Right now, the UK housing market is so volatile that you can
pretty much find evidence to support
whichever theory you want to put forward.
If you want to theorise that UK house prices are rising you
can present the March release of the Halifax index showing prices up 2.2% on
the month, and Rightmove’s asking price index showing asking prices up 2.9% in
April over March following a growth of 1.6% March over February. But your
opposite number would quickly hit back with figures from Nationwide showing a
1% drop in house prices on the month in March.
However, they all agree that house prices are down just under
1% over the past year (Land Registry and Halifax -0.6%, and Nationwide -0.9%)
except for Rightmove, which shows asking prices up 2.2% this March compared to
last. However, what we have just done there is spend an awful lot of time
looking at data which tells us absolutely nothing about the current state of
the UK housing market.
We can pretty much disregard Rightmove data straight away,
because all it is good for is sensationalist headlines. Rightmove collects
asking price data from only new listings. This leaves it vulnerable to
unrealistic sellers, and estate agents talking up the asking price to win
instructions, skewing the data. It would be far better if it tracked the
changes in asking prices of existing listings, that would actually be useful
asking price data.
As for the rest of it, all that data is based on tragically
low sales volumes for a start. Nationwide and Halifax completely miss cash
sales, and have their own methodologies for which data sets to include in the
index, not to mention how they work out their ââ¬Åseasonal adjustmentsââ¬Â. But the
biggest flaw is in the fact that it is national data. You can’t buy a house in
England, you buy a house on a street, in a town, in a region in England. And
prices vary from street to street, town to town and region to region. So if
prices rise 6% in London and the south, and fall 6% in the rest of the country,
we might be looking at flat house prices, despite the fact that house prices
were flat nowhere in the country.
If you want to know where the UK housing market is then house
price indices are the last place you should look. According to the BBA mortgage
approvals are picking up again last year, after an abysmal 2011 they are
returning to 2010 figures, which are still nowhere near historical levels. In
January 2006 almost 52,000 mortgages were approved according to the BBA, and
62,490 were approved in February. In January 2007 the figure fell slightly on
the previous year with 48,636 mortgages approved, but February rose to over
66,000 loans. This was at the height of the market, but even in February 2003
67,000 mortgages were approved.
Looking at the historical table of mortgage lending we can
see the up-cycles and down-cycles, with a 80,000 mortgages being approved in
peak summer during an up-cycle, and around 30,000 in a down-cycle June. Keeping
to the first 2 months of the year for comparison, the number ranges from
55-65,000 during an up-cycle and less than 30,000 during a down-cycle
In January 2008 for example 28,851 mortgages were approved,
and 38,527 were approved in February. Compare this to 2012 some 4 years after
the crash and we have 23,392 mortgages being approved in January, and 29,673 in
February. This, as I say takes us back to 2010 levels, last year we had an
abysmal 16,946 in January, and 26,019 in February.
So, based on mortgage figures, we have seen little
improvement in the housing market since it crashed. This is hardly surprising, because unemployment is not
falling, wages are not growing and consumer confidence is on the floor. Not to
mention the fact that most first time buyers can’t raise a sufficient deposit
to get on the housing ladder. This in turn is backed up by the incredibly strong
rental market, as more and more potential first time buyers become long term
renters.
Until the economy starts producing jobs and wage growth, and
the banks loosen the reigns on lending again, we will likely be stuck in
stagnation with only the low interest rate fending off further price-falls,
which ironically would likely be good for the market.
Article written by property expert Liam Bailey, he follows the work
of Fast Track Estate
Agents.
