In the year to end Dec 2018 new build house prices rose on average by 2.2% across the UK which is down on last year’s figure of 10.8%

The Market

We start the new year by rounding up housing market performance over the past year, based on a variety of sources. Whilst no one source is particularly upbeat, the performance of the market depends on who you are talking to, and there are some rays of sunshine breaking through the clouds, if you know where to look.

The RICS UK residential housing market forecast for 2019 anticipates little change on the relatively weak market conditions that have been experienced over the past year. They report that not enough second-hand houses are coming on to their books to replace the houses being sold, and forecast that sales volumes are expected to

weaken by about 5% during 2019. Market uncertainty, affordability issues and the potential for interest rate rises are cited as the reasons behind their prediction that average prices will stagnate during 2019. That said, price falls are not anticipated due to the restricted supply of property for sale. A decline in the availability of homes to let is expected to create some growth in rental prices. The RICS (Royal Institution of Chartered Surveyors) have said that uncertainty amongst both buyers and sellers, revolving around Brexit, is slowing market activity. There an expectation that once some form of resolution over Brexit is found, sentiment will improve and the market will start to pick up.

LSL New Build IndexThe market indicator for New Builds January 2019

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The latest housing market report from the RICS saw a continuing fall in activity indicators with sales volumes continuing to reduce. Across the UK sales expectations for the coming three months are either flat or negative, with a net balance of -28%, which is the weakest reading since the series was started in 1999. Except for London and the South east, prices are expected to rise slightly or hold steady, but this is against a background of a lack of supply and shortage of buyers.

The Nationwide House Price Index to the end of December 2018 finds that house price growth has slowed to 0.5% in 2018, down from 2.6% in 2017. This is the weakest rate of growth since February 2013 according to this index. But as with other datasets, there is a different pattern at regional level. Looking at the annual percentage change this quarter, Northern Ireland saw the strongest growth rate at 5.8%, East Midlands, Wales and Yorkshire & the Humber see price rises around 4% and the only negative figures are for London and the Outer Metropolitan areas.

The LSL Acadata House Price Index reports an annual uplift in prices of just 0.9% across England and Wales. Scotland showed a much stronger level of growth, rising by 5.5% over the year. Within England and Wales, it was Wales and those regions running across the centre of the country that performed best. Wales, the West Midlands and East Midlands recorded between 3 and 4% growth. Price changes in other English regions were more muted with the South West and

North West recording growth between 1 and 2% and the remaining regions, including Greater London having growth at between 0 and 1%. The East of England showed a slightly negative figure at -0.2%.

The latest Office for National Statistics UK House Price Index, covering the period up to November 2018, has now been released and is somewhat more bullish than other indices. However, this may be because it relies on completed sales that have been lodged with the Land Registry. In the

year to the end of November 2018 house prices in England

grew by 2.6%, in Wales the annual growth was a healthier 5.5%, in Scotland it was 2.9% and in Northern Ireland it was 4.8% (in the year to Q3 2018). At a regional level, the West Midlands and East Midlands are again highlighted as having

This is based on a weighted calculation which reflects regional differences in sales volumes of flats and terraced property. Ave annual earnings from ONS EARN 05: Average Gross Earnings of Full Time Employees.

2 BED 70 SQ.M

STARTER HOMEAVE ANNUAL EARNINGS FULL TIME EMPLOYEES HPE AFFORDABILITY

INDEX

East Anglia £252,410 £33,818 7.46 120

East Midlands £140,429 £27,937 5.03 81

Greater London £485,048 £40,295 12.04 194

North East £118,158 £26,924 4.39 71

North West £143,050 £28,732 4.98 80

Scotland £158,646 £29,671 5.35 86

South East £260,395 £35,825 7.27 117

South West £186,927 £29,568 6.32 102

Wales £129,671 £27,790 4.67 75

West Midlands £183,043 £29,242 6.26 101

Yorkshire and the Humber £130,621 £28,150 4.64 75

Average 6.22 100

First Time Buyers - Affordability.

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shown the strongest growth with figures of 4.6% and 4.4%. The other regions are generally in the 2% to 4% bracket with the South East showing just over 1% growth and London showing -0.7%.

The Long View

The new homes industry is facing up to the challenge of building more homes in a flat market and will need to carefully manage debt-to-equity ratios to moderate risk exposure. As discussed in previous round ups, the type of housing that is needed is one and two-bedroom properties that will be suitable for the one and two-person households that predominate in society. That is a good reason to encourage the sale of starter homes through Help To Buy, which is thankfully remaining for another few years. Although brick and block construction remains the preferred option for the majority of new build, the industry is slowly opening its doors to Modern Methods of Construction.

A recent article from the NHBC media centre discusses a report ‘Modern Methods of Construction: Who’s doing what?’ which found that developers are increasingly planning on investing in this form of construction. There are plenty of examples of Government nudging consumer and producer behaviour with a mixture of incentives and costs, take for example: Help to Buy and photovoltaic cells in the building sector or a 5p charge on plastic bags in the retail sector. It is increasingly likely that at some point there will be a financial incentive to build housing in a more environmentally friendly way, so it makes sense to plan for that day before it happens.

