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.

Weekly Summary: 10th August 2020

DATA: Halifax report UK house prices rose 1.6% in July

The monthly rise led to an increase in the annual change to 3.8% (2.5% previously) and all major house price indices are now reporting faster price growth following the end of lockdown with the exception of the ONS index which is yet to resume publication.

DATA: Zoopla report a “two-speed “ private rental market in Q2 2020

The data showed London rents falling (1.4% p.a.) while rents across the rest of the UK have continued rising (2.2%). Zoopla suggest rents in London could fall by up to 5% this year.

POLICY: Government launch Planning for the Future consultation on their proposed reforms to “speed up and modernise the planning system”

Perhaps more evolutionary than revolutionary, these proposals include some good ideas, interesting ideas and potentially dangerous ideas. There also appears to be little that will substantially change the way the land and housebuilding markets work. Check out our Housing Conversation with Philip Barnes for some more discussion of what it all means.

POLICY: MHCLG publish proposals to “improve the effectiveness of the current planning system”

These include “changes to the standard method for assessing local housing need” which are discussed in the Chart of the Week below, “securing of First Homes through developer contributions”, “supporting small and medium-sized builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing” and “extending the current Permission in Principle to major development”.

REPORT: MHCLG publish research on developer contributions in 2018-19

The research found the “value of developer contributions agreed in England during the financial year 2018/19 was £7bn”.

REPORT: GLA research looking at intermediate housing in London

They report “the number of intermediate homes starting construction each year in London has more than doubled in eleven years” and  that “shared ownership is generally only affordable to those at the upper end of the income eligibility bands”.

REPORT: Savills report 48,000 completed Build to Rent homes

The Build to Rent market remains a small fraction of the wider private rented sector but with 34,000 homes under construction it will continue to growth. For a more detailed discussion of this market please check out our Housing Conversation with Richard Berridge.

Chart of the Week

Today’s chart comes courtesy of Lichfields who have run the numbers on the proposed new Standard Method of calculating housing need. Check out their analysis for the numbers by local authority. The new approach leads to a big increase in the targets for London and the South East and, although higher than the current approach, targets that are still below recent delivery levels in the north of England. It remains to be seen how environmental and other development constraints will be applied and what the impact will be.

Weekly Summary: 3rd August 2020

DATA: Nationwide report UK house prices rose 1.7% in July

This reverses some of the prices falls they reported in recent months with the annual change now 1.5% (previously -0.1%). See the Chart of the Week for more information.

DATA: Zoopla report UK house prices rose 2.7% in June

They also reported “year to date volume of sales agreed are 20% lower than in 2019” and they expect “sales volumes for 2020 to be 15% lower than 2019, a much improved outlook than a few months ago.” See the Chart of the Week for more information.

DATA: Bank of England mortgage approvals for house purchase rise 331% in June compared to the month before

Despite the large bounce back, mortgage approvals for house purchase are still 39% below last year’s level while mortgage approvals for remortgage are 23% below.

DATA: MHCLG report the number of Energy Performance Certificates (EPCs) on new build homes fell 49% in Q2 2020

EPCs have been a good leading indicator for total new supply (completions, conversions, change of use etc) and the latest weekly data from MHCLG shows numbers have now recovered back to normal levels.

POLICY: There were newspaper reports over the weekend that MHCLG will publish their paper on reforms to the planning system this week

We will avoid commentating until we have seen the detail.

POLICY: MHCLG announce a small extension of Help-to-Buy Equity Loan

The deadline for new homes being finished under the existing scheme has been pushed out from the end of December to the end of February but the end of March deadline for legal completion remains the same. The scheme continues as planned from April 2021 with regional price caps and restrictions to first time buyers.

REPORT: Transparency International UK report on corruption risks in major planning decisions

In their research looking at a sample of 50 councils in England, they identified five key corruption risks relating to councillors’ involvement in major planning decisions: Opaque lobbying, Bribery & excessive gifts/hospitality, conflicts of interest, abuse of the revolving door, and weak oversight. They recommend increased transparency, tighter rules and strengthened oversight of councillors conduct and engagement with developers.

Chart of the Week

The divergence in house price measures has generated debate with Nationwide reporting annual prices falls, Halifax showing monthly falls but continued price rises over the year, the ONS index suspended, and the Zoopla/Rightmove indices reporting annual house price growth. With the rebound in the latest Nationwide data, it appears the lenders’ indices have been as much a reflection of their risk management during the lockdown period as a indication of what buyers are prepared to pay. House prices look set to continue rising over the summer but the economic situation suggests future price falls are highly likely.

