Housing market ‘treading water’ as prices drop in July ‒ Halifax
Despite this, over the previous three months prices were up by 0.4 per cent, while on an annual basis house prices rose by 4.1 per cent.
As a result the average property is now worth £236,120.
Russell Galley, managing director of Halifax, suggested the market was continuing to “tread water” with marginal increases or decreases each month.
He continued: “We have seen a reported drop off in the number of properties sold during the early months of summer, which may lead some to speculate a downturn is on the horizon. However, new buyer enquiries are up, and favourable mortgage affordability – driven by low interest rates and strong wage growth – should continue to underpin prices for the time being.”
Galley concluded that over the longer term there was unlikely to be any improvement in activity levels until there was “some form of resolution” to the current economic uncertainty.
Andrew Montlake, managing director of Coreco, said that it was now “crunch time” for the property market, with the potential impact of a no-deal Brexit.
He said: “The consensus appears to be that the property prices will suffer if we exit the EU without a deal. But if no-deal is more damp squib than end of the world then the property market could rediscover its mojo.”
Montlake added that with households bracing themselves for “potentially strong turbulence” remortgaging activity was likely to remain strong.
Joshua Elash, director of MT Finance, admitted that the market was flat and warned that the “robustness of the property market” is about to be put to the test.
“If Brexit or deflationary forces lead to the Bank of England increasing the base rate, there will be consequential pressure on homeowners to sell as they struggle to deal with meeting the cost of increased mortgage payments.
“In this scenario we would expect to see more significant downward pressure on prices.”
Market on a knife edge
Jonathan Hopper, managing director of Garrington Property Finders, cautioned that the spring bounce was “morphing into a summer slump”, with two straight months of falling prices suggesting the momentum from the spring has now petered out.
He added: “In the weakest markets, such as London and the South East, buyers are having a field day and we’re seeing homes sell for as much as 30 per cent below original guide price.”
In contrast though, in areas “starved of supply”, good homes are selling fast and in some cases over the asking price, Hopper noted.
“Such regional polarisation illustrates just how the market as a whole is resting on a knife edge. The next 12 weeks should clarify whether Britain’s economic prospects get very good – or very bad – very quickly.”
Annual house price rises grow to 5.2 per cent in May – Halifax
House prices rose by 0.5 per cent month-on-month from £236,712 in April and by 5.2 per cent from £224,925 in May 2018, the lender’s latest house price index found.
In the latest quarter from March to May, house prices were 2.5 per cent higher than in the preceding three months, it added.
Russell Galley, managing director at Halifax (pictured), said that despite the ongoing political and economic uncertainty, underlying conditions in the broader economy continue to underpin the housing market, particularly the twin factors of high employment and low interest rates.
He added: “This is supported by industry-wide figures which suggest no real change in the number of homes being sold month to month, while Bank of England data shows the number of mortgages being approved rose by almost 6 per cent in April, reversing the softness seen in the previous month.
“While current conditions may help those looking to make their first move onto the property ladder, existing homeowners will doubtless be considering long-term house price growth which continues to look subdued in comparison to recent years.
“Looking ahead, we expect the current trend of stability based on high employment and low interest rates to persist over the coming months, though clearly any downturn in the wider economy would be keenly felt in the housing market.”
Signs of recovery and confidence
Tomer Aboody, director of property lender MT Finance, said with an annual rise in values based on the same period last year, along with a steady increase in transactions, the housing market is continuing to show signs both of recovery and confidence.
He added: “Buyers have come to the conclusion that enough is enough, and the uncertain conditions which have been facing them could carry on for a while still, so that shouldn’t hold them back from getting on the ladder or moving up or down it.
“Fewer homes are on the market since sellers feel that they either don’t have to sell when values are still down on 2016 or with the stamp duty levels being so high they can’t afford the step up so are staying put for now. We don’t see this changing anytime soon.”
House price stability with strong economy
Mike Scott, chief property analyst at Yopa, said: “While the index is mix-adjusted to prevent regional imbalances from affecting the national figure, the Halifax’s mortgage book has always been concentrated in the northern part of the country, and their index may reflect the faster-growing prices in the north compared with stationary or falling prices in the south and London.
