Weekly Summary: 23rd October 2020

DATA: HMRC report transactions back to normal levels but no sign of boom

Transactions in September were just 0.7% below the same month in 2019 but were expected to be slightly higher. This may reflect the reported delays in reaching completion.

DATA: ONS report UK house prices rose 2.5% in year to August

The ONS index is based on completed sales so it may be around November/December before we see the higher growth rates reported by other indices.

DATA: Rightmove report asking prices rose 5.5% in year to (mid) October

The Rightmove index is a consistent leading indicator though could be starting to show sellers’ expectations rather than the buyers’ reality. They also report more sales agreed in the year to date than in the same period in 2019. However, there are some signs of activity slowing in October.

NEWS: Yomdel property sentiment tracker shows demand slowing

The tracker is based on activity in live chats on estate agents’ websites. It shows the big increase in both buyer and seller activity over the summer but has now started to fall back. Despite this fall, buyer and seller activity are both around 20% higher than normal levels.

NEWS: UK Finance report 162,000 payment deferrals in place, down from 1.8 million in June

Payment deferrals are down but there are other supports in place for stretched borrowers including extending the mortgage term, moving to interest only, or capitalising the interest.

REPORT: BPF report on housing and care for older people

The report provides a useful summary on the state of purpose-built housing for older people. While increasing the availability of purpose-built housing is important, the reality is that most people will age in their existing homes. We explored this issue in our recent Housing Conversation with Henry Smith from The Centre for Ageing Better.

REPORT: HBF survey of SME housebuilders suggests a “tough battle ahead”

The results highlight the challenges faced in the current economic environment along with the usual complaints about the planning system and changes to Help to Buy equity loan.

REPORT: CPRE suggest there’s enough brownfield land for 1.3m homes

Brownfield land makes an important contribution to housing supply but there isn’t enough to meet appropriate long-term levels of housing supply. Not all brownfield land will be appropriate for housing and changing housing preferences post-pandemic could have a big impact on the already significant shift in housing delivery towards lower density areas.

REPORT: Knight Frank report identifies areas for buying development land

The report is an interesting insight into their research for supporting land buying strategy.

Chart of the Week

There are widely reported delays in sales reaching completion at the moment. This is not surprising given the higher than normal levels of activity and the challenges faced by working from home and other disruptions. Data from Zoopla suggests that normally around two-thirds of sales agreed have completed three months later. We have combined this with sales agreed data to create a simple model showing when the sales agreed during the summer should reach completion as per the chart opposite. September’s transactions figure was in line with recent years and slightly lower than expected by the model. Actual sales over the rest of the year look set to be 30-50% above normal levels if they all reach completion.

Weekly Summary: 12th October 2020

DATA: ONS report a 2.1% monthly rise in GDP during August

This was lower than expected by many with GDP still 9.2% below February’s level.

DATA: Halifax report a 7.3% annual rise in UK house prices in September

A 1.6% monthly rise during September increased annual growth from the 5.2% reported in August to 7.3%. That’s the highest rate since June 2016.

DATA: ONS report a 2.3% annual rise in UK house prices in July

This data lags the mortgage approval indices as it is based on completions. We will have to wait several months to see if the current high house price growth reported in other indices feeds through to the ONS index. Also worth noting is that, in recent months, the ONS has been revising downwards the first reported price growth figure in subsequent releases.

DATA: BoE report continued increases in mortgage rates during September

See Chart of the Week for more information.

REPORT: RICS report “Housing market activity continues to advance at a strong pace”

They report “Survey metrics on demand, sales and instructions remain firmly positive” and “House price growth accelerating right across the UK”. The London rental market is the one weak market with falling tenant demand and negative expectations for rents.

REPORT: UK Housing Review 2020 released

The full report is available to purchase but several of the commentary chapters are available to read for free here and all the data tables are available here.

REPORT: GLA launch Housing in London 2020

The report contains a wealth of fascinating data and analysis on the state of London’s housing.

REPORT: Shelter publish “Building Our Way Out

The report suggests that investing in new social rented housing could help boost the economy, preserve capacity in the housebuilding industry, and help solve the “housing emergency”. The current government appear fixated on homeownership and it appears unlikely they would take this approach unless they absolutely have to.

