LSL/Academetrics last week published comments on the market. Based on the last three months, all regions in England & Wales are currently experiencing annual house price growth. However, the pattern remains one in which London and the South contrast strongly with other English regions and Wales. Last month, prices in Greater London dropped growth in the region below that in the South East. However, price increases in July and August have returned Greater London to the top of the regions.
The two tier nature of the housing market over the last year means that all regions in England and Wales experienced growth of the order of -3% to +3% in housing transactions, except for Greater London, where the number of properties sold increased by 22%.
Commenting on the latest house price index from LSL / Acadametrics, Richard Sexton, business development director at e.surv said: “This mirrors what we are seeing at e.surv. The market is fragile and I’m not surprised that prices are so static. As for transactions, if anything, the 22% increase in London seems too low. The number of valuations and surveys we carried out in London increased 25% in the year to August 2010 compared to 2009. It’s tricky to forecast if the London surge will bleed out across the rest of the country though; it’s impossible to tell how consumer confidence will be affected by the austerity measures that are yet to be announced.”
If we take housing transactions in 2005 as representative of the average number of transactions over the last fifteen years and compare the same three months May to July 2005 with May to July 2010, we can see that, when compared with the average level of housing transactions, the southern half of England and Wales market has seen more of a recovery than have the northern regions
Mark Blackwell, managing director of xit2 said: “Currently, the house price indices are failing the industry. LSL is up. Hometrack’s down. With so many interpretations out there, it’s tough to know which to put store behind. Whoever’s right, I think it will be a long old winter as the correction continues to take hold. There will undoubtedly be a north / south divide with prices in the North dropping further than in the South. Values in southeast London will continue to show some real resilience. Interestingly, the falls are not just the result of prices tightening; the information coming through our platforms shows surveyors are now coming up with more realistic prices, suggesting more accurate prices at a pre-offer stage.”
Why has Greater London had a totally different experience over the last year to the remainder of the country? Answers to this question include a stronger regional economy and, therefore, more assured employment prospects and a continuing housing shortage in London. Additionally, London is clearly a more affluent market, partially fuelled by UK and foreign cash buyers who thus manage to avoid the current mortgage drought. Moreover, for sales involving a mortgage, without doubt lenders are currently more comfortable with housing assets in southern Britain which would make mortgage supply slightly easier.
Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments: “Our annual rate of growth at 7.7% reflects past price changes rather than activity in more recent months and, as earlier months drop out from the annual calculations, we will see the annual rate of growth continue to fall over the remainder of the year. Whilst the lender indices have a deserved reputation in indicating change, our index, based upon all prices, does not show that prices, as reported on the Land Register, are falling such that a double dip in prices is already occurring, and nor does the CLG index which is based upon completion prices. Whilst the possibility of falls certainly exists, much will turn on what happens to the wider economy both here and in the USA. Falls are reported in the reservations for new homes and the Bank of England Trends in Lending report for August suggested that mortgage lending for home purchases and remortgaging was broadly flat. Offsetting these clear negatives are the continuing unmet demand for housing, the steadily growing shortfall in newly built homes and the evidence of strong local and regional variations. Much turns on area and property type and there are some active markets where prices continue to rise. What the overall position suggests is that we will continue to experience a market which is flat. If, however, the economy turns down sharply and interest rates are pushed up, we can expect to see the housing market weaken significantly and even to see the double dip. If, however, the UK economy avoids a dip and growth recovers, the possibility exists of quite strong house price growth, especially if mortgage supply is restored.”
Readers can see how the prices reported by the lenders early in the transaction cycle relate to the final prices, allowing a 2 or 3 months delay, in the Quarterly Comparison of Indices.