In the year to end Feb 2019 new build prices per m² rose by an average of 3.68% across the UK...

The Market

Although the UK feels to be weighed down by uncertainty and concern, there are some positive readings from both the housing market and within the wider economy.

UK Finance reported last month that in 2018 the number of First Time Buyers reached its highest level for 12 years. In 2018, 370,000 First Time Buyer mortgages were completed, which was 1.9% higher than the 2017 figure. UK Finance reports that the number of such First Time Buyer mortgages stood at 402,800 in 2006. The amount of lending to First Time Buyers was 4.9% up on 2017, standing at £62 billion. Given the present uncertainty, this is of course good news,

particularly as FTB’s often start buyer chains which will benefit home movers and house builders alike.

In December 2018 the slight increase in FTB activity was offset by a similar, marginal, decrease in Home mover activity. UK Finance note however that there are quite high levels of remortgaging both in the existing home owners and Buy to Let sectors, as owners look for better mortgage rates to reduce their costs.

The Halifax have taken the above UK Finance data and have analysed it along with their own mortgage data. They found that the majority of homes bought with a mortgage in the UK are now for FTB’s, the first time that this has happened

LSL New Build IndexThe market indicator for New Builds March 2019

Powered by

Powered by

since 1995. In 2008 FTB’s numbered 192,300, and by 2018 this number had grown to 372,000. Over this period the Halifax found that the price of an average home had increased from £153,030 in 2008 to £212,473 in 2018. The average deposit that a UK FTB needs to get on the property ladder is £32,841, although the amount needed in London is more than three times this amount.

The latest data from HM Land Registry found that the average price of a UK property in January 2019 was £228,147 which was 1.7% higher than the same period last year. The volume of transactions in the month was 1.3% higher than the same month last year. Also, mortgage approvals in January were slightly above the average for the past six months. House price growth seems to be most active in Northern Ireland where it stands at 5.5%, Wales, East Midlands and West Midlands are enjoying house price growth between 4% and 5% and Yorkshire & the Humber and the North West are in the 3% to 4% bracket. Over the past year London has seen a price fall of 1.6%, whilst the East of England, South East and South West have seen relative stability with price changes in the -0.5% to 0.5% range. No doubt falling unemployment, low interest

rates and rising real wages are helping many buyers in the more affordable regions make the long-awaited step into home ownership.

Analysis of new build mortgage valuation data shown in the table below shows that across the North, average new build prices per square metre were just over 5% higher than the same time last year. In the South the figure was a little over 2% higher. Analysis of HM Land Registry data on new build sales volumes and market value (which are time lagged due to the need for sales registrations to be processed), indicates that the market is topping out following a steady increase

2 BED 70 SQ.M

STARTER HOMEAVE ANNUAL EARNINGS FULL TIME EMPLOYEES HPE AFFORDABILITY

INDEX

East Anglia £232,189 £33,818 6.87 114

East Midlands £142,119 £27,937 5.09 84

Greater London £424,064 £40,295 10.52 175

North East £120,122 £26,924 4.46 74

North West £145,897 £28,732 5.08 84

Scotland £159,399 £29,671 5.37 89

South East £246,037 £35,825 6.87 114

South West £175,829 £29,568 5.95 99

Wales £145,500 £27,790 5.24 87

West Midlands £177,160 £29,242 6.06 100

Yorkshire and the Humber £135,776 £28,150 4.82 80

Average 6.03 100

First Time Buyers - Affordability.

Based on a simple average of property prices for the current year. Average annual earnings from ONS EARN 05: Average Gross Earnings of Full Time Employees.

Powered by

over the past seven years. But as other data in the report shows, there does not seem to be any evidence showing the seeds of a sudden market down turn, more a levelling off.

The table looking at the relationship between average earnings at regional level and the average price of a 70 m2– Gross External Area starter home shows the wide regional variation in affordability. Greater London, East Anglia, the South East and the South West all have high House Price Earnings ratios whilst other regions that are now seeing the highest rates of house price growth have lower HPE ratios, indicating greater levels of affordability.