Chart of the Week

The latest Bank of England data on available mortgage rates showed another increase in average rates in September as concerns about the prospects for the economy and housing market continue. The cost and limited availability (as reported in this FT article) of higher loan-to-value mortgages are the most visible signs of the ongoing credit crunch. However, they are not the only effects of lenders’ risk aversion with any cause for concern (e.g. self-employed, in the furlough scheme, or use of payment holidays) reasons to avoid lending.

Weekly Summary: 5th October 2020

DATA: MHCLG report second quarter housebuilding stats for England

Despite methodology changes and the introduction of an index, this data undercounts actual housebuilding activity and creates confusion about the true number of homes built.

DATA: Nationwide report 5% annual rise in UK house prices

This was the highest rate since 2016 with the highest regional price growth in the South West and the lowest in Northern Ireland. The year-end national price change looks likely to be around this rate (5%) barring any further shocks to the market.

DATA: ONS slightly revise Q2 GDP in second estimate

The fall in GDP was revised down from -20.4% to -19.8%. It’s the largest quarterly fall since quarterly data was first published in 1955 and will be revised further in the future.

DATA: BoE report August mortgage approvals 29% higher than 2019

The Bank of England data was the first proper evidence that the summer boom is translating into actual activity. See the Chart of the Week for more detail below.

POLICY: MHCLG announce PDR must meet space standards

They say “All new homes in England delivered through any Permitted Development Right must meet space standards” which should’ve been required from the start.

NEWS: Boris Johnson promises to create “Generation Buy”

A newspaper interview suggests government is looking at long-term fixed rate high loan-to-value mortgages a bit like those recommended in this CPS report (PDF) and announced in the 2019 manifesto. There is also the suggestion of removing affordability stress tests at higher mortgage rates and a state guarantee. It is highly likely this would be a one-off gain in first-time buyers with long-term consequences due to higher house prices.

NEWS: Savills revise their house price forecasts upwards

Having forecast a 7.5% fall in prices in June, they’ve now revised their forecast to a rise of 4% this year and five year growth of 20.4% (15.1% previously). The press release stated “The pace of change in the UK housing market has taken us all by surprise over the past few months suggestion normal rules simply don’t apply”. For an alternative view our latest housing market commentaries look at why prices are rising and what could happen next.

Chart of the Week

The Bank of England reported a large increase in the number of mortgage approvals for house purchase in August. This was the first evidence of the summer boom in sales agreed reported by listing sites and estate agents in public data and it’s likely we’ll see the boom feed through to transaction data over the next few months. While approvals for house purchase rose well above their pre-pandemic level, the number of approvals for remortgaging are still 36% below February’s level. However, these numbers only reflect those involving a change in lender so this may be under-reporting true levels of activity.

Weekly Summary: 28th September 2020

DATA: Zoopla report house prices rose 2.6% in year to August 2020

They report the “Ongoing supply/demand imbalance supports headline growth rate” and note that, unsurprisingly given the mortgage crunch, there is a “Gap opening up in relative strength of demand between existing homeowners and first-time buyers”.

DATA: HMRC report 81,000 UK residential transactions in August

Transactions were 16% higher than the previous month but were still 16% below August 2019 levels. The high numbers of sales subject to contract reported over the summer should start to feed through to the transaction data over the next three months.

REPORT: ONS report on the energy efficiency of housing

Using Energy Performance Certificate data, they present a number of findings including that “new dwellings are more energy efficient than existing dwellings” though there has been no improvement to the median rating for both types in recent years.

REPORT: Centre for Ageing Better report “Millions in cold and damp homes could be at greater risk of COVID-19 this winter”

The report highlights that “Poor-quality housing has a profound impact on health” while the “COVID-19 pandemic has exposed and amplified housing-related health inequalities”. It also suggests that “Interventions to improve housing quality, both in and outside of the home can be a highly cost-effective means of improving health outcomes”.

REPORT: Affordable Housing Commission calls for “National Housing Conversion Fund to buy-up private housing for social rent

They suggest it would help “not only on the urgent need to increase social and affordable housing and rebalance the housing system, but also as a quick and cost effective way of supporting the economy”.

