Consultation on Definitive House Price Index

Office For National Statistics

Office For National Statistics

The Office for National Statistics has launched a consultation seeking input from “users” on the proposal of developing a single definitive house price index.

As I have blogged about previously, there is not a precise house price index as all of the current indexes source their data differently.

The move to a single, UK-wide, index would help end the confusion caused by the contrasting data thrown up by the current indexes.

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Can You Trust House Price Index Data?

Can you trust House Price Index stats?

Can you trust House Price Index stats?

A House Price Index… is it worth the paper it’s written on?

It seems that every month the property industry, and the general public, is bombarded with another statistic relating to average house prices. The headlines usually heap a lot of importance on these statistics, either stating that it highlights the impending burst of the “property bubble”, its continued inflation or using it to show people are being priced out of the market.

But each House Price Index uses different measurements and covers different sample sizes, areas and date ranges. Many can indicate a national average property price that varies greatly from the consumers experience.

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Property Trends for 2011

This is always  a hot topic at this time of year.

The PR agencies and marketing departments are keen for clients to send press releases around to try to capture the imagination of

the media.

Will it be a 3% rise or a 5% fall? Do you go against the consensus, or fall in line with the crowd

? Have you covered yourself enough so when you are wrong – which invariably you are – you have wriggle room, as any good politician would? What makes predictions additionally difficult is there are so many micro markets within the overall UK market.

At Young Group we tend to talk trends rather than trying to pin the tail on the pony (so to speak). We had  an internal conversation about this earlier, here’s a sneak preview of what we think:

Property Prices – will continue in a similar vein to the last six months.

Not a very exciting market, led by lack of mortgage finance – see below – and a nervousness / uncertainty amongst both buyers and sellers.

Rental Prices – up, up and up – this does not necessarily mean double-digit growth, but the private rented sector will grow in importance as a tenure of choice as will rental levels.

Financing - whether this is for mortgages or development financing this will continue to be tight. The property sector is where many banks feel they are ‘overweight’ in lending and therefore to lend more in this sector is not that appeal

ing.

Base rate – about 6 months ago I had a small wager (proceeds to charity) that the base rate would still be 0.5% at the end of 2010, with one MPC meeting to go but I am feeling confident.

I have to say I cannot see the base rate going up for a while, I would not be surprised to see the base rate at 0.5% in at the end of 2011.

So, I have been a bit non-committal, although given my thoughts on what direction things will go. Having said that, I have been specific re the base rate!

What are your predictions?

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Investing around the East London Line

So the East London line extension has opened – great news for Hackney, great news for investors who got in early.

Back in 2004 we started investing based on the line extension. The areas where the two new stations – Haggerston and Dalston Junction

- have opened were in need of be

ing connected to the tube network. Prior to planning being granted back in 2004 we invested in Union Wharf, E2 a 19 unit residential scheme which is close to Haggerston tube and in 2005  The Interchange, E8 a 34 unit residential scheme which is a short walk from Dalston Junction station.

This long term thinking has served our investors well, it is worth noting that I have personally, along with Young Group colleagues, retained some of the units as we vie

wed these areas as good long term investments.

I am pleased to say the schemes have rented very well, with yields compared to original purchase price running at 6-7%. Capital growth has also been impressive.

Most of our clients invest for the long term, however there are times when investors do want to sell.

At The Interchange we have recently agreed a sale where the investor has seen the value increase by circa 20%, representing a doubling of the cash invested. Most of our investors are also currently enjoying the benefit of base rate tracker mortgages, a product we recommended through Young Finance at the time, and have therefore seen good net cashflow over the last few years.

I hope the above shows that sensible investing with good advice even with the credit crunch can yield good returns. Speculation is risky, but research, research and more research is the most appropriate approach.

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The Ups and Downs of Houseprices

Richard Donnell, Director of Research for Hometrack delves into the latest houseprice data in Young Group’s latest London Update.

House price rise continues but 2010 gets off to a slow start.

