Chichester Property News: UK property prices

Showing posts with label UK property prices. Show all posts

Thursday, 19 December 2024

UK property is cheaper than twenty years ago

You may think I’m mad writing the title “UK property is cheaper than twenty years ago” if you’ve even the most basic grasp of the UK’s housing market. On the face of it, you’d be right too. The average property in the UK twenty years ago cost £153,482, compared to £266,640 today.

One of the continuing words on many newsreaders’ lips throughout 2024 though has been ‘inflation’, which may give you a little clue as to where I’m heading with this…

You see, Nationwide Building Society produces some fascinating house price data. Amongst them are the ‘UK house prices adjusted for inflation’ figures, in which Nationwide use the Office for National Statistics Retail Price Index (RPI) to convert the actual house prices into an inflation adjusted one. Doing so paints quite a different story for the UK’s housing market over the past two decades.

For example, as mentioned earlier, a typical property twenty years ago (Q3 2004) would, on average, have cost £153,482 at the time. To buy the amount of ‘retail goods’ today that you could have bought then for that figure would now cost you £319,064 though i.e. more than the average UK home now costs (£266,640 as of Q3 2024). That is to say that overall inflation, measured via RPI, has increased more than UK house prices in the past twenty years.

In theory then, property in the UK should feel ‘cheaper’ than twenty years ago (despite actually increasing by 74% in price). So why is it that not many people feel like that?

I believe that largely comes down to incomes not keeping pace with property prices. This is evident when looking at median annual incomes: £21,996 in 2004 vs £36,712 today (+67%). Add in a greater level of taxation and our net pay is even further adrift when it comes to housing ‘affordability’.

That is, however, in contrast to the minimum wage, which has outpaced house prices over the past twenty years. Consider that the minimum wage was £4.85ph at the end of 2004 and is now £11.44ph. That’s a 136% increase vs the 74% increase in house prices over the same period. And the minimum wage is set to increase by another 6.7% next April…do you think property prices will increase by 6.7% next year? If not, they should in theory become more ‘affordable’ for lower income households.

You’ll note the chart below shows the inflation adjusted house prices as having fallen quite sharpish these past couple of years. That is because actual house prices have dropped a fraction in that time (from a peak of £273,135 in Q3 2022), whilst inflation in the same period has raced up by 13%. But with inflation having steadied this year (it is currently at 2.6% in the year to November) things are starting to level out.

As around 100,000 households a month continue to come off their (super cheap) fixed mortgage rates, it may be that interest rates hold the key here. Indeed, if inflation is truly under control, all economic indicators suggest interest rates will drop and a new wave of house price inflation could yet commence, which would bring them more in line with their longer-term ‘above inflation’ trend.

Thursday, 21 December 2023

UK property is cheaper than twenty years ago

One of the buzz words of 2023 though seems to have been ‘inflation’, which may give you a little clue as to where I’m heading with this…

For example, as mentioned earlier, a typical property twenty years ago (Q3 2003) would, on average, have cost £129,761 at the time. To buy the amount of ‘retail goods’ today that you could have bought then for that figure would now cost you £268,641 though i.e. more than the average UK home now costs (£260,181 as of Q3 2023). That is to say that overall inflation, measured via RPI, has increased more than UK house prices in the past twenty years.

In theory then, property in the UK should feel ‘cheaper’ than twenty years ago (despite actually doubling in price). So why is it that not many people feel like that?

I believe that largely comes down to incomes not keeping pace with property prices. This is evident when looking at median annual incomes: £21,124 in 2003 vs £34,963 today (+66%). Add in a greater level of taxation and our net pay is even further adrift when it comes to housing ‘affordability’.

That is, however, in contrast to the minimum wage, which has outpaced house prices over the past twenty years. Consider that the minimum wage was £4.50ph at the end of 2003 and is now £10.42ph. That’s a 132% increase vs the 100% increase in house prices over the same period. And the minimum wage is set to increase by another 9.8% next April…do you think property prices will increase by 9.8% next year? No? In which case, they should in theory become more affordable.

You’ll note the chart below shows the inflation adjusted house prices as having fallen quite sharpish these past 18 months. That is because actual house prices have dropped a fraction in that time, whilst inflation in the same period has raced up by 17%. But with inflation having dropped to 3.9% in the year to November (and is close to zero over the past six months), change may be afoot.

As around 100,000 households a month continue to come off their (super cheap) fixed mortgage rates, it may be that interest rates hold the key here. Indeed, if inflation is truly brought under control, all economic indicators suggest interest rates will drop and a new wave of house price inflation could yet commence, which would bring them more in line with their longer-term ‘above inflation’ trend.

