the country 14.8% of postcodes registered price rises, and 8.0% price falls. Of those
markets seeing a price rise, 74% were in London and the South East. In the South East 26% of
postcodes saw price rises. Prices remain under downward pressure in Northern regions where
the trend is tipped towards price falls. On a regional basis the North East (-0.2%), North West
(-0.1%) and Yorkshire & Humberside (-0.1%) all registered price falls, while London (0.3%), the
South East (0.1%) and Wales (0.1%) saw prices increase over the month. In all other regions,
values remained static.”
RICS “At the regional level, in terms of current prices, the London market remains the standout
performer, with surveyors seeing more modest price gains in the South East. Elsewhere,
surveyors are still a little negative albeit only by a small margin in Wales, the North West
as well as the East and West Midlands. Prices in Scotland and Northern Ireland continue to
fall, but likewise, the pace of decline has slowed dramatically recently.”
Acadametrics “Greater London continues to dominate the housing market in terms of annual price change,
with house price inflation almost three times higher than in any other region of England &
Wales. This month East Anglia has joined Greater London, now being the only two regions in
the country with annual price increases higher than the average for England & Wales as a
whole. The region with the largest fall in annual house prices is Wales, although the reduction
in prices in the principality is only half that of last month, and now stands at -0.6%. Although
there are four regions showing negative price movements on an annual basis, the rate of
decline is modest. The last time we had the lowest region showing a decline of -0.6% or above
was in October 2010, some 28 months ago.
Smart New Homes “The South West recorded the biggest monthly price rise in January at 2.1%. The region also
recorded growth of 4.0% over the quarter and 2.9% on an annual basis. This contrasts with
Yorkshire and Humberside which saw prices dip 1.7% during the first month of the year. In all,
the more southerly regions continue to perform the strongest in terms of price growth.”

Kate Faulkner comments:

“Property prices and market performance is now so localised across the UK that any national average figures are meaningless as far as consumers are concerned. London is the lead player in terms of market performance, but even areas in and around London aren’t performing. In the main, most areas around the UK are either showing no growth at all or small dips.”

Demand for Property

Nationwide xx “While activity in the housing market remains subdued by historic standards, there have been
tentative signs of a pick-up in recent months. The Funding for Lending Scheme has achieved
some success in bringing down mortgage rates, with encouraging signs of an improvement in
credit availability. While the economic backdrop remains challenging, there are reasons for
cautious optimism that activity will gather momentum in the months ahead. In particular,
employment is rising at the fastest pace since the late 1990s which, if maintained, should
help support demand for homes. However, progress is likely to be gradual, as stubbornly high
inflation will continue to exert pressure on household budgets. Moreover, buyer confidence is
likely to remain fragile until there are signs that the wider economic recovery is firmly entrenched.”
Hometrack “Shows a 14% growth in new buyers registering with agents over February, a level consistent
with the same month in previous years. Despite this seasonal bounce in demand, some agents
reported that market conditions were less buoyant than they were expecting. In the North East
and Yorkshire and Humberside, new buyer registrations grew by less than 5% over February. It
is unclear if this was down to poor weather conditions or a more fundamental weakness in
demand for housing. Looking ahead we expect demand for housing to continue to grow as we
move into Spring.”
RICS “In February, the new buyer enquiries balance rose from -10 to 3; the newly agreed sales
balance remained unchanged at +16 and the average sales per surveyor (branch) increased
from 15.9 to 16.8.”
Acadametricsxxxx “January and February are normally the quietest months of the year for housing transactions.
February is the lightly busier of the two months, with January less so due to the Christmas
period, and consequent lack of completions the following month. On average, there is a 3%
increase in activity in February compared to January, but this year we estimate that the
increase will be closer to 15%. This suggests a rally in property transactions, although only
time will tell how long this rally will last.
CML “In the fourth quarter of 2012, a total of 10,200 first-time buyers bought their first home in
London, a 4% increase compared to the previous quarter, and up by 17% on the fourth quarter
of 2011. This represented a larger boost compared to the UK overall where lending to first-time
buyers increased by 14% compared to the fourth quarter of 2011. The increase in lending to
both first-time buyers and home movers in 2012 overall, resulted in a 10% increase in house
purchase lending in 2012.”

Kate Faulkner comments:

“Demand for property does seem to be on the increase – for now. It remains to be seen though whether this will last throughout the year. However, with the huge investment in the property sector, which the government is banking on delivering economic growth, if this doesn’t work, we may have to face markets in some areas which are in the doldrums for years. ”

Supply of Property

Hometrack xx “While the number of new properties coming to the market has risen this month by 8.7%,
this growth has been off a low base. Agents across the country spoke of a shortage of new
housing stock for sale with one London based respondent commenting that housing supply
was ‘at its lowest for five years’. Looking ahead we expect demand for housing to continue
to grow as we move into spring. Supply will continue to expand but higher stamp duty costs
in Southern England remain a disincentive to sell. This will create scarcity and maintain an
upward pressure on headline prices although the pattern of growth across local markets will
remain highly varied.”
RICS “The new instructions balance improved from -5 to 1 and the average stock on surveyor
books (per branch) edged up from 63.5 to 66.1.”
Smart New Homes “Using a three month rolling average, the number of new homes added to the market grew
by 45% annually in January. Although there were more new homes available to January
buyers than the same time last year, 2012’s total output was 11% down on the previous
year according to the latest figures from the DCLG.”

Kate Faulkner comments:

The property market from a supply and demand perspective poses an interesting conundrum. On the one hand we need to boost demand to help generate economic recovery. On the other hand, if supply doesn’t increase, all this will do is increase property prices. With figures suggesting supply of new homes was down in 2012 despite investment in FirstBuy, it suggests that even government incentives might not be able to increase supply enough to keep up with demand. This potentially could lead to higher prices without any increase in supply which would be a disaster both for the market, buyers and the overall economy.”

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