April -June 2011

 

Evaluating the trend in house prices is complex as there are markets within markets, for instance, Kensington and Chelsea functions differently from many other parts of the UK. The central London prime property attracts buyers from all around the world who are less sensitive to fluctuations in exchange rates, variations in inflation and sensitivities in the global economic climate.

Therefore movement in house prices in London and South East England can vary substantially from other regions of the UK. Kensington and Chelsea can vary from neighbouring Wandsworth. Properties valued at £3-5m can move higher in price quicker than flats valued at £350-600k due to demand and supply. You can gather trends but there are different nuances in price movements based on the kind of property and the area those properties are located.

There are a number of indices which evaluate the movement in house prices. Here are a list of the top ones:

• http://www.rightmove.co.uk/house-value.html
• http://www.rightmove.co.uk/house-prices-in-my-area.html/svr/2708;jsessionid=3C05AF834E295B0E48F710A5F2A5CDDA - also follow their monthly check on Asking Prices at Rightmove.
• Halifax and Nationwide indices are based on mortgage offers made the previous month:
  http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp
  http://www.nationwide.co.uk/hpi/Default.asp?calculate=true

 

NB: Halifax and Nationwide exclude in their monthly movement calculations: buy to let mortgages, remortgages, but cash purchases accounting for approx 25% of the overall market.

 

• Working on price trends on data 3 months old - three Government run sites: Land Registry - http://www.landregistryinfo.co.uk/
  http://www.landregistryinfo.co.uk/
  CLG - http://www.communities.gov.uk/housing/
  
• www.nethouseprices.co.uk - key in the relevant postcode in "sold prices" and check price
• movements over 10 years on any street.

Some indices are rated for their ability to predict future movements especially over the next 6 months to 3 years ie

IG Index - http://www.igindex.co.uk/spread-betting/highlight-house-prices.html

 

To check for a valuation on any property try:

1. http://www.ourproperty.co.uk/
2. http://www.zoopla.co.uk/home-values/?utm_source=google&utm_medium=cpc&utm_term=zoopla&utm_campaign=Brand%20(Test)
3. http://www.hometrack.co.uk/
4. http://www.mouseprice.com/

 

Market Summary - March 2011

 

After a 15-20% drop from 2007-mid 2009 we have seen in central London a 10-15% rise from July 2009 to June 2010 and since then we have recently experienced a flat period in central west London. The market has been short of stock which has helped keep prices afloat but has also made it hard to find attractive properties. It certainly seems difficult to find really good deals for quick turn around profits but for the medium to long term investor who has a genuine need for a property then the market looks a reasonable risk.

The outlook for base rates is they will probably rise to 1 to 1.5% by March 2012 which historically is still very low. We can only hope banks will offer better rates to first time buyers as at the moment the banks are quoting 4-5% to people looking for 80% mortgages. However, mortgages are much more affordable than they were in 2007 to borrowers. The recovery in the economy in the UK is still fragile but better than most feared.

Outlook: there are more reasons to see property prices drop slightly [1-3%] in the short term [1 year] due to Government cutbacks in most developed G8 countries like the UK, However, it can really depend on the property and where it is located. Demand for properties over £1m is still good while flats around the 500k mark are slow to sell because some buyers are still finding it hard to obtain mortgages. Demand in south west London (Kensington and Chelsea, Fulham, Belgravia, Westminster) remains relatively buoyant because of foreign buyers wishing to invest in what as seen as one of the premier areas globally.

 

BUT

 

The world is more and more polarized between those who have plenty of money to invest in property and those who don't. As a result, top end properties are probably looking a fairer bet in rising in value in the medium term [1-3 years] to properties worth less than £1m mainly due to most larger banks and financial institutions recovering well from the credit crunch and more large bonuses being forecast.

 

In short, always have a good fundamental reason to buy, for instance:

1. Improve your quality of life for you and your family. Owning a property ought to be a real pleasure allowing you to create a genuine home. In countries like Germany, Italy and France people tend to buy for life and make a home they own and nurture.
2. Your family is growing, or, shrinking so good time to upgrade, or, downshift.
3. As part of a mixed portfolio, owning a rental investment property, especially by earning a return through a holiday let allowing you higher returns and the possibility to use the property for periods of time during the year, makes a lot of sense if you have only occasional use for a property. Or even having a decent rental over a 5 year period is still a good way of hedging an investment portfolio.
4. Instead of paying rent, why not jump onto the property ladder, not only as a way not to pay someone else's mortgage but as a way of enjoying one's own property.
5. In general, if you have a genuine need, it is always worth looking for any property where you have the potential to add value through structural improvements, for instance, adding space by doing a loft extension or lateral or rear extension.

Otherwise currency exchange rates can play a part in manipulating UK property prices. A substantial part of the rise in the central London market in the second half of 2009 was fuelled by foreign investors especially Italians and French [not just Russians and Arabs as in the past] buying a significant amount of properties.

There's always a complex and simple side to the simple question is it worth buying a property now. Over the past 50 years apart from the stock exchange property has been the second best area for return on investment. As the single major investment for most people it always pay to be careful and like anything else in life, to ask for the right advice from the right people who know and understand the markets.