NEWS: Scottish Government to re-open First Home Fund in April 2021

The fund was a “£200 million shared equity pilot scheme to provide first-time buyers with up to £25,000” and will close to new applications on the 2nd October. However, the Scottish Government have announced it will reopen in the next financial year.

Chart of the Week

The plight of students starting university is all over the news and so it’s worth looking at the available data on where they live. The HESA data is self-reported so it’s not perfect. For example someone living in a private sector hall but via a nomination agreement might think they live in a provider maintained residence. However, it highlights the important patterns and shows that around 43% of first-years live in halls of residence compared to 15% of other years.

Weekly Summary: 21st September 2020

DATA: Rightmove report an annual rise in asking prices of 5% in September

This was higher than the 4.6% reported in August with annual price rises across all their market sectors and regions. See the Chart of the Week for more on their activity data.

DATA: ONS report an annual rise in house prices of 3.4% in June

This was higher than the 1.1% reported for May, though that was revised down from an initial estimate of 2.9%. Therefore it may be best to treat the latest month’s data carefully.

DATA: ONS labour market data shows weak state of the jobs market

There are early signs of rising unemployment: the number of payrolled employees fell; the claimant count rose; and redundancies are rising. However, average wage measures have started rising again, but this may reflect mix issues (higher earning older workers continuing to be paid and fewer lower earning new workers starting).

DATA: ONS rental index shows continued growth in August

However, the ONS index measures all rents rather than newly paid. Analysis by Zoopla shows rents are currently falling 3% year on year in London. It could be six months before this appears in the ONS data.

REPORT: Social Mobility Commission report on “The long shadow of deprivation”

They report that “The effect of deprivation in dozens of English local authorities is now so persistent that some families face being locked into disadvantage for generations unless the right action is taken”. They add “It is not a story of north versus south or urban versus rural; this is a story of local areas side by side with vastly different outcomes for the disadvantaged”.

ANALYSIS: Bank Underground blog concludes that first time buyers are increasingly richer than their cohort peers

While not a new finding on first time buyers (FTB), it’s great to see the Bank of England using their data for original research into the housing market. They also note that “slower than average income growth for younger workers have worked against FTBs” and “challenge the view that average FTB ages have got much higher”.

Chart of the Week

In today’s press release, Rightmove note that national sales agreed year-to-date are just 5% below last year’s level. The chart below shows the regional distribution with the East of England and South East already above. Meanwhile, the much lower numbers in Wales and Scotland may reflect their longer lockdown periods. Rightmove also state that sales agreed are “stronger for larger homes more than doubling in the largest ‘top of the ladder’ homes sector (+104 %), and growing strongly in the second stepper sector (+55%)”.

Weekly Summary: 14th September 2020

DATA: ONS reported a 6.6% monthly increase in GDP during July

However GDP was still 11.8% below February’s level and the same level as April 2013.

DATA: RICS report the “Sales market continues to show strong momentum with house price inflation now accelerating sharply”

The survey also reports continued rises in enquiries, new instructions, and sales agreed. However, London’s recovery appears to be weaker on some indicators with its lettings market especially weak due to rising supply and falling rents.

DATA: Bank of England & FCA release Q2 2020 MLAR statistics

The Mortgage Lenders and Administrators Return statistics provide a useful summary of mortgage market conditions. For more information check out the link above or Chart of the Week below.

DATA: MHCLG release Green Belt statistics for England

The release shows 1,615,800 hectares was designated Green Belt at March 2020. That’s around 12.4% of England’s land area and a 0.2% decrease on last year.

POLICY: MHCLG launch £12.2 billion Affordable Homes Programme

It runs from 2021 to 2026 and includes £700 million from the current programme. Government states that “around half of the new homes will be available for affordable home ownership” and a “Right to Shared Ownership will be available on the vast majority of rented homes delivered through the new programme”. It was accompanied by the announcement of a new model for Shared Ownership including reducing the initial share to 10% from 25%, allowing the purchase of 1% instalments, and a 10 year period where the landlord covers repair and maintenance costs.

POLICY: MHCLG announce that “Emergency legislation has increased notice periods to 6 months until at least the end of March 2021”

This will help many renters at threat of eviction but the government’s approach continues to be piecemeal and lacking in longer-term clarity for both landlords and tenants.

