The latest data released from LSL Acadata shows that, for the third consecutive month, average house prices increased during February by 0.5%. The increase takes the average value of a home in England and Wales to £302,435. A spike in prices early last year, however, means prices are down 0.5% compared to this time last year.
However, according to the report, prices remain subdued. An estimated 59,100 sales in February 2019 is the lowest level for the month since 2015.
Oliver Blake, managing director of Your Move and Reeds Rains estate agents said, “Whilst a challenging market there are signs of a slowdown and yet, with some regions still experiencing price rises, there clearly continues to be demand for property and a need for more homes to come to market.”
Whilst prices are down annually, primarily because they saw a surge at the start of last year, with a peak reached last February, the situation is far less dramatic than it appears. Average prices have risen over the last three months and even where there are price falls, it’s not necessarily bad news.
Given the challenges of affordability from a decade of rising prices and sluggish wage growth, a short slowdown in prices combined with increases in pay could be a positive outcome for the market in the long term. The market still requires actions to ensure an adequate supply of housing, but the fact remains that a slowdown in prices is by no means a disaster.
As ever, the overall average hides a myriad of different stories. Crucially, there is a distinct North/South divide, with Wales in particular still growing robustly, up 3% annually. Most of the major conurbations outside London also continue to see growth, led by Cardiff (up 5.3%).
In London, prices have risen for the last five months, leaving the average price in the capital at £622,494.
Despite this average figure, prices are down in most areas (23 of the 33 boroughs). There are significant variations, however, which are exacerbated by relatively low transaction levels in January, increasing the volatility.
Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst said, “The question is where are house prices going now? In February, the average house price rose in the month by £1,363, or +0.5%. This was the third month in a row that the average price has increased, albeit at less than 0.75% over the three months.
Price movements over the last year have been relatively subdued, with the monthly change in the average price being less than ± 0.5% on eight occasions. On this basis, the England & Wales market is close to static, but of course, as we show, there are significant regional variations.
On an annual basis, i.e. over the last twelve months, average prices have fallen by £1,560 or -0.5%, and now stand at £302,435. This is the second month in succession that the annual % rate has been negative, given the mini-peak in prices in February 2018, at £303,400 (currently the record average price seen in England and Wales) prices one year later have failed to match that upward blip.
The housing market
Slowing, stabilising and indeed falling prices are not bad news in the ways some might describe them, depending on region or local authority. Given that we have had sustained periods of stretched affordability, it opens up the possibility that we can move the relationship between house prices and household incomes into better balance.
This in turn may then mean that the governments in England & Wales can think more radically about Help-to-Buy, and move away from a seemingly unplanned march towards permanence. If overall housing supply can be sustained, and the price/income ratio improved, then there is a possibility that the housing market can return to some semblance of long-term normality.
Of course these are all big “ifs”, but as we report here the market has been ratcheting downwards not in some cataclysmic and uncontrolled spiral threatening households and the economy, but rather with broadly steady slow deflation in real terms, and now therefore hovering over nominal declines in the months to come?
Transactions similarly are down, as we go on to show. This combination of static and/or lower prices and reduced transactions does have the potential to gather momentum, and in turn to trigger government action further to restimulate the market. At present, there are other distractions and this may well be a continuing context for some months or even years. The government has rightly focussed much of its attention on the rented sectors, and on making them more fit-for purpose and competitive with home ownership. This offers the prospect of a more balanced market in the future, something we should all aspire to.
So the current picture is not all gloom, and a period of readjustment, given the past is desirable. The public and media should give more thought to this, and begin to move away from relishing inflationary headlines. Can the feel- good factor be recalibrated around stability and choice rather than surging prices and market frenzy? This is a long overdue adjustment.”