Weekly Summary: 18th December 2020

DATA: Rightmove report 6.6% annual rise in asking prices in December

As a non-seasonally adjusted index, it reported its usual fall in monthly asking prices but this was smaller than usual so the annual rate increased from last month (6.3%). Rightmove also reported that sales agreed were 44% higher in November when compared to last year.

DATA: ONS report annual house price rise of 5.4% in October

The completion-based index is now reflecting the sales agreed since the summer boom started. However, it is still subject to revision with September’s annual change revised down from 4.7% to 4.3%. This may reflect a delay in completions being registered with HM Land Registry, with very few transactions available to calculate the latest month’s index.

DATA: ONS labour market stats show rising unemployment

They report an average unemployment rate of 4.9% in the three months to October, 1.2 percentage points higher than last year. The more volatile single-month data shows the rate continuing to increase over the three month period, with a reading of 5.2% in October.

REPORT: MHCLG publish English Housing Survey 2019-20 headline report

The report contains a wealth of data and analysis on households’ housing circumstances and the state of the housing stock in England.

REPORT: MHCLG publish Household Resilience Study: Wave 1

The English Housing Survey does not tell us what has happened since the pandemic hit so MHCLG conducted a follow-up survey covering June to July. The survey found increases in mortgage arrears (6% of mortgaged owners compared to less than 1% in 2019-20), and that 27% of all households reported their income had fallen by at least £100 per month. The survey also reports that private renters are being hit hardest by the pandemic and fewer are expecting to buy their own home (49% compared to 59% in 2019-20).

POLICY: Backlash against planning reforms forces MHCLG to make changes to standard method for calculating housing need

The political backlash against the “mutant algorithm” that would’ve required higher housing delivery in some of the most expensive parts of the country has been successful. The new approach will now prioritise brownfield sites and urban areas with the top 20 cities now subject to a 35% increase on top of the existing standard method. The reason for choosing 35% is not clear but it brings London’s housing need remarkably close to the figure suggested by the “mutant algorithm”. As others have suggested (e.g. Lichfields), this new approach makes it unlikely that net housing supply will hit 300,000 per year any time soon.

Chart of the Week

Perhaps the most contentious chart in the 2019-20 English Housing Survey was the one comparing mortgage and rents as a proportion of income. It is repeated below and includes housing benefit. It can be read as suggesting that owning is cheaper than renting but, as others have pointed out, it does not cover all the required costs and benefits to accurately work out the relative cost of owning versus renting. For example, it includes the cost of repaying the mortgage for owners but doesn’t include repairs and refurbishment or the imputed rent (opportunity cost) of owners’ housing equity. However, even once all these factors are accounted for, analysis suggests it is currently cheaper to own than rent, though the calculation is highly dependent on the location and type of property in question.

Setting aside the above debate and questions about whether the two groups can be fairly compared, the chart clearly shows that renters spend a large proportion of their income on rent and this is further reinforced when looking at the distribution of same data. When combined with other findings in the survey, it is clear that private renters have been hardest hit by the pandemic while paying large proportions of their income for poor quality and insecure housing.