Good news for estate agents – and for Chancellors looking at a ʻMansion taxʼ. According to the Land Registry the number of sales of homes in December over £1m year-on-year was up 151% in England & Wales and over 200% in London! That extra 1% of Stamp Duty due to come into force in April next year on the purchase of homes over £1m could actually raise an appreciable sum of money!
Double click on the report above to download the summary of the housing market in February. Drawn from the main indices and processed along with other numbers this is the definitive guide to what the market is doing. Draw your own conclusions.
Estate agents are up there with journalists and MP’s in the list of those the public loves to hate. Agents and hacks have had an easy time of it in the last year as MP’s hog the headlines and compete almost daily it seems for the sleaze crown. Today we have had the annual report from The Property Ombudsman who provides a redress service for those who have a complaint against an estate agent.
Three years ago the imaginatively entitled ‘Consumer and Estate Agent Redress Act was crafted that requires all estate agents to sign up to a redress code. Just so you are clear, someone letting homes is not an estate agent (as defined by the 1979 Estate Agents Act) but a letting agent. Last year however, the largest industry group the Association or Residential Letting Agents (ARLA) took the lead and now requires it’s members to sign up to The Property Ombudsman although this leaves many letting agents still outside with no redress available to those who come into contact with them save for the Law.
How have agents done in the last 12 months?
So what does the Ombudsman’s report say? How have the third most reviled group done in 2009? Have they come a close second to the scandal of Duck Houses and Moat cleaning? Perhaps to your surprise they have lost and lost big!
During the year there were 845,000 houses sold. That 1.7 million buyers and sellers who could have had reason to complain to The Ombudsman. In addition, there were over a million new tenancies created so that’s another 2m landlords and tenants. Over 3.6m people could have had a poor experience from an agent and complained and sought redress from The Property Ombudsman.
Most complaints are about letting agents.
In 2009 he received over 12,000 enquires which resulted in 1,047 formal complaints being made. This is an increase of 7% and looks to be because of the additional 7,000 ARLA letting agents who came into the scheme last may. Of these 1,047 complaints, 435 were new complaints about lettings agents. An increase from 300 in 2008. So in total just 0.03% of those who came into direct contact with agents actually complained!
The Ombudsman is able to make an award in case where he finds for the complainant of a maximum of £25,000. Last year his average award was £339.00 Down from an average of £666.00 the year before. 91% of complaints were dealt with in less than 120 days.
Moving home whether you are buying or renting, letting or selling is a stressful time so it may be that this is why we have such a low opinion of agents but whilst there appears to be more than enough evidence to damn the political classes and daily examples of why we think so little of journalists, agents – both sales and lettings agents seem to be rather better than we might have thought. At least that’s the official view.
It would be a huge mistake to fall for any changes that might be announced in todays Budget on Stamp Duty for first time buyers.
In what would resemble blatant electioneering just a week or so before Gordon Brown calls a General Election, the Chancellor is predicted to remove the need for 1st time buyers to pay Stamp Duty on the homes they buy up to a value of £250,000. “Ministers are behaving like drunken sailors on shore leave” says Pryor. “They seem to be offering money to any casual passer-by in the mistaken belief that we won’t notice they are morally and fiscally smashed!”
There are three reasons why a budget give-away like this is a mistake;-
Firstly, the number of first time buyers (according to a written answer to a question from the Opposition last November quoting the Council of Mortgage Lenders2) is at an historic low having fallen by 67% in the past decade. Nearly 600,000 1st time buyers bought in 1999 which fell to below 400,000 at the peak of the market in 2007 and then to less than 194,000 in 2008. First time buyers, it would seem are an endangered species or what Labour would call ‘an oppressed minoirty!”
These are the number of 1st time buyers each year in the past 10 years according to CML.
Most of these people would benefit from removing the 1-3% Stamp Duty charge as they will be spending less that £250k and we all like to pay less tax but I expect that last year there were less than 150,000 1st time buyers and this year there could be even fewer. Artificially propping up the housing market in a property equivalent of ‘Bangers for Cash’ just distorts the market and delays the inevitable.
Next, with interest rates at record lows, it is irresponsible to encourage property ‘virgins’ to invest in property when rates can only rise from here removing the tiny saving that they make on the ‘bribe’ they took to buy in the first place? If a 1% saving is enough to convince you to buy a property today then you haven’t done your own budget.
Finally, whilst many people including the NAEA and RICS have encouraged the Government to look again at changing the ‘slab’ like system of the current Stamp Duty system – perhaps to a progressive tax, the housing market has bigger challenges. With yields on residential property often at just 4-5% and with buyers unable to find the 25% deposits that most of the few remaining mortgage products demand, houses still remain unaffordable to most of those who would like to be described as a 1st time buyer. The average age of someone buying their first property is still mid-thirties. These people don’t need a couple of grand of the cost of buying a house, they need cheaper prices and fairer credit terms.
