Housing transactions see 4% rise as market grows slowly
Despite average house prices seeing their second monthly fall in succession during April, the market continues to inch forward.
Peter Williams, Chairman of Acadata and John Tindale, comment: "In April, the average house price in England & Wales fell by a modest -£180, or -0.1%, to £302,122. This was the second month in succession that average prices have fallen marginally, although in March the price fall was even less, at -£72. Indeed, over the last twelve months the movement in prices from one month to the next has been relatively subdued, with a maximum growth rate of ±0.6%. Thus the change in the average price over the last twelve months totals a relatively minor +£690, or +0.2%, suggesting that all is quiet on the housing front.
However, the national picture of a flat housing market obscures the movements that have been taking place at regional level. England can be divided into distinct areas, with four southern regions all experiencing falling prices. In contrast to this, Wales, the Midlands and the north of England (with the notable exception of the North East) are experiencing rising prices, with the likes of Merseyside and the West Midlands conurbations seeing price growth of +5.1% and +4.2% respectively. At the same time, Greater London prices are falling by -1.1%.
The Housing Market
The latest Bank of England Inflation report (May 2019) provides ample corroboration of the trends Acadata has been reporting on for some months now. Commenting on the slow-down in house prices (according to the Bank the slowest rate of inflation since 2013), the report links this to Brexit related uncertainty, affordability constraints, policy impacts on Buy-to-Let and the increase in housing supply. The Bank suggests that house price inflation and housing investment growth “are expected to fall further in the near term”, but that “both are expected to pick up as headwinds from uncertainty dissipate and stronger income growth supports the demand for housing”. Clearly, much depends on an early resolution to Brexit, and although there does seem some renewed momentum, the “near term” could be some while yet.
However, there are a number of positives. First time buyer activity is strong, supported by the Bank of Mum and Dad alongside Help-to-Buy, and in the context of a contracting Buy-to-Let market. The Residential
Landlords Association is reporting that a quarter of its members were planning to sell at least one property in the next 12 months. The lending market has moved from funding for purchases to re-mortgages. These changes have allowed more FTBs to enter the market and to negotiate lower prices in the absence of stronger competition. It is clear from a number of market commentaries that sellers in some regions, notably London, are dropping prices in order to secure early sales. However, as we explain later, only a minority of boroughs are showing increases in transactions at this stage.
From a government perspective, this puts continued pressure on the issue of the future of Help-to-Buy. It is evident that thought is now turning to alternatives in order to maintain the forward momentum in the market, and to prevent the build-up of negative sentiment towards the government in the housing arena. In addition, of course, there is the question of Stamp Duty income. The latest statistics show this has been falling, reflecting the market conditions discussed above - though it is also the result of taking Wales out of the statistics since a new system has been put in place there. Interestingly, only 65% of transactions were then reported as liable for Stamp Duty in the first quarter of 2019, reflecting the rise in the number of exempt first time buyers.
All-in-all, the market continues to present a complex and changing landscape which requires the kind of detailed analysis and assessment presented here. Top-line data about overall trends will not necessarily be mirrored in many localities.
In April 2019, there were an estimated 64,000 transactions – based on Land Registry counts for England & Wales – which is a -10% fall on our estimated March total of 71,000 sales. However, a seasonal fall in sales volumes of -8.8% would be expected in April, based on data for the last eight years (excluding 2016), so the decrease of -10% represents a relatively minor -1% reduction in transactions on a seasonally-adjusted basis. Indeed the estimated 64,000 sales in April 2019 are +4% higher than one year earlier, suggesting that the market is growing - albeit slowly.