Chestertons Monthly RESIDENTIAL PROPERTY MARKET REVIEW February 2020 chestertons.com 1 CONTENTS Economic Overview 01 Sales Market 03 National sales 03 London sales 06 New homes 08 Lettings Market 10 National lettings 10 London lettings 11 Investment market 13 Contact 15 Nicholas Barnes – Head of Research “Welcome to our latest monthly review of national and London residential property markets.” 2 ECONOMIC OVERVIEW GDP Growth Although economic output is expected to have been however the signals from the new Government are flat in Q4 last year, recent surveys point to an increase positive and we can expect an expansion of fiscal policy inꢀbusiness sentiment following the General Election. inꢀthe Budget, albeit with some likely clawback in the Theꢀflash IHS Markit/Cips Composite Purchasing formꢀof additional taxation. Meanwhile, the corona virus Managers’ Index rose to 52.4 in January, from 49.3 in has already affected global supply chains and could have December. Business activity also expanded for the first a significant impact on economic output if it continues to time in five months, driven by the sharpest increase in spread at its current rate. newꢀwork since September 2018. The Treasury’s forecasting panel has held its February There remains considerable uncertainty while the UK forecast GDP growth rate for this year at 1.1% but lowered negotiates its new relationships with its trading partners, its 2021 forecast to 1.4%. Figure 1: UK GDP growth outlook 3.0% 2.5% 2.0% 1.5% 1.7% 1.8% 1.7% 1.4% 1.0% 1.3% 1.1% 0.5% 0.0% 2019 2020 2021 2022 2023 2024 Source: HM Treasury Forecast Panel 1 Inflation & interest rates Annual inflation rates rose in January: to 1.8% for CPI The next MPC meeting in March may take a different andꢀ2.7% for RPI. Bank Rate was held 0.75% at the Bank viewꢀifꢀinflation rises above its 2.0% CPI target rate. of England’s Monetary Policy Committee (MPC) meeting UK 3 month Libor rates have risen this month to reach in January, although only the December inflation data 0.75% as at 24th February. 5 year swap rates continued was available at that time which showed a fall in inflation. toꢀfall, standing at 0.56% at the same date. Figure 2: Inflation & Bank Rate forecasts 4.0% 3.5% 3.0% 3.0% 3.0% 3.0% 2.5% 2.5% 2.8% 2.2% 2.0% 2.0% 2.0% 1.7% 1.9% 1.9% 1.5% 1.6% 1.55% 1.0% 1.34% 0.77% 0.70% 0.99% 0.5% 0.78% 0.0% 2019 2020 2021 2022 2023 2024 Bank Rate (Q4) CPI RPI Source: HM Treasury Forecast Panel & ONS Employment and earnings growth The latest UK employment rate has reached a new realꢀterms) and to 3.2% (1.8% in real terms) excluding recordꢀhighꢀof 76.5%, while the unemployment rate bonuses. Average real pay without bonuses is now the standsꢀat 3.8%, the lowest since 1974. highest it has been since August 2007, although for much of the interim real wages growth was in negative territory. Annual growth in average weekly earnings including bonuses in Great Britain has slowed to 2.9% (1.4% in 2 SALES MARKET National sales The post-Election bounce is gathering momentum. rates and a combination of Help-to-Buy and the Bank December’s Election result has given buyers and sellers ofꢀMum and Dad for first time buyers. the confidence that the market has lacked for so long Although the number of national residential property and has brought to an end the lengthy period of political sales fell by 13% in January according to provisional uncertainty which has plagued the country since the dataꢀfrom HMRC (although on a seasonally adjusted referendum on EU membership. The pent-up demand basisꢀthey rose), January is typically a low sales month which has built up over the past three and a half years is and sales were 13% up on January 2019. now being released, supported by low mortgage interest Figure 3: Monthly residential property transactions (non-seasonally adjusted) 120,000 100,000 80,000 60,000 40,000 20,000 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 UK England Source: HMRC New listings on the Rightmove portal between 12th Visits to Rightmove in January were up by 7.2% on the January and 8th February rose by 2.1% compared to the prior year, reaching a new record of over 152 million, same period in 2019. This is the first time that Rightmove indicating strong pent-up housing demand. Momentum has reported a year-on-year rise in new supply for 13 isꢀstill growing, with traffic in the first week of February up months and suggests that sales are likely to continue by 9.2% on the same week in 2019. to rise in the shorter term at least and are likely to be boosted by the usual spring upsurge. 3 Figure 4: Average annual house price growth: UK & England 4% 3% 2% 1% 0% Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 UK England Source: Land Registry/ONS National house price growth accelerated again in compared to £251,711 in England. For the first time in December according to the Land Registry. Average two years, every English region saw house prices increase pricesꢀrose by 2.2% in both the UK and England. The on an annual measure, with Yorkshire & Humberside average house price in the UK now stands at £234,742 recording the strongest uplift (3.9%). Figure 5: Average regional house price & annual price growth (Dec 2019) £500,000 5% £450,000 3.9% 4% £400,000 £350,000 2.8% 3% £300,000 2.4% 2.3% 2.2% £200,000 2.0% 2% 1.8% 1.4% £250,000 1.2% 1% £150,000 £100,000 0% £50,000 £0 -1% Yorks & East East of London South North North West South Humber Midlands England West West East Midlands East Avg prices 12 months growth Source: Land Registry Average asking prices of property coming to market rose new buyer enquiries and the fact that supply is lagging by 0.8% in February according to Rightmove, and were demand, this suggests that a further rise in achieved 2.9% up on February last year. Given the sharp rise in prices is likely. 4 Figure 6: Monthly change in average asking prices 3% 2.3% 2% 1.1% 1% 0.9% 0.6% 0.3% 0.8% 0.7% 0% 0.4% -0.2% -0.2% -1% -1.0% -0.9% -1.3% -2% Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Source: Rightmove New mortgage lending fell again last December: loans to higher (+0.3%) while loans to movers were 3.2% higher. first time buyers (FTBs) were 4.4% down on the previous Re-mortgaging was also lower in December – by 13% - month, while loans to home movers fell by 4.4%. Compared although it was 2.7% higher than in December 2018. to December 2018, loans to FTBs were marginally Figure 7: Mortgage approvals for house purchase 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 First time buyers Home movers Source: UK Finance The average loan-to-value has risen over the past while the average loan size has risen by 4.3% for FTBs year, from 76.4 to 77.0 for FTBs and from 66.8 to 67.6 (£174,275) and by 6.4% for movers (£230,847). 5 London sales market There are further signs that the London market may have ago. Buyer demand is outpacing supply, with the number turned the corner in terms of activity and price growth. of newly marketed properties up by 1.6% compared to Rightmove reported that the number of sales agreed rose February last year, the first time that Rightmove has seen by 26.4% in February compared to the same month a year a year-on-year rise since October 2018. Figure 8: Annual price growth in Greater London 2.5% 1.5% 0.5% -0.5% -1.5% -2.5% -3.5% Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Source: Land Registry The rate of annual house price growth across Greater coming to market in February increased by 2.7% and London accelerated in December according to the Land theꢀannual growth rate stood at 2.4%, rising to 3.1% Registry, reaching 2.3% - the highest it has been since forꢀInner London. October 2017. This takes the average house price in the 20 boroughs recorded price growth in the 12 months to capital to £483,922, which is 2.1 times the UK average. December, one more than in the previous month. Brent More recent data reveals that asking prices are also rising: (5.9%) recorded the strongest growth while Camden Rightmove reported that the average price of property sawꢀprices fall by 9.8% over the period.