The housing market has started 2018 much like at the end of 2017, with fewer enquiries, instructions and sales but house prices still continuing their upward trend over the year.
Simon Rubinsohn, RICS chief economist, says: “Lack of inventory on agents’ books continues to provide a major challenge with the number of valuations being undertaken not suggestive of a pick-up in new supply anytime soon.”
However, prices have continued to go up – both in terms of the asking prices that buyers are seeking – Rightmove says they increased by 0.8% between January and February 2018 – and the price paid for properties, which is up by a more meagre 0.4%, according to latest Land Registry data – but this is for December 2017. However, the message to sellers is clear – they need to be more realistic about their asking prices if they want to guarantee a sale.
Jonathan Hopper, managing director of Garrington Property Finders, comments: “Buyers should be wary of overpaying, and sellers need to be pragmatic in their pricing if they are to achieve a sale to Britain’s committed but vigilant buyers.”
Key stats at a glance
- UK House Price Index for December 2017: House prices up by 5.2% annually. Average price of a UK property: £226,756. Monthly change: +0.4%.
- Halifax House Price Index, January 2018: House prices up by 2.2% annually. Average price of a UK property: £223,285. Monthly change: -0.6%.
- Nationwide House Price Index, January 2018: House prices up by 3.2% annually. Average price of a UK property: £211,756. Monthly change: +0.6%.
- Rightmove House Price Index, February 2018: Asking prices up by 1.5% annually. Average asking price of a UK property: £300,001 Monthly change: +0.8%.
New sellers show ‘cautious optimism’
Rightmove’s House Price Index for February reports that average asking prices were up by 0.8%, or by £2,414, between January and February 2018. Over the year, asking prices rose by just 1.5% – in part diluted by London house prices falling by -1% since February 2017. It also reports a busy start to the year, with a record over 141 million visits to the site in January.
Miles Shipside, Rightmove director and housing market analyst, says: “This month’s rise of 0.8 % is well below the 1.6 % monthly average at this time of year over the past 10 years, and it is wise for sellers to be cautious and not to over-price, given stretched buyer affordability.”
Rightmove reports that some areas are selling much quicker than others. Looking at properties that have been newly listed since October 2017 and have been marked as sale agreed, it reveals that six out of the top 10 fastest selling locations are in the East or West Midlands. However, the UK’s hot spot is Livingston in Scotland, with houses selling, on average, in just 17 days.
Mr Shipside adds: “The average price of newly marketed property in the Midlands is up by over 5% compared to a year ago – a marked contrast to parts of London and its commuter belt.”
House prices up by £12,000 over the year
The latest figures from the UK House Price Index (UK HPI) for December reveal that property prices went up by 5.2% over the year. It puts the average property in the UK at £226,756.
While all the regions saw house prices go up over the year to December 2017, the biggest hike was in the South West – up by 7.5%. London witnessed the lowest annual house price growth at 2.5%, with an average house price of £484,173. Yorkshire and Humber came a close second with house price growth at just 2.8%. The South East was the only region that saw prices drop between November and December 2017, showing a -0.5% fall. Prices have risen annually by 5% in England, with an average property price of £243,582.
Paul Smith, chief executive of haart estate agents, comments: “House prices soared in December, reaching £12,000 higher than the same time last year. Putting this into perspective, this is almost half the average UK annual salary – a sure sign that we should hold our confidence in the market.
“Even London bounced back on the month in December. Buyers here were paying £4,000 more to buy a home than those in November – an increase matched only by the North East. Perhaps an early indication of where the stamp duty cut will have the most profound effect.”
Shortage of properties ‘will underpin house prices’
Halifax reports annual house growth to January of 2.2%. It says that house prices fell by -0.6% between December 2017 and January 2018 – the same drop as in the previous month, with the average price now £223,285.
Russell Galley, managing director of Halifax, says that despite a slowdown in the market, a shortage of housing will help prop up prices.
He says: “Annual house price rises have slowed from 2.7% in December to 2.2% in January – the lowest rate since July last year. We’ve seen a monthly decline as well as the quarterly rate of growth flattening out.
“Although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages. Additionally, it’s still too early to see any impact for first-time buyers from the abolition of stamp duty on purchases of up to £300,000, which was announced in the November Budget.
“Despite the recent rise in the Bank of England Base Rate, mortgage rates are still very low. This, combined with an ongoing acute shortage of properties for sale, will continue to underpin house prices over the coming months.”
But Jeremy Leaf, a north London estate agent and a former RICS residential chairman, says that the market is doing better than Halifax’s figures suggest.
“The Halifax numbers are a little historic. At the sharp end of the market, we’ve noticed better-than-expected viewings but won’t know whether this interest will translate into confirmed sales for the next few weeks at least,” he says.
“Prospective purchasers seem to be taking confidence from recent encouraging news about the economy and continuing low interest rates.
“Once again the market is showing considerable resilience and little sign of a larger correction. Nevertheless, sellers still have to be realistic and particularly recognise the importance of setting sensible asking prices if they are to generate offers.”
‘Surprising’ house price growth
Nationwide reports that the annual rate of house price growth went up by 3.2% in January 2018, with prices up by 0.6% over the month and an average house price of £211,756.
Robert Gardner, Nationwide's chief economist, says that he is “a little surprised” at how fast house prices have risen, given the squeeze on household incomes and a decline in mortgage approvals during December.
He says: “Activity has been subdued on both the demand and supply side of the market. The flow of properties coming on to estate agents’ books has been more of trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.”
However, Sam Mitchell, chief executive of online estate agent HouseSimple.com, believes that it is not just a lack of supply that is propping up the market.
He says: "Across the UK, there are micro property markets seeing healthy price growth because houses are affordable and job prospects are good. Thriving regional business hubs are attracting skilled workers, many from London, because among other things, homeownership is a reality.
"The UK property market is no longer all about London, which is no bad thing, as the impact of a hard-Brexit is likely to hit the capital harder than anywhere else in the country."
Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.
Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.
Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90% of the market.
UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.