Zoopla’s latest report has shown that property prices in London are starting to stabilise as buyers see better value for money.
Key Findings
• London’s annual house price growth picked up in February 2019 to +0.4%.
• There are signs of a pick-up in demand. Buyers who have delayed purchases since 2015, are beginning to see greater value for money, finding buying opportunities while Brexit uncertainty impacts market sentiment.
• The number of London postcodes registering price falls is starting to reduce – down from 69% in October 2018 to 55% today.
• Prices continue to increase in 45% of London City postcodes, typically lower value, more affordable areas in outer London.
• The latest UK cities house price index reveals that average prices increased +2.8% over the last year
• Regional cities have seen the greatest price growth over the last 3 years – prices are up by as much as +17% since the Brexit vote in Leicester and Manchester.
Richard Donnell, Research and Insight Director at Zoopla, comments: “Our latest index results show that house prices in London are starting to firm. Buyers who have stood on the side-lines since 2015 are starting to see greater value for money, seeking out buying opportunities amidst the uncertainty of Brexit. This is supported by greater realism on pricing by sellers. We do not believe London prices will rebound but it is a positive for sales volumes which are still 25% lower than in 2016.
House price growth has remained strong in regional cities over the last 3 years rising as much as 17% since the Brexit vote but signs of weaker growth are building as affordability pressures grow.
While the Brexit debate reaches fever pitch data on housing sales and demand for mortgages shows buyers are largely unmoved. Transaction volumes over 2018 remained in line with the 5-year average. The latest data shows that housing transactions have increased slightly in the first 2 months of 2019. With unemployment at a record low and mortgage rates still averaging 2%, buyers appear to be largely shrugging off Brexit uncertainty until there is a material change in the overall outlook.”

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Propertymark has become the newest company  to operate a Government-authorised Client Money Protection (CMP) Scheme.

The Government is requiring all rental agents in the private rented sector to obtain membership of an approved CMP scheme when the legislation comes into force on 1st April, all agents will need to have joined an Approved CMP scheme or will be operating illegally.

David Cox, Chief Executive, ARLA Propertymark said: “CMP has always been mandatory for Propertymark members, but when it becomes a requirement 1st April, all letting agents will be operating on a level playing field and consumers will be protected regardless of which agent they choose. This is a triumph for the industry, and will go a long way towards improving the regulatory environment in the lettings sector and increasing protection for consumers who rely on agents to handle their money safely. Having worked closely with MHCLG to get this into law, we’re really pleased that our scheme has secured formal Government Approval.”

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HMRC has revealed that residential property transactions increased by 0.8% (seasonally adjusted) between December 2018 and January 2019 – a 1.3% rise against January 2018.

The provisional seasonally adjusted UK property transaction count for January 2019 was 101,170 residential and 10,650 non-residential transactions.

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The Office for National Statistics has revealed that, in the year to December 2018, average house prices in the UK increased by 2.5%

Key Findings

• This is the lowest annual rate since July 2013 when it was 2.3%.
• Over the past two years, there has been a slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.
• The lowest annual growth was in the North East, where prices fell by 1.0% over the year to December 2018
• This was followed by London where prices fell 0.6% over the year.
• Average UK house prices during December 2018 stood at £231,000 – a rise of £6,000 when compared to December 2017.
• The West Midlands shows the highest annual house price growth in England with prices increasing by 5.2%.
• East Midlands and Yorkshire and The Humber (both increasing by 4.2%).
• The slowest annual house price growth was the North East, where prices fell by 1.0% over the year

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HomeLet latest data has shown that, during January, rents in the UK rose by 2.5% against the same month a year ago and that the average monthly rent now stands at £932 a month.

Other Key Findings

• London increased by 3.7% in January this year compared to January 2018
• The average monthly rent in the capital now stands at £1,588 a month.
• When London is excluded, the average UK rental value was £775 in January 2019, this is up 2.0% on last year
• The Rental Index reveals that rents rose in 11 of the 12 regions of the UK

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Halifax has reported that the average house price now stands at £223,691 with and Annual growth of 0.8%.

Russell Galley, Managing Director, Halifax, said: “Attention will no doubt be drawn towards the monthly fall of -2.9% from December to January, the second time in three years that we have seen a drop as a new year starts. However, the bigger picture is actually that house prices have seen next to no movement over the last year, with annual growth of just 0.8%.

This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.

There’s no doubt that the next year will be important for the housing market with much of the immediate focus on what impact Brexit may have. However, more fundamentally it is key underlying factors of supply and demand that will ultimately shape the market.

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.”

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10,000 people across the UK responded to the Tenant Survey, conducted for Knight Frank by YouGov from the analysis Knight Frank has forecasted that homeownership is becoming increasingly harder to achieve due to increasing costs the and as a result the Private Rented Sector will see investment increase to £75bn in the next 5-6 years.

Some of the key findings include:

• Young professionals (aged 25-34) no longer make up the largest group living in the PRS, having been overtaken by 35 to 49 year olds. This age group is also expected to show the biggest growth in households in the PRS over the coming years, with difficulty in obtaining a mortgage deposit to buy a home remaining a hurdle

• Affordability remains the key priority for 61% of tenants when choosing a property. More than one in ten tenants said renting allowed them to live in an area they could not otherwise afford

• Location is the second biggest priority for tenants(23%) followed by the size of the property (10%)

• Lack of a mortgage deposit remains key driver for renting, though this ranges from 71% of young families to just 41% of iGens (those aged under 25)
• On average, 69% of tenants still expect to be renting in three years’ time, rising to 93% for Baby Boomers (aged 65+)
• Tenant priorities are more focused on ‘internal’ factors – amenity within an apartment – than ‘external’ factors – such as local shops.

