Market Commentary – November 2020

Open For Business During Lockdown

Looking Ahead

New Housing Supply

The housing market stayed open for business during this second lockdown and the housing boom has continued. Activity levels and house prices look set to continue rising through to March next year but, as the end of the year approaches, analysts and commentators have turned their attention to forecasts. The range of forecasted outcomes reflects the massive uncertainties facing the economy and the housing market, and most are possible. Meanwhile, the latest net housing supply data from MHCLG tells us what was happening last year but little about the challenges that the housebuilding market is now facing.

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Weekly Summary: 27th November 2020

DATA: MHCLG reports net housing supply of 243,770 homes in 2019/20

This data for England is the most comprehensive measure of new supply but only showed a 0.8% increase compared to the previous year. It also provides the best measure of new build completions, which had increased 2.9% to 220,600. Unfortunately, it is not very timely due to the time it takes to collect the data.

DATA: HMRC reports an 8.1% annual rise in transactions during October

The provisional data shows transactions rising above their recent average (2013-19) to 105,620. This marks the start of the boom in sales agreed reaching completion and transactions should rise further in coming months (subject to delays in the sales process).

DATA: Zoopla reports annual house price rise of 3.5% in October

They report demand has fallen but remains 34% higher than last year and sales completed will be just 6% lower in 2020 than 2019. This suggests a large number of transactions in November and December. They also forecast year-end house price growth of 4% at the end of 2020 and 1% for 2021 with limited downside for prices and turnover.

POLICY: MHCLG announce buildings without cladding not subject to EWS1

The announcement suggested that “Owners of flats in buildings without cladding will no longer need an EWS1 form to sell or re-mortgage their property”. However, there was some uncertainty about the actual impact as news reports suggested UK Finance and the Building Societies Association had not agreed to the announcement.

POLICY: Chancellor presents the 2020 Spending Review

There were lots of big numbers for housing announced including a £7.1billion National Home Building Fund and funding to tackle homelessness and rough sleeping. However, as with all these announcements, the big question is how much is new funding and it looks like much of it had already been announced.

REPORT: OBR release their “Economic and fiscal outlook” report

Alongside the forecasts for the economy and public sector finances, the report also provides forecasts for the housing market. It suggests house prices will fall next year with the annual change falling to -8.3% by the end of 2021. However, it also suggests transactions will rise to 1,368,000 which was a level last seen in 2008.

Chart of the Week

This week the Home Office released data on visa numbers and this gives us a first, albeit hazy, look at what might be happening to international student numbers. The data shows a 36% fall in the number of Tier 4 (sponsored study) visas over the last 12 months, with a table on the Home Office website reporting a 56% fall in Chinese nationals being granted Tier 4 visas over the period. Unfortunately, the Home Office have not released the breakdown by type of institution so we have estimated the impact in the chart below (dotted yellow line). Based on the previous relationship between Tier 4 visas for higher education and non-EU first year enrolments at higher education institutions, it appear last year was a record high for international student enrolments (we’re still waiting on HESA data for 2019-20) but this year could be the lowest since 2008-09.

Weekly Summary: 20th November 2020

DATA: Rightmove reports 6.3% annual rise in asking prices in November

Despite a monthly fall in asking prices, the annual rate increased from 5.5%. See Chart of the Week below for more info. Rightmove also reported that sales agreed were 50% higher in October compared to last year and there are 650,000 sales in progress.

DATA: ONS reports 4.7% annual rise in house prices in September

Sales agreed during the summer are now reaching completion and the ONS index is now starting to reflect the faster growth rates already seen in other house price indices.

DATA: HMRC report Q3 2020 transactions by price band

The data shows the impact of the stamp duty holiday on the lower end of the price distribution but the biggest quarterly and annual increases are at the top of the market.

DATA: National Statistics UPRN lookup now links to postcodes

A geeky but very useful release that now allows us to link data with full postcodes to individual property locations. The next step is a full address to UPRN lookup.

POLICY: MHCLG launch Social Housing White Paper

The white paper contains some good, some bad, and some “offensive” parts. You can watch our Housing Conversation with council house tenant Rob Gershon on YouTube here.

POLICY: MHCLG launch Shared Ownership technical consultation

Shared Ownership has been described as neither shared nor ownership to reflect the unfair distribution in costs and legal ownership between tenant and landlord. These proposals go some way to fixing some of the problems but they are far from perfect.

POLICY: Dominic Cummings and planning reform

It is not clear exactly what impact the departure of Dominic Cummings will have on the proposed planning reforms but it was widely reported that he was responsible for pushing them despite widespread disagreement from backbench Conservative MPs. We’ve already seen Robert Jenrick promise to revise the housing need calculation but it’s possible we’ll see other reforms watered down or shelved.

REPORT: UCL research on new mortgage lenders and local housing markets

The report investigates what happens when a new mortgage lender enters a local housing market. It finds that “increased competition in the banking market can have adverse consequences for risk-taking and financial stability” with house prices rising by around 5% in the local market and an increase in transactions.

Chart of the Week

The Rightmove asking price index reported a monthly fall in its November release but the annual rate of growth increased from 5.5% to 6.3%. This situation reflects the seasonal nature of the housing market and, despite everything that’s happened this year, this pattern appears to have continued. To highlight this seasonal pattern, we have compared the year-to-date percentage change month-by-month for recent years. The chart below highlights this seasonal pattern, along with the lower growth seen in recent years. 2020 appears to be broadly tracking the average of 2013-16 when year-end growth was 6.6%.