House Price News
  More of the same for house prices in August, with the market continuing to slow as we reach the end of the traditionally quieter summer period. Nationwide reported a small fall of 0.1% and Rightmove’s asking prices were down by 0.9%. Rightmove points out that it is a smaller than average fall for August, which is normally around -1.2%. Within both sets of figures, it’s a mixed picture, though. There are some hotspots around the country, especially in the Midlands, where annual growth is rising twice as fast as average. In contrast, prices continue to struggle in the inner London boroughs, which were down by 2.9% for the month, but were up in the more eastern areas, such as Hackney (+1.5%), Redbridge (+0.7%) and Bexley (+0.3%).

Robert Gardner of Nationwide says,

“The annual pace of house price growth moderated to 2.1% in August, down from 2.9% in July. The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent with signs of cooling in the housing market.”

One the key drivers of house prices is the economy and the latest data shows it is performing better than expected - unemployment is falling, hitting a 42 year low at 4.4%. Manufacturing is growing at its fastest pace for seven months and, according to the BRC (British Retail Consortium), retail sales increased at their fastest rate of the year in August - up by 2.4%. In addition, we are now moving out of the summer lull into one of the busier periods of the year, as buyers return refreshed from their holidays and hoping to move to a new home before Christmas.

Despite the positive economic data, Brexit is still acting as a drag on the housing market and a recent survey by RICS shows that less homes are now achieving their asking prices.

Their members reported in July that homes at the top end of the market (those listed at more than £1 million) saw the greatest deviation from their initial asking prices, with 68% of respondents reporting sales prices coming in below it. While this is not uncommon in a flatter market, 33% of respondents said the agreed price was up to 5% below the asking price and 26% reported they were between 5% and 10% under.

When RICS’s members were asked about their thoughts on the future direction of the property market, most said they were expecting a continuation of the current flat trend for the next three months. Over the next twelve months, they were considerably more optimistic, with a net balance of +28% (of their members) predicting an increase in prices.

The most up to date indices - Nationwide and Rightmove - both show prices fell in August, but only very slightly. And, looking back at last year, those figures have the tendency to go positive again in September, as the market comes back to life.
Nationwide: Aug: Avge. price £210,495. Monthly change -0.1%. Annual change +2.1%
Halifax: July. Avge. price £219,266. Monthly change +0.4%. Annual change +2.1%
Land Registry: June: Avge. price £223,257. Monthly change +0.84%. Annual change +4.87%
Hometrack UK City Index: July: Avge. price £252,700. Quarterly change +1.6%. Annual change +5.3%
Rightmove: Aug: Avge. price £313,663. Monthly change -0.9%. Annual change +3.1% (asking prices on Rightmove)

From September 30th tougher lending criteria will be applied to buy to let loans and many experts fear this will push up rents and reduce rental stock.
At the start of the year, affordability tests had already been tightened to take into account the changes in tax relief for mortgages and whether a borrower would still be able to service the loan if interest rates hit 5.5%. Now lenders will also look at the financial health of the borrower’s entire property portfolio rather than just the one they are lending against.
It means that many landlords will either have to offload rental properties that fail to produce sufficient yields or increase their specifications and rents to ensure they do. Either way, it is likely to produce considerable upward pressure on rents.
In other news, it seems that the Bank of Mum & Dad is not only helping their children with the purchase of their homes, it is helping to pay their rent, too. Research by Legal and General reveals that 10% of renters have had help from their parents for their rental deposit, 6% had help with their moving expenses and 5% with their letting agent fees. Legal and General estimate parents have subsidised their children's rent by £626 million in London alone.

Article by Simon Cairnes




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