Current News

Rightmove produce information on changes in average newly listed asking prices and this shows a significant North South divide. It highlights falls in the average price of properties coming to the market in both November and December. Asking prices are now 3.2% down on the October figures, which equates to nearly a £10,000 reduction in average asking prices. This is the largest two monthly fall that they have recorded since 2012. Rightmove also report that sales agreed by estate agents are down by a modest 2.1% on last year’s figures. But at a regional level a more varied picture appears. Wales reports the biggest increase in asking prices which are up by 6.2%, closely followed by the

East Midlands, West Midlands and Yorkshire & the Humber, all of which have rises around the 5% mark. Greater London, the East of England and the South East are recording falls in asking prices of around 1%.

Whilst overall things are very downbeat, the new homes industry is providing something of a silver lining for the economy. Take for example the NHBC’s recent report of strong housing growth in November as more than 15,000 new homes were registered to be built, the second highest monthly total of 2018 and 2% up on last year’s figure. The rolling quarter is up 7% on last year and nine of the twelve regions recorded growth by this measure.

The latest Household Finance Update from UK Finance finds that gross mortgage lending in November 2018 stood at £23.1 billion, which is only 2% down on the same month last year. However, the number of mortgages approved in November by the main High Street banks was 10.6% lower than in November 2017, but much of this was due to significant falls in remortgage and secured loan activity. Approvals for house purchases were only 1.2% lower, which is quite respectable given the current economic uncertainties.

Whilst no business likes uncertainty, there is an ongoing need for homes and overall the housing market is slow but does seem to be relatively stable. New build homes offer a different marketing proposition to second hand homes and it is likely to be this ability provide low maintenance, energy efficient homes, in a well-designed setting, will help to maintain sales volumes during this transitionary phase.

Average New Home PricesDetached

Flats

Semis

Terrace

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Period January 2018 to December 2018.

SCOTLAND £ AVERAGE

£301,311

£176,702

£191,694

£216,603

NORTH EAST £ AVERAGE

£290,757

£130,447

£181,686

£172,003

NORTH WEST £ AVERAGE

£347,538

£161,901

£197,173

£203,655

YORKSHIRE & THE HUMBER £ AVERAGE

£325,461

£154,843

£187,425

£188,546

WEST MIDLANDS £ AVERAGE

£363,976

£213,204

£237,852

£240,348

EAST ANGLIA £ AVERAGE

£478,656

£288,418

£326,591

£320,148

WALES £ AVERAGE

£293,280

£156,462

£203,787

£177,413

EAST MIDLANDS £ AVERAGE

£347,377

£151,774

£213,123

£208,635

SOUTH WEST £ AVERAGE

£415,883

£218,697

£268,964

£258,844

GREATER LONDON £ AVERAGE

£780,078

£506,558

£558,559

£554,046

SOUTH EAST £ AVERAGE

£545,122

£286,061

£365,880

£351,686

NORTH % AVERAGE

5.22%

5.00%

0.88%

1.48%

SOUTH % AVERAGE

1.33%

5.68%

0.52%

-1.37%

North/South Average % Change

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This Index has been prepared by e.surv using anonymised

data based on a proportion of all new build valuations

provided for lending purposes. Figures represent 12 month

rolling averages for each period. The copyright and all other

intellectual property rights in the Index belong to e.surv.

Reproduction in whole or part is not permitted unless an

acknowledgement to e.surv as the source is included. No

modification is permitted without e.surv’s prior written

consent.

Whilst care is taken in the compilation of the Index no

representation or assurances are made as to its accuracy

or completeness. e.surv reserves the right to vary the

methodology and to edit or discontinue the Index in whole or

in part at anytime.

e.surv (www.esurv.co.uk) is the Valuation business of LSL

Property Services plc (www.lslps.co.uk) and is the UK’s largest

residential valuation practice, acting for lenders, developers,

Social Housing organisations and other stakeholders in the

residential property market.

The business employs circa 450 chartered surveyors and

covers the entire UK.

LSL Land & New Homes is a trading name of LSL Land & New

Homes Ltd, which is a member of the LSL Property Services

Group Estate Agency Division, one of the leading residential

property services groups in the UK. It’s strategy is to create

partnerships with developers and builders to support their

objectives and add value to their businesses.

It can provide integrated solutions for their benefit drawing

on the expertise of companies who are also under the LSL

Group umbrella including valuation services (e.surv), rental

portfolio services, asset management services and estate

agency services fronted by well-known high street estate

agency brands like Your Move and Reeds Rains. Services

can be tailored to suite individual needs from bespoke site

sales and marketing, agency referral to the disposal of part

exchange, assisted schemes and new build stock, land sales

and acquisitions.

Disclaimer: The data is provided by LSL Land & New Homes and is based on data provided as described above. While reasonable skill and care has been taken in the preparation of the data – the copyright and all other intellectual property rights of which belong to e.surv limited - neither e.surv Limited nor LSL Land & New Homes can accept liability for the accuracy or completeness of the data provided.

Reproduction in whole or part is not permitted unless an acknowledgment to e.surv Limited is included. No modification is permitted without e.surv Limited’s prior written consent.

No warranty of the figures is given and no responsibility or liability of any nature to you or any third party for the whole or any part of its content is accepted. It is assumed that you will carry out your own due diligence before proceeding with any proposals or making any financial commitments.

For further information or enquiries regarding the underlying data of the

LSL New Build Index, please contact Shaun Peart via email

Shaun.Peart@lslnewhomes.co.uk or by phoning 07789 948411.

For further information about the LSL Property Services Group including

LSL Land & New Homes and e.surv, visit www.lslps.co.uk

Notes