NEWS:  UCL report “shows potential influence of longer-term funding on affordable housing supply”

The research shows “the Government’s stop-start approach to grant funding has inevitably contributed to a more cautious approach by housing associations when it comes to building their development pipelines and limited the number of affordable homes they have been able to deliver”. The report suggests a long term approach with the duration of the funding programme doubled to ten years.

Chart of the Week

We will have to wait for the next quarter’s release to investigate what was happening in the mortgage market during the summer boom. In the meantime, last week’s data provides some interesting information including that in Q2 2020 the value of advances for most purchasers was 45% below Q2 last year but buy-to-let purchases was only down 27%.

Weekly Summary: 7th September 2020

DATA: Nationwide reported an annual house price rise of 3.7% in August

The mortgage approval based index continued the rebound in prices started last month with a 2% monthly increase. The index is now at an all-time high.

DATA: Halifax reported an annual house price rise of 5.2% in August

Their mortgage approval based index reported a 1.6% monthly increase leading to the highest growth since “late 2016”. The index also hit an all-time high.

DATA: ONS reported an annual house price rise of 2.9% in May

The ONS index is based on completions rather than approvals and this release continues the catch-up process due to the suspension of the index during the lockdown period. June data is due out next week (16th September).

DATA: Bank of England reported a spike in mortgage rates during August

Average rates on available mortgages spiked across all loan-to-value (LTV) ratios but particularly those at higher LTVs. See Chart of the Week for more detail.

NEWS: CMA launches enforcement action against housebuilders

“The CMA is launching enforcement action involving 4 leading housing developers it believes may have broken consumer protection law in relation to leasehold homes.” The four are Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey. However, the press release states “It should not be assumed at this stage of the CMA’s investigation that the businesses under investigation have been involved in any or all of the outlined practices”.

REPORT: Resolution Foundation investigate how big the negativity equity crisis will be and who will be affected if house prices fall

Using the OBR’s downside scenario for house price falls, they find that “12 per cent could fall into low or negative equity today compared to 15 per cent after the financial crisis”. They also find that “equity risk has migrated up the age distribution” and those “with equity risk now have higher income and wealth than those at risk after the financial crisis”.

Chart of the Week

There has been an ongoing credit crunch affecting the cost and availability of mortgages since the pandemic hit. It was initially blamed on the inability of surveyors to access homes during lockdown for the physical valuation required on higher LTV lending. However, it has since become clearer that it is a reflection of lenders’ attitude to risk during these uncertain times and the possibility of large falls in house prices once the various supports (furlough, mortgage payment holidays, possession moratoriums etc) are removed from the market.

Weekly Summary: 1st September 2020

DATA: Bank of England report mortgage approvals back to “normal” levels

The rebound in mortgage approvals for house purchase during July has seen them return to their recent average level. Approvals for remortgaging are still 25% below 2019 levels.

DATA: Zoopla report UK house price growth of 2.5%

They suggest prices are unlikely to fall this year and activity levels are at their strongest level for over five years. To explain this rebound they point out that “This is not just pent-up demand returning to the market. It also reflects the impact of a once in a lifetime reassessment of the nation’s housing needs in the wake of the 50+ day lockdown”.

DATA: UK Finance data on the largest mortgage lenders in 2019

They produced the annual update of mortgage lending by outstanding balances and gross lending for individual lenders. See Chart of the Week for more detail.

NEWS: Alasdair Rae launches his consultancy: Automatic Knowledge Ltd

Alasdair, a BuiltPlace member, has moved on from his job as a professor at the University of Sheffield to launch his own company offering data and spatial analysis.

Chart of the Week

The annual release of mortgage lending by UK Finance is a useful summary of activity by individual lenders. Lloyds Banking Group is usually the largest in terms of gross lending but continues to see falls in net lending (it has lower total outstanding lending every year). Meanwhile NatWest, Santander, Barclays, HSBC and Nationwide recorded the largest net increase in the value of their outstanding mortgages.

Weekly Summary: 24th August 2020

DATA: HMRC report continued recovery in UK residential transactions

They report transactions increased by 14.5% in July but are still 27% below July 2019 levels. This data is an estimate based on the first two weeks of July with the stamp duty holiday starting on the 8th. Therefore the data may be revised in future updates. See the Chart of the Week for more on housing market activity.

