This week has opened with a barrage of news on the UK housing market. Whilst this is of course the equivalent of a hardy perennial there are two factors bringing it into focus. The first is that it is the UK Budget next week and the second is a weekend where a strong end to the last week for the UK Pound £ has been replaced by this.
Barclays trade of the week (short EURGBP) stopped out at Monday 0857am… ( @RANSquawk )
Is that some sort of record? As Prince would say it is a Sign O’ The Times.
One issue at play is building evidence of changes in the housing market. From Estate Agency Today.
Sellers have launched “their own sale” in response to the stagnating market by slashing asking prices according to Rightmove – but some sellers have not cut enough.
So what has happened?
The portal says sellers of homes that are new to the market have trimmed asking prices over the past month by a modest 0.8 per cent; more dramatically, 37 per cent of properties already on the market have reduced their asking prices since first being listed.
The 37 per cent figure represents the highest proportion at this time of year for five years, the portal says in its latest monthly market snapshot.
It is not the fact that there are price offers at this time of year that is unusual it is the amount of them. Also the five-year timing will be noted by the Bank of England as that takes us back to developments which influenced its decision to boost house prices with its Funding for Lending Scheme.
At the moment the situation as regarding price drops is recorded thus.
Analysis of those properties that actually sold last month after having reduced their prices shows that their average reduction between initial and last advertised asking price was also 6.3 per cent.
However the state of play in London seems rather different especially as we note this in the Guardian is from an estate agent.
Lucy Pendleton, of the London estate agent James Pendleton, said sellers in the capital are facing some particularly tough decisions. She argues that one large price cut can work better than several small ones.
As to the gap between asking prices and actual selling ones Henry Pryor helps us out.
This body covers all transactions including those for cash and tells us this.
The slowdown in prices continued into October, with values flat over the month and up 0.8% on an annual basis. This is the slowest growth since March 2012, and at £298,438 prices are now roughly level with November 2016.
The driver of the slow down is very familiar.
London continues to weigh on the market, with the decline in prices there (now 2.4% annually) dampening growth substantially though. Prices fell more slowly in September than the previous month, down 0.3%. The average house in the capital remains at £583,598, despite a fall of £14,250 over the year.
We have had various suggestions and hints from ministers over the past couple of months but this morning has brought this in the Financial Times.
UK chancellor Philip Hammond is drawing up plans to help first-time buyers in his Budget later this month, in an attempt to show the government is getting to grips with the housing crisis.
Having opened this piece with a mention of hardy perennials we have one which blooms very regularly in the UK which is what the UK government will badge as help for first time buyers. I would imagine that many of you will be able to guess what form this will take before reading the details below.
The chancellor is preparing a stamp duty cut for first-time buyers as a signal that the Conservative party understands the widespread resentment felt by those locked out of the housing market because of high prices, according to government aides………The Treasury regards a stamp duty cut for first-time buyers, which might be introduced for a temporary period, as one way to address a growing feeling of inter-generational unfairness in Britain.
There are more than a few begged questions in that but let us for the moment move on whilst noting the changes at play.
This problem is exemplified by how younger people are struggling to follow in the footsteps of their parents by buying their own homes. The number of homeowners under the age of 45 in England has dropped by 904,000 since the Conservatives entered government in 2010: down from 4.46m in that year to 3.56m in 2015-2016, according to data from the Department for Communities and Local Government.
Also this is an intriguing way of looking at the likely impact which also points out the wide variation in average house prices around the UK.
Lucian Cook, head of residential research at Savills, an estate agency, said any cut in stamp duty for first-time buyers would primarily benefit those purchasing homes in London and south-east England. Stamp duty is not payable on properties worth less than £125,000, and Mr Cook highlighted how the average price for a first-time buyer in Yorkshire was just over £125,000.
So a response to house price falls in London? We have been wondering on here how long that might take….
Bring me a higher love
The hardy perennial theme continues as I note this from City-AM.
Writing to the chancellor, an influential group of housing associations urged Hammond to allow developers to extend the height of properties without having to secure planning permission.
Under the “build up not out” plan, championed by Tory MP John Penrose, developers would be able to increase a building’s height so it matched the tallest building in its neighbourhood, or the height of surrounding trees.
The supply of homes is of course an issue in the UK although of course developers have quite a vested interest in being able to build higher as I recall the Yes Prime Minister episode that referred to this. Those who live next door may not be quite so keen so care is needed.
There is a clear problem with two possible government policies which is the proposed expansion of Help To Buy we looked at back on the 2nd of October and today’s Stamp Duty cut. This is that moves which are badged as help are tactically true but strategic disasters. What I mean by this is that the person helped gains at that moment but that fades away as we note that these moves are not only associated with but cause ever higher house prices. Sometimes they are priced straight in and people may be being helped to buy at the top of the market signified by the ever higher multiple of income required. This of course then requires even more help to stop house prices falling as the cycle repeats so far endlessly.
An irony is that a Stamp Duty cut would also damage one of the better revenue areas for the government in recent times. From the FT.
The Treasury’s receipts from stamp duty surged to a record high of £11.77bn in 2016-17, up 10 per cent per cent compared with the previous year.
There are regular debates about taxation and the apparent impossibility in more than a few areas of increasing it. Well Stamp Duty has not been one of them and has seen increasing flows to the UK Exchequer.
The issue of raising housing supply seems much better founded than raising demand. But it is problematic for the current Chancellor of the Exchequer as whilst it is welcome I think to see someone who is not just a career politician owning businesses which are in property development and construction raises a moral hazard question. Approving changes which benefit you personally is not a good look especially when the developers have benefited from the whole Help To Buy era.
Also if we look back to October 23rd there was this.
The government should borrow money to fund the building of hundreds of thousands of new homes, a cabinet minister says.
Communities Secretary Sajid Javid said taking advantage of record-low interest rates “can be the right thing if done sensibly”.
If Mr.Javid was a Chelsea footballer it would appear that he has been sent to Vitesse Arnhem on loan maybe permanently.
Meanwhile there is news from the Bank of England that house buyers have had the advantage even before it existed.