Jan 1, 2017 - The rental market is less volatile than the sales market. The ONS index ... Figure 4 â Survey data sugge
January 2017
UK Housing Market Update What the lead indicators tell us this month
Savills Research UK Residential
Residential transaction volumes have stabilised and house prices are likely to be static in 2017 House price growth has slowed substantially over recent months. This has been most noticeable in London and the South East. However, Nationwide reported 0.8% growth in UK house prices in December after two months of no growth. This may be the first sign of the strengthening price growth anticipated by the RICS survey, but it is only one month of data. Any current price growth may be short-lived. Consumer confidence stayed robust through to the end of 2016 despite the uncertainty presented by Brexit. It is anticipated that 2016 will have seen the strongest growth in consumer spending for nine years. However, there are growing signs that consumers will find life much tougher in 2017. Recent employment data has been weak and the expected rise in inflation is starting to come through with wages unlikely to keep pace. In December, the Bank of England Monetary Policy Committee voted unanimously to keep the base rate at 0.25%. Mortgage rates have continued to fall and approvals have returned to pre-referendum levels. The RICS reported no change in the number of properties coming to the market in November, while demand levels rose slightly. This matches our expectation that there will be very little change in house prices either up or down in 2017. Despite recent stability, we expect transaction volumes to fall in 2017. The pattern of price growth across the country has continued to shift. Central London continues to see very slow growth with slight falls in some areas, whilst the strongest growing markets are some of the lower value towns in the south east – Romford, Grays and Luton. The rental market is less volatile than the sales market. The ONS index of rents currently being paid shows annual rental growth running at 2.3% in Great Britain in November. Homelet and Countrywide publish indices of newly agreed rents, showing similar levels of annual rental growth at 3.1% and 2.0% respectively. Both report that London saw the weakest rental growth in the year to November, with Countrywide showing small falls. There is no consistency between sources on which region saw the strongest rental growth over the same period. Figure 1 – Average price versus 2007/8 peak, Sep-16
Figure 2 – Average price growth, year to Sep-16
Source: Savills using HM Land Registry and Registers of Scotland (6 month smoothed)*
January 2017
Market Briefing | UK Residential
80 60
This suggests that there is some upward pressure on prices. Activity levels are likely to remain subdued.
40 20 0 -20 -40
New buyer enquiries
-60
New instructions
Dec-16
Jun-16
Dec-15
Jun-15
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Dec-07
Dec-06
Jun-08
-80
Jun-07
The number of surveyors reporting growth in new buyer enquiries has continued to increase, having been in positive territory since September.
Figure 3 – Supply is static, but demand is slowly increasing
Net balance of opinion
The November RICS Survey shows no change in the number of new instructions being received by surveyors to sell homes. This measure has mostly shown falling numbers of instructions since 2014.
Source: RICS (seasonally adjusted)
The increase in 3 month Nationwide price growth, from zero in November to 0.8% in December, may be the first sign of this strength in the house price indices.
6%
60
4%
40
2%
20
0%
0
-2%
RICS net balance of opinion
The number of surveyors reporting a rise in house prices over the last three months has increased strongly since the June low.
Figure 4 – Survey data suggests house price growth is strengthening
Rolling 3 month house price growth
The RICS Survey has at times been a good forward indicator of house price movements.
-20
-4%
RICS (right axis)
-40
-6%
Nationwide
-60
-8%
ONS
-80
Dec-16
Jun-16
Jun-15
Dec-15
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Jun-09
Dec-09
Dec-08
Jun-08
Dec-07
Jun-07
-100
Dec-06
-10%
Source: RICS, Nationwide, ONS
110%
South
Midlands
North
London
Wales
Scotland
100% Great Britain
90% 80% 70% 60% 50% 40%
Jun-16
Dec-15
Jun-15
Dec-14
Jun-14
Jun-13
Dec-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
30%
Jun-06
Transaction volumes in London have fallen sharply and are now at their lowest level since August 2013.