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Thursday, 2 February 2023

£80m per hour increase in property values in 2022

Research from Zoopla has concluded that the total value of UK housing reached £10.5 trillion by the end of 2022. That represents an increase of £700 billion compared to the year before, or nearly £80 million being added to the collective worth of UK property each and every hour!

12 out of 13 homeowners were said to have registered a gain in the value of their property in 2022. The average gain for those 27.4 million homes was £19,000, but there were nearly three million that increased in value by more than £50,000.

Over a quarter of the 2.3 million homes that registered an average fall in value of £7,300 were located in London. Much of this decline came in the second half of the year, as mortgage rate rises put downward pressure on prices. In the final quarter of 2022 there were actually more homes in the UK (15.8 million) that declined in value, compared to those that increased in value (13.9 million).

One million homes are thought to have now lost all the gains they made in the first two years of the pandemic (whereby values increased an average of £32,400 between February 2020 and February 2022). These are mostly located in London, the South East and Scotland; areas which did not increase in value as much as others during the period.

Nationwide Building Society has since confirmed that house prices declined for a fifth month in a row in January 2023, so this downward trend seems likely to pick up steam as the year goes on.

The research shows how the profile of gains and losses varies across the country and by price band. This highlights how there is not really a singular ‘housing market’ across the country, but many micro-markets, with each home having its own trajectory when it comes to its worth.

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Thursday, 8 October 2020

Do postcodes matter?

I was asked several years ago whether your postcode matters when it comes to the value of your property. Well, in swanky West London, the difference between SW3 and SW10 can influence values by thousands or even millions of pounds. In Chichester however, we don’t have many Russian Oligarchs and Saudi Princes buying our properties. Nevertheless, ever since being asked that question, I’ve always found it interesting to compare Chichester’s PO18, PO19 and PO20 postcode areas.

The central postcode area for Chichester is PO19, covering the area up to Lavant and down to the A27, plus Stockbridge and part of Fishbourne. The villages to the North of this are in PO18, incorporating as far as Eartham to the East and Nutbourne to the West. Then to the South of the A27, covering the Manhood Peninsula and reaching down towards Bognor Regis, is PO20.

It is for these geographical reasons that I have indeed witnessed scenarios where two seemingly similar properties, but on different sides of the PO19/PO20 border, have varied in desirability and price (largely due to the proximity to Chichester’s city centre).

Of these three postcode areas, the one with the best performing housing market over the past 12 months has in fact been PO20, to the South of Chichester, with average values rising by 2.0%. In a close second was PO19 with a rise of 1.7% and in third was PO18 with a 1.3% increase.

It’s a similar story when looking back at the areas over a longer period. Over the last 5 years, values in PO20 have risen by 17.7%, PO19 is slightly behind with a 14.4% rise and finally PO18 has seen a 12.7% increase. That narrative remains the same when looking at the postcode regions on a 10 and 20 year timespan too.

Why might this be the case? Simple supply and demand of course! 53% of all properties on the market in PO20 are showing as sold, compared to 47% in PO18 and 43% in PO19, suggesting demand is strongest in PO20. And where there’s demand, prices typically follow. It’s a different story when it comes to rentals though, with 83% of the total properties showing as ‘let agreed’ in PO18, compared to 74% in PO20 and 69% in the PO19 region.

With all this in mind, it’s interesting to note that the PO20 postcode region has a greater ratio of homeowners versus renters than the more central PO19 postcode area. This is evident by the fact 380 properties are available for sale in PO20 but just 16 are available to rent, whilst there are 437 properties for sale in the PO19 postcode and a far healthier (albeit still low) 55 for rent.

I would therefore conclude it has been the homeowners of Chichester that have predominantly driven house price increases. This tallies with other evidence that it is not landlords who have the greatest baring on property prices, but owner-occupiers who are happy to pay a little more for their dream home.

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Wednesday, 1 April 2020

Chichester Property News - Issue 49 - April 2020

Featuring the articles:

"Will property follow the stock market downwards?",
"Is now a good time to sell your Chichester Property?",
"Should you buy a new or used property?'",
"Community Focus: Enable's 'Queen of Hearts' Ball for Love Your Hospital "

and "Buy-to-let deal of the month: 4 bed house in Tangmere, £325,000,

4.8% yield"

➕ Plus, the latest average property values, rents and yields in Chichester!