In the year to end May 2018 new build house prices rose on average by 5.8% across the UK which is down on last year’s figure of 10.2%, according to the LSL New Homes Index.
The LSL New Homes Index used three indices, Nationwide, HM Land Registry / ONS and LSL Acadata, to create an average year on year price change based on the most recent information they have made available.
The combined result shows that the North East is still experiencing sales at an average price that is 6% below the 2007 to 8 peak. But the three indices are all showing relatively strong price growth in this region which is now averaging 4% year on year growth.
At the other end of the spectrum London has experienced strong and sustained house price growth since the last peak, having risen by 62% over the period to the present day. However, whilst year on year prices were increasing by 15% two years since they have declined rapidly in recent times and the average year on year figure is now near -1%.
In between these extremes it is clear that the property market is showing its traditional North/South divide and that the Northern regions are seeing stronger and rising growth whilst the Southern regions are now cooling down. The London market is probably now an exception as its growth to become the leading financial centre and the influx of overseas money have caused prime London to disengage from the wider UK property market.
But generally speaking in past cycles, inflation has led to wage growth and eventually this has made property look cheap, so demand has increased and prices have risen. But we are now in a low inflation economy and wage growth is at best sluggish. The main thing that has changed is in the past decade is affordability, whereby low interest rates and some limited wage growth have created some stimulus to house price growth.
But whilst some growth is now happening in the North, it doesn’t seem likely that this will drive up into the double-digit growth that was seen in previous cycles. And as always, the main driver of the housing market is sentiment, and the over-riding feeling at present seems to be caution.
The recently published RICS May 2018 Residential Market Survey reports the supply of new sale instructions edging into positive territory for the first time in 27 months. However, the availability of stock for sale on estate agents books remains close to an all-time low. But the general feeling amongst Chartered Surveyors is that the market will remain flat. The regional pattern of house price change that they report is in line with that reported above.
At the start of the year the RICS noted quite a sharp decline in buyer enquiries but this has now largely tailed off and six of the 12 regions/countries reported on saw an increase in buyer enquiries over the month.
Respondents to the RICS survey reported that agreed sales had remained steady and that they expected this situation to continue into the coming months. Also included is a chart showing the number of new homes transactions up to November 2017.
The number of transactions now seem to be levelling out (following six years of steady growth) at around 9,000 transactions per month. It is likely to be of concern to the Government though as it considers the best way to achieve its target of 300,000 new homes a year. Data from the same source shows the average selling price of new build detached houses which of course dipped when the market crashed a decade since but has steadily increased since. The third edition of the PRSim-LSL Tenant Survey has continued to challenge rental market myths. Current findings reveal that renting spans all lifestages as people seek financially manageable housing solutions.
They found that whilst some priorities do differ between lifestages others such as security remain constant. House builders were advised to deliver amenities to enhance day to day life such as outdoor space and play areas. They were also encouraged to communicate with their future tenants to allow them to feed into the design process.