There were further signs that the property market was slowing last month. Although, many of the indices show prices continuing to rise, transaction levels were subdued. Home lenders Nationwide, for example, reported a 2.1% house price rise in March but, at the same time, there was a fall in sales volumes and, according to surveyors, a shortage of new instructions.
The slowdown has been blamed by many on the widening gap between wages and house prices. The ONS (Office for National Statistics) has found, on average, full-time workers can now expect to pay around 7.8 times their annual salary when purchasing a home in England and Wales. That’s considerably more than most lenders’ caps of 4.5 times earnings and shows why it is so difficult for people to buy houses without the financial support of a working partner. In London, as you’d expect, the ratio was even higher, at 13.24 times average incomes. Even in the cheapest region, the North East, it’s at 5.18 times local earnings. To put this into some sort of perspective, back in 2002 the average ratio across the country was just 5 times income.
Miles Shipside, Rightmove director and housing market notes:
“Higher prices stretch buyers’ willingness to pay or ability to afford them. This month’s increase of 0.4% is the lowest at this time of year since 2008, though the subdued figure could partly be a re-balancing from the seasonally large 1.5% rise the previous month.”
As a result of the slowdown, the market is becoming more price sensitive. Properties are now achieving, on average, 96.7% of their asking price. In London that figure is 95.6%, although in the West Midlands it has gone up from 96.4%, four years ago, to 97.5% and, in Scotland, it’s now 99.4% (source: Rightmove).
Miles Shipside of Rightmove believes that some of this disparity is a result of people overpricing their homes when they come onto the market and urges a more realistic approach to pricing, saying,
“Buyers can easily spot a speculative price and ignore a property that is out of line with others nearby, and is also likely to be out of kilter with their pocket.”
HOUSE PRICES AND STATISTICS
Although there is still some considerable variation in the monthly figures, annual growth is far more uniform, with the two main lenders’ figures hovering around 2.6% and 2.7%. The Land Registry’s larger growth figure of 4.9% is several months out of date and Hometrack’s (5.5%) relates to cities only.
Nationwide: Apr: Avge. price £213,000. Monthly change +0.2%. Annual change +2.6%
Halifax: Mar. Avge. price £227,871. Monthly change +1.5%. Annual change +2.7%
Land Registry: Jan: Avge. price £225,621. Monthly change -0.3%. Annual change +4.9%
Hometrack UK City Index: Mar: Avge. price £254,900. Quarterly change +2.9%. Annual change +5.5%
Rightmove: Apr: Avge. price £305,732. Monthly change +0.4%. Annual change +1.6% (asking prices on Rightmove)
This month the headlines in the sector were dominated by Andy Burnham, Mayor of Manchester, who announced he would be offering an amnesty to rogue landlords, buying their rental properties, reportedly, for below market rates, if they could not bring them up to an acceptable level. It’s part of his Proposed Good Landlord Scheme, which he hopes will drive up standards in the region. It is still at a very early stage in its development, but will, no doubt, be watched with interest by many other local authorities.
In the meanwhile, HomeLet’s most recent market report shows average rents have been rising across the UK. Overall, they were up by 0.9% over the last year and by 1.5% in London
HomeLet’s Chief Executive, Martin Totty, said:
“Rental price inflation was much more stable over the whole of 2017 compared to 2016, when rents rose at an annual rate of more than 4% in the first half of the year, before dropping back in the second half. So far, we are seeing this more stable market continue to prevail in 2018."