The British property market has certainly been grabbing the media’s attention recently, and for all the wrong reasons. With the banks battling with the government over lending criteria’s and the 0.5% base rate causing a huge dip in the average property price, 2011 has not started too well! Looking at the most recent Property Price Index, released in October last year by the Land Registry, the property market saw its biggest dip in three years at the end of 2010. The country’s leading property site, RightMove, reinforced this data by releasing statistics that highlighted the average seller cut their asking price by as much as 3.2% as of November 2010 in desperation to offload their property before the festive period.
These statistics show a sorry state of affairs and economists stress that the housing market is unlikely to return to its pre-recession form for quite a while yet! However, there is a silver lining, albeit the tiniest ray of hope! These economists have also marked a trend in the movement of housing prices over the past year that implies they are increasing, just at a very slow rate. They state that house prices are a far cry from their lowest point in 2007, when the credit crunch first hit hard. The banks disagree though and tell a considerably different story. Nationwide Building Society released figures at the close of 2010 that presented house prices as much weaker in the last quarter of the year, implying that the market would have a shaky start to 2011. Our aim here is to analyse the Land Registry’s Property Price Index in the hope to mark some of the trends over the year between October 2009 and October 2010. Could this be the year for that commercial mortgage?
Perhaps not surprisingly, the City of London has seen the largest property price increase over the past 12 months, from an average of £316,943 in October 2009 to £341,105 in the same month this year; an annual growth of around 7.6%. Additionally, all 33 boroughs have experienced property price increases, the most significant of which were seen in Merton (+8.9%), Redbridge (+10.2%), Camden (+8.6%) and The City of Westminster. London’s property market has reaped the benefits of a consistent interest in property investment from foreign buyers looking for secure investment outside of the weaker Euro Zone areas.
November this last year, specifically, saw the average price in London reach a record high of £383,243. According to major property website LSL Property Services/Acadametrics, this was the fourth month in a row in which London has reached a new peak price. However, the website also claims, that despite these impressive statistics, there has actually been a decreased acceleration of price growth in London over the last 3 months.
One of the main reasons for this slow decline in the property market in central London is, ironically, the improvement of the city’s transportation facilities. With continuous upgrades being made to the underground system and with the Crossrail service currently being under construction, travelling to and from the city has become much more efficient and relatively hassle free. As a result, commuters are settling down in the quieter towns and cities surrounding the capital and instead just commuting to work.
Furthermore, London isn’t the only city in the UK to see property price increases over the period between October 2009 and October 2010. Eight regions in England and Wales also saw increases, one of the largest being in the Welsh town of Merthyr Tydfil of +10.2%. Surprisingly, the area of Darlington saw the best monthly growth between September and October 2010 in the whole of the UK, with a rise of 3.1%. Nonetheless, as you would expect in comparison to London, the average regional statistics for the North West weren’t quite as impressive. The North West actually experienced a slight decrease in property prices from an average £118,838 in October 2009 to a slightly lower £117,868 in October 2010.
The North/South divide of the country is nothing new, from accents, culture, the back and banter, but now the most growing difference between the two is property prices. It’s not the best kept secret that the South’s property market has seen the largest increases and has been the more robust of the two, withstanding past economic fluctuations. With the credit crunch though that has all changed with both property markets running neck and neck and are pretty equal when it comes to growth and the other usual factors. Land Registry research shows that the engines of house sales in 2010 have actually been County Durham and Northumberland, property sales having increased 11.6% in County Durham and a whopping 25.9% in Northumberland.
Nationally, the largest price increases on average were last seen in October 2007, so to put it in context, the 2010 average annual rise was 3.4% by October, putting the average price of a UK at 3.4%. What is not talked about often however is how prices are moving when comparing differing housing types. Naturally detached houses saw the largest increase with 4.8% since the fourth quarter of 2009. Next came Semi-detached at 3.3% increase a year with terraced housing bringing up the rear at 2.5%, so no major shocks in that regards I think you’ll agree.
So what can we expect for the 2011 market? All the figures point to growth the length and breadth of Britain, all areas and all sectors which points to the fact that a recovery is underway, although it’s a slow recovery. We see evidence of house prices beginning to slow again as time moves on, nevertheless certain experts and think tanks are still predicting growth over the New Year and into the first quarter of 2011. Foremost among them being the Centre for Economics and Business Research (CEBR), who predict a 0.8% rise in the UK as a whole and 1.2% within London, not the greatest growth figures but fears of a double dip recession have receded with such predictions floating about, if they turn out to be true, it’s good news for us all.
So what can we take from all these numbers? Well, the first thing is to not assume that London is the best place to make a sound investment in property with growth being experienced across a majority of regions in the country, you could be just as well grabbing a bargain in the Northern regions. Similarly, with the massive improvements in commuter links to the capital, it is likely that more and more people will look for property outside of the capital, in quieter, more suburban areas. The main thing to take from all this is to not despair at all the negative headlines out there about the property market at the moment, it may not be quite as bad as it is made out to be, this could well be the year for finding that commercial property finance!
Hassam 