120%
Dec-05
Since the Q1 2016 peak, annual transaction volumes have gradually declined, but some of this effect is due to purchases having been brought forward to avoid the tax rather than a general reduction in activity.
Figure 5 – Transaction volumes are falling in all regions
Annual number of transactions versus 2002-7 average
Nationally, transaction volumes have now been stable since June. Annual transaction volumes in England & Wales have been distorted by the spike in purchases of ‘additional homes’ in Q1 2016 before the additional SDLT came into effect in April.
Source: Savills using HM Land Registry and Registers of Scotland 2
January 2017
Market Briefing | UK Residential Recent house price growth
UK
m/m
Nationwide q/q
y/y
ONS (to Oct-16)
(to Dec-16)
(to Dec-16)
(to Dec-16)
m/m
q/q
Savills* (to Sep-16) y/y
m/m
q/q
y/y
0.8%
0.7%
4.5%
0.6%
1.0%
5.8%
-0.2%
0.8%
5.7%
London
n/a
0.3%
3.6%
-0.2%
-0.2%
6.2%
0.1%
0.7%
8.9%
South East
n/a
1.3%
6.9%
0.9%
0.9%
8.0%
-0.5%
0.9%
9.4%
East of England
n/a
3.0%
10.1%
1.3%
2.4%
10.3%
0.4%
2.1%
11.8%
South West
n/a
0.7%
4.5%
0.6%
1.5%
6.3%
0.2%
1.8%
7.3%
East Midlands
n/a
1.0%
4.9%
0.9%
2.1%
6.6%
-0.1%
0.6%
6.0%
West Midlands
n/a
0.4%
4.1%
0.0%
1.2%
5.4%
-0.2%
1.2%
5.5%
North East
n/a
0.7%
0.0%
0.2%
-0.2%
1.7%
-0.6%
0.4%
1.9%
Yorks & Humber
n/a
0.6%
4.0%
0.2%
0.3%
3.6%
-0.1%
-0.6%
2.7%
North West
n/a
0.6%
3.7%
-0.1%
0.0%
3.8%
0.2%
1.7%
5.1%
Wales
n/a
1.2%
2.4%
1.4%
1.1%
4.9%
0.9%
1.7%
4.9%
-1.5%
2.6%
Scotland n/a 0.2% 2.2% 1.0% 1.6% 3.1% -1.5% Source: Savills using HM Land Registry and Registers of Scotland*, Nationwide (seasonally adjusted), ONS
Five year forecasts (first published November 2016) 2017
2018
2019
2020
2021
5-year
UK
0.0%
2.0%
5.5%
3.0%
2.0%
13%
London
0.0%
3.0%
4.5%
2.0%
1.0%
11%
South East
2.0%
2.0%
6.5%
4.0%
1.5%
17%
East of England
2.5%
2.5%
6.5%
4.0%
2.0%
19%
South West
1.0%
2.0%
6.0%
3.0%
1.5%
14%
East Midlands
0.0%
2.0%
5.5%
3.5%
2.0%
14%
West Midlands
-0.5%
2.0%
5.0%
3.5%
2.0%
13%
North East
-2.5%
1.5%
5.0%
2.0%
3.0%
9%
Yorks & Humber
-2.0%
1.5%
5.0%
2.5%
2.5%
10%
North West
-2.0%
2.0%
5.5%
3.0%
3.0%
12%
Wales
-2.0%
1.5%
5.0%
2.5%
2.5%
10%
Scotland Source: Savills
-2.5%
1.5%
5.0%
2.0%
3.0%
9%
Contacts
Website
Holly Titford Analyst
[email protected] 0207 299 3077
Chris Buckle Associate Director
[email protected] 0207 016 3881
www.savills.co.uk/housing-market-updates
*Savills index is an unadjusted repeat sales index based on HM Land Registry and Registers of Scotland price paid data. Note that Savills national index (labelled UK) is for Great Britain, not including Northern Ireland. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
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