The Long View

A back log of First Time Buyers will have been created in recent years as the age at which people get onto the housing ladder has steadily grown. Hopefully the reported increase in FTB activity will prove to be an ongoing trend. In 2018 the Institute for Fiscal Studies produced a briefing report on ‘The decline of home ownership among young adults’. The report found that at the age of 27 those born in the late 1970’s had a 43% home ownership rate, by the early 1980’s home ownership at the same age had fallen to 33% and by the late 1980’s it had fallen to 25%. The report noted that the falls in home ownership were most marked amongst young adults with middle incomes. with the key reason for this being the sharp rise in house prices relative to incomes. Real earnings are now growing and we are now enjoying historically low mortgage interest rates, record employment levels and modest house price growth over the past decade for much of the UK. A steady supply of property coming to the market to meet this demand and so avoid house price pressures would be advantageous.

Current News

The Chancellor’s spring statement promised to put the UK on course to increase housing supply to its highest level since 1970 by the end of the current parliament, and to reach 300,000 new homes a year by the mid 2020’s. The Chancellor also announced the Future Homes Standard 2025, the details of which will follow soon after consultation. This standard is to build on the Prime Minister’s Clean Growth Grand Challenge, which is to halve the energy use of new build property

by 2030. Further money has also been released from the Housing Infrastructure Fund to bring forward marginal sites for development.

In the Spring statement the Chancellor said that the Future Homes Standard would bring about the end to new build property being heated by fossil fuels. This effectively means an end to gas fired central heating systems. This follows advice from the Committee on Climate Change which last month said that developers should be banned from connecting to the gas grid from 2025.

New build homes are already far more energy efficient than average second-hand homes and the new build sector adds less than 1% to the total housing stock in any given year. The challenge will be to meet these new standards without allowing an increase in build costs that will ultimately need to be passed on to the consumer via the selling price. And that in turn leads on to the thorny question of how much value consumers actually place on year on year savings in energy consumption and other green measures.

In news just out, the Office for National Statistics have reported that the unemployment rate has fallen from 4.0% to 3.9%, the lowest rate for 44 years. The total number of unemployed people fell by 35,000 to 1.34 million. The ONS added that wage growth continued to outpace inflation. Inflation remains below 2% and the lack of inflationary pressure is one reason why interest rates can remain low which continues to be good news for house buyers. So, although the economic uncertainty continues, its not all bad news.

Average New Home price per m2

Detached

Flats

Semis

Terrace

Powered by

Period March 2018 to February 2019.

SCOTLAND £ AVERAGE / M2

£1,843

£2,313

£1,791

£2,040

NORTH EAST £ AVERAGE / M2

£1,740

£1,879

£1,715

£1,627

NORTH WEST £ AVERAGE / M2

£2,167

£2,357

£1,848

£1,955

YORKSHIRE & THE HUMBER £ AVERAGE / M2

£1,998

£2,188

£1,776

£1,830

WEST MIDLANDS £ AVERAGE / M2

£2,307

£2,993

£2,198

£2,348

EAST ANGLIA £ AVERAGE / M2

£2,949

£3,824

£3,050

£3,113

WALES £ AVERAGE / M2

£1,660

£2,346

£1,817

£1,703

EAST MIDLANDS £ AVERAGE / M2

£2,003

£2,189

£2,007

£2,025

SOUTH WEST £ AVERAGE / M2

£2,658

£2,972

£2,414

£2,481

GREATER LONDON £ AVERAGE / M2

£4,842

£7,020

£5,248

£5,182

SOUTH EAST £ AVERAGE / M2

£3,436

£4,002

£3,382

£3,338

NORTH % AVERAGE

9.35 %

-0.41 %

4.06 %

8.40 %

SOUTH % AVERAGE

4.06 %

-1.85 %

3.74 %

3.23 %

North/South Average % Change

Powered by

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