ARK’s Market Synopsis

COMMENTARY

Welcome to the latest edition of ARK’s Market Synopsis report covering market outcomes to the end of October and with Rightmove picking up reporting for November. We have also included the Regulator for Social Housing’s Quarterly Survey for Q2 report in the final section of this report.

According to Halifax “The average UK house price now tops a quarter of a million pounds (£250,457) for the first time in history”. We cannot see any way that house price inflation is good for anyone but downsizers. The Independent reports the median income of a full time employee as £30,353 so the average house is now 8.25 x median salaries.

The reports are all suggesting lower house price inflation in 2021, which will be welcomed, particularly for First Time Buyers.

There are two trends now starting to be backed by data. The first relates to the Covid related re-evaluation of the desire for houses over flats. Halifax reports that flat prices are up by 2.0% (£2,883) compared to a 6.0% (27,371) increase for detached homes.

Data from Nationwide shows a loss in momentum over the recent months. However, market activity seems to be holding strong as behavioural shifts in wanting more space continues to support market activity.

In homeownership terms, there is a strong drive towards houses over flats. We are seeing that preference expressed across tenures and readers planning to build flats need to pay attention to the access to, and quality of, outdoor space.

The second trend can be found in the Nationwide reporting in which they have started picking up the trend in demand for greener homes. In their reporting 41% of respondents wanted to improve their energy efficiency and reduce their carbon footprint – this was almost as many people who wanted to add/maximise space.

This may be due to the increased awareness of climate change, and at ARK we believe this trend will become more significant in the near future, given the UK’s commitment towards carbon zero emissions by 2050.

Whatever the reason, those building for sale and shared ownership may find that greener, as well as larger homes, present a USP that customers will respond to. We are not yet clear as to whether that is able to drive premium pricing.

It was pleasing to see Nationwide reporting that “energy efficiency is better among social rented stock (properties owned by local authorities or housing associations)” and we are supporting clients in the drive to decarbonise the sector.

The Regulator of Social Housing’s Q2 report makes interesting reading:

  • The Regulator reports “The number of AHO units unsold for more than six months increased by 15% to 3,973; the highest number recorded since the data was first collected in 2009. This increases the proportion of stock that has been unsold for over six months from 44% in June to 52% at the end of September”.
  • There are good reasons; record numbers of completions up to March followed by a shutdown and then decent numbers being handed over post lockdown will all have contributed and anecdotally providers have been bullish about the volume of sales being achieved across the summer and to date.
  • But the Regulator reports “a small number of providers have reported delays in mortgage applications being approved as building safety certificates are obtained.”

We await the Quarter 3 figures with interest. We know that potential Shared Owners are likely to have been disproportionately affected by furlough, redundancy and job uncertainty, at some point we must expect that to feed into sales.

HIGHLIGHTS

Halifax reported annual house price increased to 7.5%, marking the strongest growth since mid-2016. However, month-on-month price growth fell to 0.3% from 1.5% in September.

Nationwide reports annual price rising to 5.8% – the highest since January 2015. On a month-on-month basis, house price growth rose to 0.9%.

Moving to RICS, key indications (buyer enquiries, agreed sales, new instructions and prices) continue to remain strong in October. Regionally, agreed sales for East Anglia (net balance of +72%) North West (+62%) and the Midlands (+60%) display strong readings. Near term sales outlook still holds in positive territory but the 12-month outlook is looking subdued “with a net balance of -27% of respondents anticipating sales will begin to weaken over the longer time-frame.”

Hometrack reported house price growth at +3.5%. Regionally, house price growth was above 4% in the North West, Wales, Yorkshire & the Humber and the East Midlands. Demand slowed down since summer to pre-COVID levels however remains 34% higher than the same time last year.

Hometrack also mentions “we expect completed sales in 2021 to be in line with 2020 levels at 1.1m.” It further adds “We expect house price inflation to end 2020 at 4% and then slow to 1% by the end of 2021 as weaker demand and economic uncertainty reduces the upward pressure on prices.”

In Rightmove’s reporting we see a dip in house prices for November with a reading 0.5 % (-£1,505), despite strong demand. The report also indicates a “stronger growth in activity in the higher price bands, where buyers stand to make the biggest stamp duty savings.”

Rightmove states that regionally, the South is performing better than it did a year go with the East of England recording the number of agreed sales going up by 72% and the South East going up by 69%.

In our final report, the Quarterly Survey for Q2, “AHO sales totalled 3,823 units compared to the 3,652 completions reported in the quarter [June to September]. The total number of unsold AHO units reduced by 3% to reach 7,676 at the end of September.”

Adding to this, “The number of AHO units unsold for more than six months increased by 15% to 3,973; the highest number recorded since the data was first collected in 2009.”

For market sales, statistics looked as such: “There were 1,461 market sales in the quarter compared to the 1,005 units developed.” This marks the second highest number of market sales recorded since 2014 (when the data was first collected).

‘The overall number of unsold units decreased by 17% over the quarter to 2,344, and the number of units unsold for over six months decreased by 4% to 1,460.”

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