“However, while their reported rate of house price growth may be on the high side, we agree with the Halifax’s view that house prices will remain broadly stable as long as the economy remains strong, with no sustained price downturn likely unless unemployment rates or interest rates rise, or mortgage lenders reduce the amounts that they are prepared to lend.”
Annual house price growth jumps to five per cent in April – Halifax
House prices rose by 1.1 per cent in April after a fall of 1.3 per cent in March, according to the latest figures released by Halifax.
The report found that in the latest quarter to April house prices were 4.2 per cent higher than in the three months up to January.
Russell Galley, managing director of Halifax, said that the index has seen a weaker pace of growth over the last three years, which is consistent with the easing of transactions volumes and housing market activity reflected in figures from the Royal Institution of Chartered Surveyors (RICS), Bank of England and HM Revenue & Customs.
He added: “Looking further back, this April also marks 10 years since the lowest point of the Halifax house price index following the financial crash in 2008.
“Over the past decade annual house price growth has seen the average price increase by £81,956, or an average rise of 4.3 per cent each year.”
Positive attitude from estate agents
Tomer Aboody, director of property lender MT Finance, said the numbers were encouraging, reflecting the fact that people are putting the uncertainty of Brexit to one side so that they can just get on with things.
He added: “There is a positive attitude out there from estate agents to valuers to lenders – everyone is busier with transactions, just as you would expect for this time of year.
“Those people who have been looking to buy for a while are realising that the opportunity to move now is as good as any.
“Mortgage rates are extremely low and interest rates are unlikely to rise anytime soon, even though Mark Carney has been warning that it could happen in the future. Longer fixes are looking attractive for those families who need to move on and want some security from potential rate rises in a few years.
“When we get to October and Brexit looms again, transactions will probably fall off again as jitters return. But for now, with Brexit kicked into the distance, people are transacting and getting on with their lives.”
House prices rising again
Mike Scott, chief property analyst at online estate agent Yopa, said that there had been a sharp up-turn in house prices.
He added: “Virtually all of the annual growth occurred over the past three months. Other indicators have shown a return to house price growth following a virtual standstill in the last quarter of 2018, but this is the highest rate of growth that has been reported for some time.
“This large increase is partly because the same period in 2018 was affected by the snow and ice caused by the ‘Beast from the East’, which depressed housing market activity and prices.
“However, it does seem safe to say that house prices are rising again, although the underlying rate of growth is probably not as high as five per cent per year. With the number of house sales holding up well, house price growth for the whole of 2019 may well exceed most forecasts, which were generally somewhere between zero and four per cent.”
House prices fall back in March after surprise February gain – updated
The average house price in March was £233,181, according to the lender’s index, down 1.6 per cent from the unexpected rise to £236,954 in February.
However, March’s figure was 2.6 per cent higher compared to the same period last year – easing slightly from the 2.8 per cent rise in February.
And on a quarterly basis the movement was somewhere in between, with prices up by 1.6 per cent compared to the final three months of 2018.
Corrects February growth
Halifax managing director Russell Galley highlighted the impact that fewer property transactions was resulting in a more volatile price index.
“The average UK house price is now £233,181 following a 1.6 per cent monthly fall in March,” he said.
“This reduction partly corrects the significant growth seen last month and again demonstrates the risk in focusing too heavily on short-term, volatile measures.
“Industry-wide figures show that the number of mortgages being approved remains around 40 per cent below pre-financial crisis levels, and we know that lower levels of activity can lead to bigger price movements,” he added.
Galley noted that the more stable measure of annual house price growth rose slightly to 2.6 per cent and remained within the lender’s expectation for the year.
He added that challenges around deposit raising and lack of available properties, combined ongoing uncertainty around Brexit, meant the lender expected subdued price growth for the time being.
More resilient picture
Mortgage Advice Bureau head of lending Brian Murphy agreed that the data highlighted the mercurial nature of month-on-month price movements.
“That said, the quarterly figure for the first three months of 2019 suggests a more resilient picture, which given the ongoing political turbulence is perhaps reassuring,” he said.
“There is, however, the distinct possibility that the lack of homes for sale in many parts of the UK is providing support for pricing. Also, let’s not forget that last March, we were all shivering in the grip of the Beast from the East with its concomitant impact on housing market activity.