DATA: ONS resume publication of the UK House Price Index

They published data for April which showed a monthly fall of -0.9%, taking annual growth to 2.6%. The index will be published more regularly in coming weeks as they catch up with their regular schedule. The next release will be data for May on the 2nd September.

DATA: ONS report SDLT receipts increased 19% in July

Total stamp duty revenues on residential and commercial property are still 37% lower than July 2019 and are unlikely to recover given the current holiday on residential property.

DATA: MHCLG release land value estimates for policy appraisal 2019

The data is based on desktop surveys of a “typical” residential site in each local authority and it is important to read the guidelines before (mis)using this data.

POLICY: MHCLG – “Jenrick extends ban on evictions and notice periods”

MHCLG announced a last-minute 4 week extension to the eviction ban, taking the total ban to 6 months. In addition, 6 month notice periods will be in place until at least 31 March 2021. The Nearly Legal blog is worth reading for the concerns about this temporary solution.

REPORT: Homes For Later Living report calls for “government to set goal of building 30,000 new homes a year for ageing population”

Homes For Later Living represent around 90% of the market for owner-occupier retirement housing so it is no surprise they report “More than three million older people want to move to a smaller home but aren’t able to” and so recommend that more specialist retirement housing should be built. They also call for a permanent cut in stamp duty for people downsizing into specialist retirement housing. In reality, most old people will age in their existing homes and so more needs to be done to ensuring both existing and all new homes are appropriate for the ageing population.

Chart of the Week

There are widespread reports that housing market activity has rebounded over the summer and we discussed why this is happening in our latest market commentary. The Chart of the Week below shows Rightmove sales agreed were 38% above their 2019 level in July while last week’s HMRC transaction data showed a small recovery but still below 2019. However, it will take time for the sales agreed to reach completion and so the next test for how broad this recovery is will be in the Bank of England’s mortgage approval data next week.

Weekly Summary: 17th August 2020

DATA: Rightmove reports 4.6% annual rise in asking house prices

Although asking prices fell slightly compared to last month, the annual change rose to 4.6%. This is because the index is not seasonally adjusted and prices fell by less than they usually do in a typical August. Rightmove also reported the “number of monthly sales agreed is the highest that we have ever measured since we started tracking this figure ten years ago, up by 38% on the prior year”.

DATA: ONS first estimate of Q2 2020 GDP reported a 20.4% quarterly fall

With two quarterly falls in GDP the economy may now technically be in recession but the monthly GDP index reported 8.7% monthly growth in June. However, even on this measure, GDP is 16.8% below June 2019 levels. See the chart of the week below for more on GDP.

DATA: UK Finance report record low repossession numbers

They report that thanks to the industry moratorium on involuntary possessions, there were just “90 homeowner mortgaged properties and 130 buy-to-let mortgaged properties” taken into possession in Q2.

REPORT: RICS survey reports rebound in activity but longer term caution

They reported “All activity metrics point to a significant pick-up in July” and “The headline price growth indicator moves out of negative territory for the first time since March” but also that “Respondents envisage sales slowing at the twelve-month horizon due to the difficult economic climate”.

REPORT: Bank Underground blog looks at the age of first-time buyers

Looking at the number of first-time buyers in 2006, 2008, and 2018, they report “the age distribution of FTBs has moved much more up-and-down than side-to-side”. This suggests that there has been little catch-up amongst people who have missed out on buying their first home due to the credit crunch and stretched house price affordability.

REPORT: Resolution Foundation publish Q3 2020 Housing Outlook

They suggest that “while some might see anticipated house price falls as a potential opportunity for young people to get onto the housing ladder, the Office for Budget Responsibility’s house price scenarios suggest otherwise.” Their analysis shows that even if house prices were to fall, the deposit requirement for first-time buyer would be similar.

Chart of the Week

House prices crashes and recessions have tended to go hand-in-hand in recent decades but will the massive collapse in GDP lead to a massive correction in house prices? While the historic trend suggests so, the housing market has proven remarkably robust so far. However, as furlough ends and job losses mount, it looks likely that the market will weaken.

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