Weekly Summary: 27th July 2020

DATA: HMRC report residential transactions increased 32% in June

Transactions are still 36% below pre-lockdown levels and it will take some time for the recent spike in sales agreed reported by Zoopla and Rightmove to complete.

DATA: MHCLG reported the number of Help-to-Buy Equity Loan completions fell 8.6% in Q1 2020 when compared to Q1 2019

While most of this fall reflects the impact of the lockdown in March, there were already signs that new build completions were levelling off. See the Chart of the Week for more info.

POLICY: MHCLG announce new laws to extend homes upwards and revitalise town centres

“The new rules, which will come into effect by September, will mean full planning applications will not be required to demolish and rebuild unused buildings as homes and commercial and retail properties can be quickly repurposed to help revive our high streets and town centres.” Homeowners will also be able to add up to 2 additional storeys to their home through a fast track approval process.

REPORT: MHCLG funded report into permitted development released

The UCL/University of Liverpool report concludes that “permitted development conversions do seem to create worse quality residential environments than planning permission conversions in relation to a number of factors widely linked to the health, wellbeing and quality of life of future occupiers. These aspects are primarily related to the internal configuration and immediate neighbouring uses of schemes, as opposed to the exterior appearance, access to services or broader neighbourhood location.”

REPORT: Law Commission publish their recommendations to transform home ownership and help leaseholders

They suggest reforms that “would make it easier and cheaper for homeowners to buy the freehold or extend their lease, and to take control of the management of their block of flats or an estate” and “would also improve commonhold to ensure it is the preferred alternative to leasehold as a way of owning home”.

REPORT: HCLG Select Committee says “a social housebuilding programme should be top of the Government’s agenda to rebuild the country”

The reports suggests “there is compelling evidence that England needs at least 90,000 net additional social rent homes a year and it is time for the Government to invest. The sector estimates that £10 billion in extra grant funding will be needed.”

Chart of the Week

The chart of the week shows the annual percentage change in the number of Help-to-Buy equity loan completions. The sharp fall in March 2020 due to lockdown is clear but what is perhaps more surprising in the performance since September 2019. Since then, the number of Help-to-Buy completions has been lower in every month when compared to the same month in 2019. It appears the housebuilding market was slowing even before COVID-19.

Weekly Summary: 20th July 2020

DATA: Rightmove report asking prices up 2.4% since March

Annual growth increased to 3.7% with larger rises since March for the “Top of the ladder” sector and lowest for  “First-time buyers”. London was the weakest region, only rising 0.5% since March while sales agreed were “up 15% in England on last year, and in the five days after the stamp duty announcement it jumped to 35% up on the same days a year ago”.

DATA: ONS reports GDP rose 1.8% in May

This was a slight improvement on April’s figure but is still 24.5% below February’s level and at a level last seen in 2002.

DATA: ONS labour market presents mixed picture falls in number of paid employees but no rise in unemployment

Although there has been an increase in the number of people out of work, unemployment has not risen because they are not (yet?) looking for work. However, the number of paid employees, vacancies, hours worked all point to continued stress in the job market.

REPORT: MHCLG report on land use shows just 8.3% of England is of a developed use

The report also showed that 12.4% of England is designated as Green Belt and 6.7% of that Green Belt is developed, with around half highways and roads.

NEWS: OBR publish new economic scenarios

They included three scenarios with peak-to-trough price falls of -3.3%, -8.2%, and -16.4%. They also published transaction scenarios but these don’t look sensible as they have transactions peaking in Q2 2021, after the end of the stamp duty holiday.

NEWS: BoE Credit Conditions Survey report decreased supply of secured credit to households in Q2 and lenders expect it to decrease further

The report also shows the demand for secured lending decreased in Q2 but was expected to increase in Q3.

NEWS: Nationwide increase lending limit to 90% loan-to-value

This will go some way to countering the mortgage supply crunch but there are some suggestions that mortgage terms will be limited to just 25 years while other criteria will remain constrained.

Chart of the Week

Last week MHCLG released data on affordable housing completions in England funded by Homes England and the GLA (.xlsx file). This data has tended to be a decent leading indicator for total affordable housing supply and it suggests the number of affordable homes completed in 2019-20 was slightly lower than last year. However, recent years have seen an increase in affordable homes completed via other funding mechanisms and so the total will be dependent on the wider housing market. That should be ok for 2019-20 but raises many questions about affordable housing delivery in 2020-21.