Investor survey

Knight Frank spoke with more than 25 of the largest funders and developers of purpose-built PRS and Retirement Housing to gain insight into how the market is set to develop:

• 38% of respondents said they wanted to engage in providing “cradle to grave” housing, i.e. student housing right through to Housing with Extra Care for older people. 
• In five years’ time, 56% of investment will be outside London (up from current levels of 44%)
• The average net yield for professionally-managed PRS properties is expected to settle at around 3.9% in 2022

Nick Pleydell-Bouverie, Head of Residential Investment Agency commented, “We are seeing a significant number of individual private buy-to-let landlord exiting the market as the Government’s buy-to-let tax changes start to bite. Large-scale professional PRS landlords are well placed to absorb this, as well as satisfying some of the structural shortfall in our housing supply.

A principal constraint on the delivery of housing is the estimated rate of sales for developers. The Institutional PRS market can significantly accelerate this through near immediate absorption. It is crucial that the UK Government resists further legislation and taxation and enables the PRS market to significantly contribute towards the UK housing challenge.”

Tim Hyatt, Head of Residential Lettings at Knight Frank commented, “Once again, affordability has emerged as a key reason for people choosing to rent in order to live in an area where they would not be able to buy. However, average rents in Great Britain rose 1% in the 12 months to December as more landlords leave the sector and levels of stock decline. The tenant fee ban, which comes in into effect in June this year, may also result in some landlords increasing rents to offset any extra costs.”

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Throughout the course of 2018 it was clear to see that Brexit was the main talking point in regards to the UK housing market and this grew over the course of 2018.

The impact of the political uncertainty was decisive in influencing property price growth and rarely has it been easier to identify the main reason for the current Market behaviour. As the UK moves closer to March 29 with no deal in place the breaks are being put in place in the UK housing market with a reduction of transactional volumes as people adopt a wait and see approach.

With house prices nearing to halt, there are some signs of green shoots so there is little reason to cut all ties and run.

While the number of exchanges declined over 2018, the number of new prospective buyers registering rose by 5% according to the latest data by Knight Frank.

Also the ratio of new demand to new supply rose to 4.9 in the final quarter of 2018, the highest level in four years.

Following the large-scale rejection of Theresa May’s Brexit deal by UK MP’s, there have been a series of cross-party initiatives on the next steps and now a majority has materialised on how to achieve Brexit, something which a few weeks ago was not thought possible by the EU.

The presence of the Irish backstop in the withdrawal agreement is now the key focus of negotiations the UK government believes amending its current proposal is the best way to achieve a consensus. So there is now a clear path ahead on how to achieve an orderly Brexit back by the majority of MPs

While the political situation remains unstable, record high levels of employment at 4.0%, it has not been lower since December 1974 to February 1975 underline the strength of the UK economy.

Interest rates are also likely to remain low due to the political uncertainty and falling inflation, which should help liquidity.

This combined with the fact that the UK are still not building enough housing to meet the demand  the underlying signs that there is pent-up demand the conditions for a recovery in the UK residential market are building.

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Former Rics residential chairman, Jeremy Leaf

“What we are seeing on the ground is the release of some pent-up demand prompting more listings, viewings and offers over the past few weeks than we dared hope for,” he said. “However, interest is very patchy and real value must be perceived, otherwise little market change will result.

“Looking forward, we do not expect any significant improvement at least until the odds on a Brexit deal improve.”

Andy Soloman Boss of business growth adviser Yomdel,

 “The coming months are likely to bring some small green shoots of price stability and once we emerge from our Brexit blanket in to the cold light of day having reached an agreement, further stability and upward growth should return to the market,” he added.

“If the UK does enjoy a good EU exit, then a relief rally could be in store given the plentiful government support for buyers, cheap borrowing and rising wages coupled with low supply

Mark Harris, the chief executive of mortgage broker SPF Private Clients

 “Flat growth is probably the best we can hope for, given the current tricky political situation we find ourselves in. Brexit has caused a slowdown in purchase activity as would-be buyers sit on their hands, waiting for the outcome before committing to something as major as buying a new home.” He noted that many lenders had reduced their mortgage rates to pull in customers.

Hansen Lu, a property economist at consultancy Capital Economics

 “We therefore expect annual house price growth to bump along at its current rate, ending 2019 at 1%.

“That is assuming the UK exits the EU with a deal. If the UK exits without a deal, house price growth would be even slower, or even fall gently. But a correction in prices would still be unlikely.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics

“a sentiment-led deterioration in house price growth, which chimes with the drop in measures of consumers’ confidence since November, when it became clear that the [Brexit] withdrawal agreement would not be ratified seamlessly”.

“Looking ahead, increasing numbers of prospective house-buyers likely will wait a few months for Brexit uncertainty to fade, forcing sellers to lower asking prices to attract braver buyers in the interim. As a result, year-over-year declines in house prices in the near term should not be ruled out.”

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ONS has revealed that average house prices in the UK saw a rise of 2.8% in the year to November 2018

Key Findings

• Over the last two years, the slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.
• In London, where prices fell by 0.7% over the year to November 2018
• The report shows that the average UK house price was £231,000 in November 2018.

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