In the year to end March 2018 new build house prices rose on average by 8.6% across the UK which is up on last year’s figure of 5.7%

Political events

The House of Lords defeat of aspects of the EU Withdrawal

Bill continues the uncertainty around Brexit. Brexit related

issues (such as a fall in overseas buyers) are being cited

as potential causes for a stagnant or falling market around

London, but the Government knows that it can’t waiver in

its determination.

In a less dramatic way, next month will see the

introduction of the GDPR (General Data Protection

Regulation) and this will have an impact on the house

building industry. Marketing and sales processes

will need to have more clarity on how prospect and

customer data will be used, as well as the need for

clear confirmation action by the prospect at the point of

collection. In addition, the use of marketing agencies to

carry out mailings and bought-in prospect lists will require

verification about the way in which customer data is

shared and kept safe. And that only relates to prospects

and customers, company employees are also covered.

The market

Acadata and Rightmove have recently reported a

continued slowdown in transaction volumes with price

falls in Greater London. But against this, prices are rising in

the regions, indicating that a long awaited catch up is still

underway.

The RICS market index which compares the number of

surveyors reporting rises and falls in prices over the past

three months has remained at 0%, indicating a balance

which continues the five year low point reported last

month. As with the Acadata report, the RICS points out

that the weakness stems from Greater London and the

South east with other regions showing some strength.

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LSL New Build IndexThe market indicator for New Builds April 2018

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The volume of residential

transactions seems likely

to remain low with the

RICS reporting that new

sales listings had fallen

for the last seven months,

with stock levels now

being within a whisker of

the all time low figure.

The long view

The above chart shows

the Bank of England’s Official Bank Rate through time

and the Office for National Statistics RPI inflation figures

over the same time period. In the three decades pre 1995

markedly higher levels of inflation and interest rates

prevailed but around the 1990’s we moved into a lower

inflation economy.

The housing market outlook is not strengthened by the fact

that many economists are expecting to see a further rate

rise following the Bank of England’s meeting next month.

This was the finding of a survey of economists carried out

by Reuters against a backdrop of 3% inflation, a pick up

in household debt and wage growth, all of which point

towards a rate hike in May. But Reuters also report banks

to be anticipating a rise in mortgage lending during 2018,

following a weak first quarter.

However figures just out

for the Consumer Price

Index including owner

occupiers’ housing costs

(a different measure

of inflation) 12 month

inflation rate was 2.3%,

in March 2018, down

from 2.5% in February

2018. Following a recent

high, this figure has

now dropped back to

a one year low. Whilst

consumer goods are

rising less sharply than in recent times, it is council tax and

electricity bill rises that are presently creating upwards

price pressure. But overall this lower than expected rate of

inflation is unexpected to most economists and will reduce

the likelihood of a rate rise in May.

But against the short

term indicators, the

longer term perspective

is that the Bank has

effectively lost the use

of interest rates as a

means of controlling the

economy. It needs to be

able to raise or lower

rates to control economic

growth and inflation.

For most of the past decade that control has been out of

action and with current signs of a strengthening economy

(limited economic growth, wage growth and some inflation)

the time is right to raise the Official Bank Rate (base rate)

back to a more normal level, regaining that economic

control in the process. Mortgage possession activity is back

to very low levels, having peaked during and the 2008-9

financial crisis and as noted below mortgages are at the

most affordable levels in nearly a decade. So the risk of

increased mortgage repossessions resulting from a rate

rise is at least diminished.

Current News

The LSL Land and New Homes ‘New Build Market Review

2006 to Sept 2017’ gives an overview of the new build

market over the past decade. It looks at the overall volume

of new build transactions

as well as the value of

the new build market

and provides a detailed

analysis by region and

property type.

One chart (see left) shows

new build transaction

volumes on a monthly

and averaged basis.

As well as showing the

seasonality of the market

it shows the longer term

market trend. A marked

decline can be seen in the volume of transactions trend

line between 2007 and 2011 with a healthy and steady

recovery occurring thereafter and up to 2016. The trend line

looks to be reaching a plateau, in line with industry output

predictions, which themselves reflect the general economic

uncertainty. As always, there does not seem to be a clear

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message from the various

economic indicators that

would encourage house

builders to start opening

more sites in anticipation

of more sales.

Another chart (see

right) in the same report

shows the average

purchase price for

detached houses. Over

the decade up to 2017

average detached

house prices started at

around £320,000 then fell to a low point average price of

about £290,000 before increasing to around £360,000 at

present. The relatively modest increase reflects the fact

that most flats are built in the regions where land is more

easily obtained and where, as discussed previously, price

rises have been more sedate.

Figures just out through the Labour Force Survey show

a seasonally adjusted unemployment rate of 4.2% for

the three months to Feb 2018. There were 32.26 million

in work, 55,000 more than the previous 3 months, and

427,000 more than a year earlier. The employment rate

(the proportion of 16 to 64 year olds in work), was 75.4%,

the highest levels since comparable records began in 1971.

With the continuation

of low interest rates

combined with some

wage growth and

generally stable house

prices, the Halifax

has reported that

mortgages are at their

most affordable level for

nearly a decade. But as

discussed above, interest

rates are due to start

rising at some point in the

reasonably near future.

Indeed a number of leading banks have recently increased

mortgage rates in anticipation of another interest rate

increase.

Finally the Government’s view seems to be very London

centric. In some regions prices are not much higher than

they were in at the 2007 to 2008 peak. And in Greater

London house prices are at best stagnant and possibly

falling, added to which is the considerable uncertainty

that Brexit brings, particularly to the service sector based

Southern regions. These aren’t market conditions that

would encourage companies to hold on to land in the

expectation of rising prices, so again they don’t support the

claim of land banking.

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 £253,551 £32,894 7.71 123

East Midlands £138,455 £27,401 5.05 81

Greater London £493,102 £39,155 12.59 201

North East £115,711 £26,522 4.36 70

North West £144,363 £28,573 5.05 80

Scotland £148,735 £29,375 5.06 81

South East £255,885 £34,588 7.40 118

South West £191,524 £29,730 6.44 103

Wales £127,974 £27,544 4.65 74

West Midlands £162,805 £28,703 5.67 90

Yorkshire and the Humber £140,551 £27,829 5.05 80

Average 6.28 100

First Time Buyers - Affordability.

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Average New Home PricesPeriod April 2017 to March 2018.

SCOTLAND £ AVERAGE

£272,384

£156,933

£197,955

£217,321

NORTH EAST £ AVERAGE

£301,782

£129,422

£183,907

£172,700

NORTH WEST £ AVERAGE

£338,965

£162,607

£202,073

£211,596

YORKSHIRE & THE HUMBER £ AVERAGE

£311,304

£164,553

£186,995

£194,181

WEST MIDLANDS £ AVERAGE

£372,478

£191,120

£241,097

£232,733

EAST ANGLIA £ AVERAGE

£465,432

£285,326

£340,847

£322,635

WALES £ AVERAGE

£252,202

£171,912

£186,517

£174,811

EAST MIDLANDS £ AVERAGE

£326,712

£169,673

£202,157

£204,928

SOUTH WEST £ AVERAGE

£382,338

£223,803

£262,692

£268,692

GREATER LONDON £ AVERAGE

£837,975

£496,696

£624,294

£610,451

SOUTH EAST £ AVERAGE

£538,066

£269,645

£375,059

£366,200

NORTH % AVERAGE

2.57%

16.86%

6.53%

11.66%

SOUTH % AVERAGE

7.85%

20.76%

11.79%

10.79%

Detached

Flats

Semis

Terrace

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 style for members 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