Housing Market Data
At their December meeting, the Bank of England’s Monetary Policy Committee (MPC) agreed to hold the Base Rate at 5% following last month’s 25 basis point rise. This decision was widely anticipated by market analysts and was in line with the MPC’s recent tendency to monitor the effect of Base Rate changes before deciding whether or not to take further action.
Although commentators on the housing market continue to report good levels of growth, factors such as the unexpected dip in consumer spending in September, rising unemployment levels (even though numbers in the workforce actually increased), steady inflation (at 2.4% albeit still significantly higher than the Government’s target of 2%) and the pound at a 14 year high against the US dollar, are all thought to have influenced the MPC’s December decision. Economic analysts are not in agreement as to whether a further Base Rate rise will be required in early 2007 so it appears too early to make a solid prediction on what the MPC will do next.
With regard to rates of annual growth in the UK housing market, Halifax and Nationwide are currently in broad agreement. For the 12 months to the end of September 2006, Nationwide reported annual growth of 8.2% (up from 6.6% in August) while Halifax reported annual growth of 8.0% (down from 8.2% in August).
The August 2006 RICS Housing Market Survey reported that house prices were continuing to climb despite the recent rise in the Bank of England Base Rate. Buyer enquiry levels are said to have increased at their highest pace since September 2003. Scotland, London and the South East were said to be highlighted as the best performing regions.
Generally, the UK housing market continues to display property sector and regional differences with evidence of a widening North / South split. While London and the South East are still benefiting from the good levels of growth experienced in the first half of the year, other regions continue to show nominal growth only.
The RICS residential lettings survey for May to July 2006 signalled that the rental market has consolidated its recent improvement and looks set to improve further in the coming months. Rents are reported to have risen at their highest rate in five years as tenant demand for rental properties increases. Although investor interest in the buy-to-let sector has again grown (shown by a rise in new lettings instructions), the rise is less marked than was the case in spring 2006. Therefore, with substantial tenant interest, demand continues to outstrip supply. Gross yields are said to remain unchanged, suggesting that rent rises and house price growth are keeping pace with each other.
New build apartments in many urban areas have, for at least the last three years, been the domain of the off-plan investor and speculator. The supply of apartments has been driven by the availability of off-plan purchasers and we have therefore seen a self-fulfilling circle of demand stimulating supply and then supply satisfying demand. In 2006. This has led to price cutting in a good number of locations. Owner–occupiers have generally not come forward to soak up excess supply because they have been deterred by factors such as space standards, parking availability and poor property management, not just affordability.