Where next for UK house prices? – The Property Chronicle
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Where next for UK house prices?

The Analyst

Today has brought a flurry of information on the state of play in the UK housing market as we wait to see how the slow sown in house price growth is developing. We start by noting that according to the official series things may have changed a little.

Average house prices in the UK increased by 1.3% in the year to August 2019, up from 0.8% in July 2019 (Figure 1) but remain below the increases seen this time last year. Over the past three years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.

As someone who welcomes the fact that UK wage growth is now well above house price growth it is a shame that house price growth picked up. But we do at least have wages growth around 2% higher than house prices. That will take quite some time to fix the imbalances bit at least they are not still growing.Indeed the place where things are worst on the affordability front is improving faster than that.

he lowest annual growth was in London, where prices fell by 1.4% over the year to August 2019, followed by the South East where prices fell by 0.6% over the year.

This weekend has seen a swing in both directions from the Financial Times. First there is a switch to Paris.

Why London’s bankers cannot resist Paris property

Then er perhaps not.

David Livingstone, the new head of Citigroup in Europe, said the City of London will remain the region’s top financial centre regardless of the outcome of Brexit.

For balance here is the other side of the coin.

House price growth in Wales increased by 4.5% in the year to August 2019, up from 3.8% in July 2019, with the average house price at £168,000.

Rightmove

They have joined the fray this morning via Reuters.

Asking prices for British houses put on sale in October showed the smallest seasonal increase since the financial crisis, as all but the most determined sellers waited for greater certainty over Brexit, industry figures showed on Monday.

Rightmove said that the average asking price for homes sold via its website was 0.6% higher in October than in September, well below the average 1.6% rise seen for the time of year and the smallest increase since October 2008.

Reuters seemed a little less keen on this bit.

Average asking prices in October were 0.2% lower than in October 2018, compared with an annual rise of 0.2% in September.

Views differ on the 2016 referendum but personally I welcome this consequence.

Britain’s housing market has slowed since June 2016’s referendum on leaving the European Union, and official data last week – based on completed sales – showed annual house price growth of 1.3% in the year to August, up from a near seven-year low of 0.8% in July.

LSL Acadata

LSL operate rather a different system to the asking price driven Rightmove and in fact Rightmove’s methodology seems to have taken a further downgrade according to Henry Pryor.

“..average asking price for UK homes sold..” I think it’s for homes listed, it includes the 50% of homes that don’t sell.

LSL however use this.

The LSL/Acadata house price index provides the “average of all prices paid for houses”, including those madewith cash.

As to the detail there is this.

Although average house prices in England and Wales climbed by a marginal £113 in the month of September, this was not a sufficiently large increase to avert a further decline in prices over the last twelve months, with the average annual price over this period falling by some -£1,100, or -0.4%. This was the eighth month in this calendar year in which the annual rate of growth has been negative.

In terms of a trend their accompanying chart shows that UK house price growth was of the order of 9% as 2016 began and has been heading lower ever since. So it was heading lower before the Brexit vote partly because if I recall correctly some tax changes for landlords which inflated things then deflated them.

As to the situation regarding real movements I am afraid that LSL then dig a hole for themselves. You can ( and I often do..) argue that the imputed rent driven CPIH is a woeful measure anyway but surely one should use wage growth here.

if we exclude London and the South East from our national statistics, price growth in England & Wales has remained positive over the last twelve months, albeit at a diminishing rate, such that by the end of September the rate of growth was a flat 0.0%……..It is currently only Wales where house price growth is ahead of CPIH. So we have marginal nominal gains alongside real terms falls, although of course the picture varies by type and area.






The Analyst

About Shaun Richards

Shaun is an independent economist who studied at the London School of Economics. His speciality is monetary economics. Shaun worked in the City of London for several investment banks and then on his own account over a period of 15 years. After initially working in the government bond department at Phillips and Drew Ltd. he moved on into the derivatives arena with options of all types being a speciality.

Articles by Shaun Richards

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