All in all, national house prices are fairly flat although the strength of house prices in London has been pulling up the national average. Home sales in the capital represent roughly thirteen per cent of the national average. Therefore any increase, even if it is small, in house prices in the capital is likely to have a significant inflationary effect on the national average, masking the actual story of stagnating prices for the UK as a whole.
The recent fall in world stock markets on the back of increased sovereign debt concerns in the Eurozone makes house prices in the capital a relatively safer bet than those within the Eurozone.
• House prices ticked up by 0.2% between August and September 2011 adding to the stabilisation of house prices across the country
• The national picture somewhat masks a diverging trend between the North and South of England, highlighted by the chart below
• House prices in London grew in line with the UK average this month, but have far outpaced the national trend over the year
Amidst the doom and gloom of recent prophecies for the international economy and turbulence in financial markets, house prices in the UK remain roughly stable. The average price of a house in the UK rose by 0.2% in September to reach £176,553, which is -1.6% lower compared to the same month last year.
However, this figure masks a significant difference between homes in the North and South of England. For example, house prices in London have risen by 2.5% over the year compared to a fall of -5.2% in the North West. Taken together, this means that the national average is being heavily supported by the desirability of homes in the capital.
Nevertheless, there were 52,410 new mortgage approvals in August compared with 49,644 in July – the highest level since May 2010. Higher transaction activity in the market is largely down to more favourable lending terms, which have allowed cash-rich investors to take advantage of higher rental yields. The housing market presently appears to be better placed than most other parts of the economy to weather the impending storm.
Exactly half of the eight house price and asking price indices tracked in this report (see attached for details) showed house price rises for the most recent month of data – highlighting the on-going stability of UK house prices.
Taking into account the timeliness, lag and accuracy of the various indices, the Chesterton Humberts’ Poll of Polls (PoP) shows that the average price of a residential property in England and Wales increased by 0.2% over the month to September reaching £176,553. This is -9.8% down on the price of houses back in February 2008, when prices peaked before the start of the financial crisis.
Last month’s Land Registry data were worse than expected and worse than had been predicted by changes in asking price indices in earlier months. The Land Registry posted a monthly decline of -0.3% between July and August, an unusual result for the end of the summer buying season and in contrast to what the PoP, which is based on a weighted combination of both asking price and selling price indicators, had predicted for August. Hence this explains why the PoP shows home values increasing in September, but to a lower average value than was purported for August.
The methodology behind the Poll of Polls is unique in that it uses all of the major national house price and asking price indicators and weights their results according to the historical accuracy of the various indices. It also captures all residential properties, rather than only those which have been sold or are for sale, by incorporating the stock of residential properties in England and Wales.
The PoP, therefore, provides a more complete analysis of house prices than most other measures of house price movements, which only tell part of the story as they are based on a single set of data.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“In recent months the gulf between asking prices and selling prices has widened as sellers, on average, have been in denial about the true market value of their homes based on the economic realities. This is most keenly observable in the difference between the Rightmove Asking price surveys and the Land Registry data. In addition, buyers appear willing to wait longer at present, without much urgency to make offers or conclude a purchase.
“The result is a low volume of sales as sellers and buyers struggle to settle on a compromise price, somewhat exacerbating the situation. We expect that asking prices will begin to fall into line into the winter months, traditionally a less active period for home buyers. This relatively relaxed attitude to buying is likely to disappear when stamp duty relief ends in March next year, so we expect a flurry of activity in the New Year.”
Douglas McWilliams, Chief Executive of CEBR, comments:
“Three years after the collapse of Lehman Brothers, credit conditions remain a significant obstacle to improvements in the housing market. Small improvements in mortgage lending activity will not let the Bank of England off the hook. Another round of quantitative easing is now not only expected, but it is becoming increasingly necessary”
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