“Therefore, while the annualised growth figure is encouraging at first glance, there’s a possibility that it doesn’t perhaps provide an accurate picture of market movements over the past twelve months, given the unusual circumstances of the same period last year.”
House prices rebound almost 6% in February – Halifax
In the three months leading to February, house prices were 2.8 per cent higher than in the same three months a year earlier, up from the 0.8 per cent annual growth rate recorded in January, Halifax’s house price index revealed.
In the latest quarter from December to February, house prices were 1.8% higher than in the preceding three months, while prices rose by 5.9% in February from January’s figures.
Russell Galley, managing director of Halifax, said that with buyers still facing challenges in raising a deposit the lender continues to expect subdued price growth for the time being.
He added: “However, the number of sales in January was right on the five year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident.”
Increase in price growth
Tomer Aboody, director of specialist lender MT Finance, said that with all the uncertainty around Brexit it is “pleasantly surprising” to see the resilience of UK house prices.
He said: “While properties might sit on the market a bit longer, those that have steered clear of inflated valuations are selling, and there is a substantial appetite for properties which are priced correctly.
“There is far more demand than supply in the UK housing market which should curtail any dramatic fall in pricing and act as an antidote to any potential fallout caused by the Brexit saga, keeping the property market active.
“Going forward, we don’t foresee a vast increase in property prices, unless stamp duty is reduced and demand therefore increases.”
Jeremy Leaf, north London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chairman, said: “The increases across the board are certainly welcome and particularly the reference to transaction numbers keeping up with the five-year average but there is no doubt that the shortage of supply is a significant factor in the uplift.
“The reasons behind it are certainly not just to do with Brexit as we consistently hear on the doorsteps – affordability and tough lending criteria as other factors. Local factors are also highly relevant and activity varies quite a bit from area to area.
“Looking forward, we expect to see more of the same and hopefully a more balanced market, particularly if negotiations on EU withdrawal begin to make some progress.”
House prices took a plunge in January: Halifax
As a result, the average property is now worth £223,691.
It’s the second time in the last three years that house prices have started a new year with a fall, and a stark contrast to the 2.5% increase seen in December. On a quarterly basis, house prices have now fallen 0.6%, while year-on-year they are up marginally, having increased just 0.8%.
House price growth to remain subdued
Russell Galley, managing director at Halifax, downplayed the monthly drop, arguing that the “bigger picture” is that house prices have seen “next to no movement” over the last year. He suggested this could either be viewed as a sign of resilience given the economic uncertainty or a continuation of the slow growth seen over the last few years.
He added: “On the supply side the most constraining factor to the health of the market is the shortage of stock for sale, although this does support price levels. On the demand side we see very high employment levels, improving real wage growth, low inflation and low mortgage rates. All positive drivers tempered by the challenges of raising deposits. On balance therefore we expect price growth to remain subdued in the near term.”
Jonathan Hopper, managing director of Garrington Property Finders, noted that January is often a tough month, but argued that seasonality “gives only a slight sugaring to the bitterness of Halifax’s data”.
He continued: “Barring an improbable Brexit solution that magically avoids both economic and political turmoil, a return to universally rising prices appears unlikely any time soon.”
Slow market leading to rate drops
Mark Harris, chief executive at SPF Private Clients, suggested that flat growth may be the best the market can hope for given the difficult political situation, pointing out that Brexit was causing would-be buyers to sit on their hands.
He added: “Fewer transactions has meant less business for lenders, yet they remain keen to lend. They run big operations and need their staff to be busy, so have two options – change their risk profile or mortgage pricing. The latter is easier, which is why many lenders have reduced their mortgage rates, and is great news for borrowers who are ready to make a move.”
Sam Mitchell, chief executive officer of online estate agent Housesimple.com, argued it was difficult to read too much into the “roller coastering” house price figures.
“We are actually seeing healthy transaction levels in many northern areas such as Yorkshire, where there seems to be an almost stubborn refusal to let Brexit govern their lives,” he continued.
“What’s clear on the ground is that there’s plenty of pent up buyer demand, but buyers are watching Brexit developments like hawks and taking their time to commit.”