Weekly Summary: 13th July 2020

DATA: Halifax report house prices fell 0.1% in June, the 4th month in a row

House prices are still 2.5% higher than June 2019 but have fallen 1.2% since February.

NEWS: RICS report the “Recovery in activity now underway but longer-term expectations remain cautious”

The majority of surveyors responding to the survey reported increases in buyer enquiries, new instructions, and sales agreed. However, price expectations are still negative.

NEWS: MHCLG English Housing Survey release a wealth of reports and fact sheets on housing in 2018-19

These include reports on Energy, Housing across the life course, and Housing costs and affordability. Along with fact sheets on Accessibility, Size, Sofa surfing and concealed households, and Second homes. Among the many interesting findings, was an increase in UK based second homes from 279,500 in 2008-09 to 495,000 in 2018-19.

POLICY: Chancellor increases Nil Rate Band of Residential SDLT to £500,000 until 31st March 2021

The stamp duty holiday marks a substantial reversal in housing policy. The previous focus on first-time buyers and home-ownership has been set aside and the priority now appears to be supporting transactions irrespective of who is buying.

POLICY: LBTT Nil Rate Band increased to £250,000 for residential sales

The stamp duty policy only applies to England and Northern Ireland so Scotland has announced its own LBTT holiday, again until 31st March 2021.

REPORT: Savills’ development land report shows “Fewer land deals and lengthened payment terms”

There’s a lack of publicly available land transaction data and so insight from agents is useful if treated with care. The latest index reported slight falls over the last year but it is the longer term trend that is more intriguing. It shows UK greenfield land values have risen by 21% since June 2013 but the ONS index shows UK new build house prices have risen 47%.

Chart of the Week

Among the fascinating, surprising, and depressing data published in the latest English Housing Survey was some analysis on affordability, specifically the proportion of private renters spending more than 30% of their income (including housing benefit) on rent. The chart below shows the result of this analysis by region and how it has changed over the last ten years. Affordability is most stretched in London and the south, and the proportion of households spending more than 30% has increased. Conversely, there are fewer renters spending more than 30% in the north of England and West Midlands than ten years ago.

Weekly Summary: 6th July 2020

DATA: Nationwide reported house prices fell 1.4% during June

Annual growth is now -0.1% though prices are still up 0.5% since December 2019. These price falls are not yet reflected in other indices and so they may just reflect valuer caution rather than actual market trends.

DATA: ONS latest estimate of GDP for Q1 2020 revised down to -2.2%

The previous estimate for Q1 was -2.0% and this is now the joint largest quarterly fall in UK GDP since Q3 1979.

POLICY: Prime Minister has apparently “announced the most radical reforms to our planning system since the Second World War”

The announcements so far are limited by a lack of new money and the new rules around changing property use may increase supply but come with massive risks already highlighted by the poor quality of homes delivered in recent years via permitted development rights. We await the promised planning Policy Paper later this month to find out if it really is radical.

REPORT: Resolution Foundation look at housing quality across generations

They report “Younger age groups have spent lockdown in considerably less salubrious conditions than those in older age brackets. They have less space, are more likely to live in a damp home, and are more likely to have no garden or to live in a derelict or congested neighbourhood than older generations”. They also highlight the differences within age groups where “income and ethnicity are strongly corelated with housing quality”.

REPORT: Shelter & Savills assess the impact of COVID-19 on housebuilding

They report that Savills predict “that up to 244,000 jobs will go in the first year, and as many as 300,000 fewer homes will be built over five years” and Shelter suggest that Government can help avoid this by investing in social housing.

DATA: Open data released by OS, HM Land Registry & Registers of Scotland

OS have released their Open Identifiers products including UPRNs, and HM Land Registry and Registers of Scotland have released INSPIRE spatial data. UPRNs provide a unique  reference number and location for properties while the INSPIRE data provides a polygon for freehold properties. Unfortunately the lack of an open data lookup between UPRNs and addresses, and INSPIRE polygons with title numbers severely constrains their usefulness.

Chart of the Week

There are issues with some of the housebuilding data published by MHCLG as highlighted in our recent conversation with Kate Barker on YouTube. Given these issues, the  number of new build Energy Performance Certificates (EPC) has emerged as a useful leading indicator for net additional supply. The latest data suggests activity in June rebounded to 75% of the level seen in June 2019, having been just 28% of previous levels in April. It is not yet clear whether this rebound will be reflected in actual completions or sustained over the summer. It is possible that the new build market may perform relatively stronger than the existing market given the availability of H2B equity loan though there may be timing issues that emerge between the lodgement date of the EPC and when/if the new home is completed.