House prices rose by 0.3% over February, but Hometrack caution that price rises alone are not indicative of strong foundations as the 2010 housing market gets off to a slow start.

February is traditionally a month when the Hometrack survey registers significant growth in the number of sales agreed – over the last eight years the growth in sales agreed over February has averaged 30%. Yet this year the number of sales agreed has averaged just 10%.

While it is important to not read too much into one month’s set of figures, the survey also reveals below average increases in both the amount of new housing for sale and new buyer registrations.

The supply of homes for sale may have grown by 4.6% but the average increase over the same month in previous years has been 14%. Buyer registrations have increased by 8.3% this month compared to an average of 24% in the same month over the last 8 years.

Despite the broad evidence of sluggish market activity, price pressures are feeding through more strongly than was the case in the second half of 2009.

Average prices are up 0.3% over February and by 0.4% in the last 12 months – the first year on year rise since March 2008. The survey also shows that prices have risen across 25% of postcodes – to a level not seen since 2007.

Greatest upward pressure on prices is in southern England…

January saw a decline both in the number of new sales agreed and in buyer registrations – the average time to sell posted its first monthly increase for 12 months, growing to an average of 8.6 weeks.

Southern England continues to see the greatest upward pressure on prices with average values in London up by 0.7% in the month – the highest monthly

increase in the capital since June 2007.

Imbalance between supply and demand continues…

The strong end to 2009 saw growth in sales volumes running well ahead of new supply coming to the market for sale.

Over the last six months of 2009 the supply of homes for sale grew by just 1% while sales volumes increased by 20%. M any

agents have started 2010 with a smaller order book than they would like.

While the supply of housing for sale has grown by 6% over February there is a real need for agents to win more instructions to satisfy the expected increase in demand over spring.

The proportion of the asking price being achieved has risen from 88% 12 months ago to 93.8% today and agents seem willing to push asking prices further to test the market.

The proportion of the asking price has bounced back over the course of 2009 from a low of 88% in February 2009. This measure has now reached 93%, and is starting to plateau in the face of firmer pricing and reduced sales volumes.

A shortage of properties for sale has supported prices over the last 12 months but there is a danger that the pressure to gain instructions may result in the gap between asking and achieved prices starting to widen again.

Prices have risen across 25% of postcodes in February – a level not seen since 2007.

The time on the market has also been falling since early 2009. The measure stands at an average of 8.4 weeks – well down from the high of 12 weeks seen in February 2009.

Richard Donnell
Director of Research
Hometrack

To see Young Group’s latest London Update in full, download a printable PDF copy.

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Property Prices for 2010

There are many property price predictions doing the rounds currently.

I thought I would share what investors are forecasting for the coming year. Our latest Young Index show that investors forecast 2010 to be a year of consolidation and stability in the residential property market.

Far from the large property price changes foretold at either extreme of the wide ranging predictions made by agents, lenders and economists, the man in the street expects UK house prices to fall by a modest 1.0% during the course of 2010.  London, on the other hand, is predicted to perform slightly stronger than the national average by charting a growth of 0.7%.

Price Forecasts 2010

We directly poll the opinions of property owners – people who own their own homes and also investment properties – and it’s clear that they remain cautiously optimistic, expecting prices to remain relatively unchanged during 2010.  Interestingly, Young Index reveals that London is expected to out-perform the rest of the UK and is set to lead the market recovery.

The consolidation indicated by average price expectations is also reflected by the fact that 59% of those questioned are considering purchasing additional residential property assets to rent out within London over the next 12 months, compared to 43% who are looking at opportunities in the UK outside of the capital.  This compares to 33% and 8%, respectively, in Q4 2008 and is a continuation of last quarter’s upward trend.

However, again the lack of buy-to-let mortgages is of increasing concern to UK residential landlords, more so than any other aspect of the rental sector. When asked what improvement they would most like to see in 2010, 39% indicated that they long for more buy-to-let finance options. This is a significant increase on the fourth quarter of 2008, when 28% picked the lack of buy-to-let mortgages loans as their major concern.

So let’s see what happens . . .

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