November fall drags house price growth down to six-year low
The average cost of a home in November was £224,578, down from £227,694 in October and £226,247 in November 2017 respectively.
November’s 1.4% month-on-month fall was the third drop in prices in the last four months and means six out of the last twelve months have witnessed falls.
It means prices in the three months to November were just 0.3% higher than in the same three months last year.
That figure was a significant slowdown from the 1.5% growth recorded in October and was the lowest rate of growth since December 2012.
The November fall was also reflected in the latest quarter of September to November, where prices were 1.1% lower than in the preceding three months of June to August.
Halifax managing director Russell Galley was not too concerned about the figures.
“While this is the lowest rate of growth in six years, it remains within our forecast range of 0% to 3% for 2018,” he said.
“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,” he added.
This was echoed by a former RICS residential chairman Jeremy Leaf who noted the figures came on the back of recent encouraging housing transaction and mortgage approvals.
“However, they do continue the trend from last month of a softening, not correcting, market,” he said.
“Looking forward, we don’t expect activity to change much bearing in mind seasonal and political distractions.
“On the ground, lethargy is replacing energy as the market seeks direction in the early new year.”
Repeat of 2009
However, fears were raised that the figures could be more foreboding and that uncertainty around Brexit was dragging the market down significantly.
Octane Capital CEO Jonathan Samuels said: “Without wanting to appear overly pessimistic, there’s every chance 2019 could be 2009 all over again.
“People need to be preparing for that eventuality and the low level of transactions suggests they are. All the ingredients for extreme uncertainty, both political and economic, are in the mix.
“Mortgages are still cheap and the employment market strong, but the great unknown of Brexit is causing prospective buyers and sellers alike to err on the side of caution,” he added.
First-time buyers £27,000 better off than renters – Halifax
In December 2017, the average costs of buying a three-bed home was £679 a month, compared to average monthly rent of £754 for the same property type.
This means the gap between buying and renting for a three-bed home in the UK has increased 44% since 2016 and is the biggest in four years.
According to the latest Halifax Buying vs. Renting Review, the difference has jumped from £623 to £900 a year.
This means that FTBs would be saving £27,000 over a 30-year mortgage term against renters, though the savings are still smaller than the average deposit of £31,751.
Indeed, since 2008, the average monthly cost of buying has dropped 22%, or £192, against rental payments which have increased by 22%, or £138.
Russell Galley, managing director of Halifax, said: “The gap between buying and renting has widened significantly, primarily driven by a reduction in mortgage rates and a more competitive market pushing down monthly payments.”
He continued: “Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat.”
The review also found that buying is consistently cheaper than renting cross the UK, with the greatest annual saving found in London at £2,191, and the smallest in Yorkshire and the Humber with £589 a year.
However, in percentage terms, Scotland and the South West of England represent the biggest savings, where the cost of buying is 17% lower than renting.
The smallest percentage gain is in the South East of England, with cost of buying 8% lower than renting.
Galley continued: “The good news is that record numbers of first-time buyers are still taking their first step on to the ladder and helping to bridge this gap thanks to a continued low-rate environment and government schemes including Help to Buy.”
FTB numbers fell from a high of 359,000 in 2007 to a record low of 192,300 in 2008, according to UK Finance data.
However, FTB levels jumped back to the pre-crisis peak in 2017 to 365,000 – exceeding 300,000 for the fourth consecutive year.
“Despite having to put a sizeable deposit up front, homeowners are overall better off than renters in all parts of the UK. But those who are unable to get on to the property later because they can’t raise enough cash are paying more by renting,” Galley added.
Stable, but modest housing market expected in 2018 – Halifax
This will be driven by a combination of a shortage of properties for sale, and continued low levels of house building, unemployment and interest rate environment, said Halifax.
Over 2017, property price growth fell from the 10% in March 2016 to a low of 2.1% in July this year, with a recent recovery to around 4%.
“Both demand and supply pressures in the market have altered little over the course of 2017,” said Halifax, which is likely to keep prices at the same level this year.
The stamp duty changes announced in the budget are expected to provide boosts to first-time buyer (FTB) demand – indeed, the number of FTBs getting on the housing ladder exceeded 150,000 in 2017 for the third time in four years – a level of momentum not seen since before the financial crisis.