The average home in this country costs over £160,000. Today’s first time buyers are paying over £120,000 and there are thousands who can’t afford this. Imagine how few of the next generation will be able to describe themselves as home owners even if Labour are around in two months time to enact the kind of madness that the Chancellor is said to be contemplating.
As the volume of sales slows to a trickle it is often suggested that house price indices might be reflecting the frenzy of activity that is taking place in Central London and in parts of the South East rather than the reality of a rather tougher market elsewhere. Bankers blowing their bonuses in Belgravia is somewhat different from bin men trying to borrow to buy in Bradford.
To find out exactly what is happening we need to be certain about what is selling and what where. Lenders like the Halifax and Nationwide give us a clue each month about the health of the market but to be certain we need the detail beneath the Land Registry data since recorded sales in each region will demonstrate just what influence the South East has on the property markets.
As estate agents and nosey neighbours know, the Land Registry has been publishing details of individual sales for many years providing information to help lubricate the market and each month they provide the most revealing index on the housing market in England and Wales. Calnea, the data wizards who produce the index on behalf of HM Land Registry allow us to see average prices, trends and sales volumes – in some considerable detail in part. However, when it comes to sales volumes they only publish the numbers for sales in London and in England and Wales.
For the first time in this form, with the consent of the Land Registry, Calnea has provided the sales volumes for all ten regions of England and Wales for each month back to 2003. Now we can see the volume of sales in the South West, take the pulse of the market in the North East and examine just how healthy the property market in East Anglia is. Are agents so busy in London and the South East that their efforts are all that is propping up the housing market numbers nationally or are London-centric journalists over-playing the reported recovery in the market by not venturing out of the M25?
The surprising answer perhaps is that the housing market across the country is actually as busy in Liverpool as it is in Luton and whilst sales volumes in the South East are about half what they were in 2007/8 the same is true in Newcastle. Prices and their trends upwards and down do vary markedly across the country but estate agents are selling proportionally just as few as they used to – everywhere.
Transactions in London and the South East account for 29% of all sales on average and in the most recent numbers kindly provided to me exclusively by the Land Registry which include the numbers for December we can see that this proportion was just one percent higher.
East Anglian agents typically account for 11% of all sales but were slightly busier in December contributing 13% of the total. Out of 64,000 sales so far recorded in December, 4% or 2,393 properties were sold in the North East. This is 1% less than usual.
The number of homes selling every day is now 2,161 across the whole of the UK, up from 1,742 in January last year but way below the highs of 5,000 a day in 2007. Prices according to both the Land Registry and the Halifax fell nationally last month although they are up over the year, but as we can see for the first time from the volume of sales across all 10 regions, it appears that wherever you are, there is a modest market in which to buy and sell.
The surprise for many is that there isn’t a north/south divide when it comes to the housing market – except in the direction of values. Prices according to the Land Registry were up 10% annually in January in London but they fell 3.4% in the North East.
Although there has been an improvement this January when compared to previous years we are still some way below the average for the time of year.
In particular, we can see that the supply of new properties coming to the market is 20% up on January 2009 but at at 100,000 we are still 40% below the average.
Similarly, the number of homes selling across the UK per day has ticked up by a quarter on the rate last year. Better news for estate agents but we at 2,161 we are over 40% below the average of the past 7 years.
It is perverse and distracting to find that sellers seem to be more optimistic at present with average asking prices up both on last year (6%) and the usual January figure (10%) but the prices that those few who are actually selling are also up according to both the Land Registry and Halifax. However, the latest figures from both sources marked prices down in January compared to December. Easter, an Election and two (possibly even three budgets if we get a second election as a result of a failed hung parliament) are all going to delay any longer-term recovery in the UK housing market.
What is worrying however is that the gap between average asking prices and average sale prices (see graph) is climbing once again and today that gap is nearly £60,000.
The supply/demand ratio is also back to it’s long term average with the number of homes selling per day compared to the number coming onto the market each month fell well below the long term average of 46 in January 2007 to just 37 days. Wild swings such as that seen in January 2005 when we had a whooping 83 days worth of stock despite the rate that homes were then selling indicated the fundamental imbalance that was starting to occur which eventually saw stock levels build to over 1.3m. Today there are less than 730,000 individual homes for sale in the UK. I expect this to swell bringing with it downward pressure on prices.
Cash buyers typically make up around 15% of all transaction. Today around 34% of all deals are done by people either trading down or who are perhaps coming from abroad. Cash buyers rarely get a check valuation on what they buy, are not counted in the mortgage statistics every month but they now represent a significant proportion of the market.
As for transaction volumes across the country, figures obtained from HM Land Registry confirm that the slow down has been balanced across all the ten regions of England and Wales that they monitor. London and the South East accounted for 30% of all sales in December – exactly as they do on average each month.