However, while October completions rose to 105,000 – the highest recorded in 18 months, and total house sales in 2017 are expected to total around 1.23m – mortgage approvals and newly agreed sales fell.
Households are also in a financial squeeze – owing to inflation outstripping wage growth – alongside the broader economic uncertainty.
“Even with inflation expected to fall next year, household budgets are likely to remain strained in the absence of accelerating wage growth,” said Halifax managing director Russell Galley.
In the year to June 2017, there were 153,330 new builds completed – an 11% increase from June 2016 – with the government pledging to build 300,000 additional net new homes per year by the mid-2020s.
Nevertheless, price fluctuations are expected by be minimal, as “higher levels of housebuilding should help bring supply and demand into better balance and contain the upward pressure on prices over the medium and longer terms,” said the bank.
Galley added: “There is little reason to expect any fundamental shift in the key housing market drivers in the immediate future.”
The regional picture
Cutting against the grain of the past decade, price momentum was strongest in Northern England, but weaker in the South East and London.
The North saw the highest annualised growth in Q3 2017, at 9.1%, followed by the East Midlands and the North West. But London was the weakest at 2.6%, down from a peak of 21% in Q1 2016, while the South East grew at a slower pace than the UK as a whole for the first time in three and a half years.
Halifax noted that with average prices in London still 8.8 times the annual average earnings,constrained affordability means price growth will stay low.
Galley said: “Outside London, there are few signs of significant stresses and imbalances at present, limiting the risk of a sharp slowdown elsewhere.”
He continued: “UK house prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of house building, low unemployment levels and finally, good levels of affordability due to the low interest rate environment.”
“A further rate rise is not seen as imminent and we may not see one until the latter part of 2018, if at all,” he added.
House price growth rises to 4.5% but confidence dips – Halifax
According to the latest Halifax House Price Index, the 4.5% year-on-year growth recorded in October was the highest rate since February. The updated average price of £225,826 represents a 2.8% jump from the January figure of £219,741, and the highest average on record.
In the three months from August to October, house prices were 2.3% higher than the May to July period – the fastest price growth on this measure since January.
On a month-to-month measure, prices rose by 0.3% between September and October, following a 0.8% jump in September.
However, despite recent increases in house prices, confidence in the housing market has fallen to its lowest level since December 2012, according to the Halifax Housing Market Confidence Tracker.
The survey, which tracks consumer sentiment on whether house values will increase or decrease in a year’s time, showed that one in five respondents thought prices would fall – the highest level since October 2012.
The Halifax index is also released as mortgage approvals – an important indicator of completed house sales – fell in September for the second consecutive month to 66,232 loans.
Strong growth from weak supply
Both new sales instructions and buyer enquiries fell in September. The quantity of new sales instructions for homes fell for the 19th consecutive month, while new buyer enquiries declined in September for the sixth month in succession.
Jonathan Samuels, chief executive of the property lender, Octane Capital, said: “For a number of months now the property market has exuded strength, but in reality its main driver is weak supply. Price rises are being driven by the shortage of property available for sale, and broader supply problems, rather than a confident consumer and strong economy.”
Nevertheless, although the amount of home sales fell by 2% to 100,850 in September, monthly sales have stayed above 100,000 since January, with the three months to September being 6% higher than the same period last year.
Commenting on the index, Russell Galley, managing director of Halifax Community Bank, said: “The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, continues to support house prices and is likely to do so over the coming months.”
However, Galley also noted that “increasing pressure on household finances and continuing affordability concerns are some of the factors likely to dampen buyer demand.”
The Autumn Budget
All eyes are now on the upcoming Autumn Budget, which may see the introduction of new housing policies.
Jeff Knight, director of marketing at Foundation Home Loans, commented: “With just three weeks until the chancellor’s first Autumn Budget, the arrival of rumoured new housing policies are eagerly awaited.
“In the run-up, we have seen moves to curb second home-ownership and the impact of Stamp Duty on housing market activity debated, with potential cuts rendering significant savings for first-time buyers.” He added: “However, Stamp Duty is only one hurdle facing those struggling to enter the market as mortgage affordability, rising prices and inflation outstripping wages continue to delay home ownership plans.”