Are UK house prices rising again?

Today we get to look at the money supply and credit situation in the UK  But before we get there yesterday brought news to warm a central banker’s heart. From Zoopla.

The annual rate of growth edged up to 2.7% in June, after rising 0.2% on the month. Price growth is highly localised, but there is little evidence of material declines at regional or city levels, although a small proportion of local areas are seeing price declines of up to -0.2%.

If the Bank of England had any bells they would be ringing right now with Governor Bailey stroking a cat whilst smiling. As to why? We are told this.

Buyer demand has risen strongly since housing markets reopened, as shown on the purple bar in the chart below. Although the number of new homes being listed for sale has also risen, it hasn’t increased by the same margin. This creates an imbalance of low supply and high demand – and contributes to house price growth.

So simply more buyers than sellers then. To be specific the purple bar in their chart shows a 25.3% imbalance.

This imbalance is most stark in cities in the North of England, including Manchester, Liverpool and Sheffield, and it is notable that these are in the top six cities for levels of annual house price growth.

I note a mention of Gloucestershire seeing a mini boom. The 20 cities sampled show the nearest ( Bristol) being one of the weaker areas albeit having more demand than 2019 unlike Belfast and Edinburgh. Interestingly London looks quite strong and is fifth on the list. Another house price rally in London would be a turn up for the books and here is Zoopla’s explanation.

The biggest change in the market spurred by the Chancellor’s announcement of a stamp duty holiday for England and Northern Ireland has been seen in London. Sales jumped by 27% in the weeks after the change. Given the higher average house prices in London and the South East, these are where the largest benefits from the stamp duty holiday will be felt. The stamp duty holiday will continue to support demand in these higher value markets.

Have they managed to bail it out again? Well it would appear that they intend to keep trying. From the Financial Reporter.

The Government is reportedly drawing up plans to extend the Help to Buy scheme due to Covid-19 delays.

According to the FT, ministers have been asked to extend the Scheme beyond its planned December deadline to support buyers whose purchases have been delayed by the pandemic.

The scheme is due to end in April 2021 and a new version of the scheme will run from April 2021 to March 2023, for first-time buyers only. If the original scheme ends when planned, sales transactions will need to be agreed by December 2020.

Help to Buy seems to be covered by The Eagles in Hotel California.

“Relax”, said the night man
“We are programmed to receive
You can check out any time you like
But you can never leave”

There is another route funded by the Bank of England and Nicola Duke or @NicTrades has kindly highlighted it.

I got my first mortgage in 1997 and the 2 yr fixed rate was 7.7% Today I got a fixed rate at 1.13% Amazing………..2yrs – the 5 yr is 1.3 and 10yr 1.44

As the band Middle of the Road put it.

Ooh wee chirpy chirpy cheep cheep
Chirpy chirpy cheep cheep chirp

Mortgages

This morning’s Bank of England release would also have cheered Governor Andrew Bailey.

On net, households borrowed an additional £1.9 billion secured on their homes. This was higher than the £1.3 billion in May but weak compared to an average of £4.1 billion in the six months to February 2020. The increase on the month reflected both more new borrowing by households, and lower repayments. Gross new borrowing was £15.8 billion in June, below the pre-Covid February level of £23.4 billion.

Since the introduction of the Funding for Lending Scheme in the summer of 2012 they have been targeting net mortgage lending in my opinion. This time around they have kept is positive and as you can see it appears to be rising again. It is much less than earlier this year but after the credit crunch we saw negative net lending for some time. Even when the FLS was introduce it took until 2013 for there to be a return to positive net mortgage lending.

Approvals still look weak.

The number of mortgages approved also increased in June. The number of mortgage approvals for house purchase increased strongly, to 40,000, up from 9,300 in May. Nevertheless, approvals were 46% below the February level of 73,700 (Chart 3). Approvals for remortgage (which capture remortgaging with a different lender) have also increased, to 36,900; but they remain 30% lower than in February.

At these levels remortgage if you can is my suggestion, although not advice as that has a specific meaning in law.

Consumer Credit

The Governor will be chipper about these numbers as well and presenting them at the monthly morning meeting will not have been potentially career ending unlike the last few.

Household’s consumer credit borrowing recovered a little in June, following three particularly weak months (Chart 2). But it remains significantly weaker than pre-Covid. On net, people repaid £86 million of consumer credit in June following repayments totalling £15.6 billion over the previous three months. The small net repayment contrasts with an average of £1.1 billion of additional borrowing per month in the 18 months to February 2020. The weakness in consumer credit net flows in recent months meant that the annual growth rate was -3.6%, the weakest since the series began in 1994.

We have discovered ( via large revisions) that these numbers are not accurate to £86 million so substantial repayments have been replaced by flatlining and the junior at the meeting would do well to emphasise this.

The smaller net repayment compared to May reflected an increase in gross borrowing. Gross borrowing was £17.7 billion, up from £13.6 billion in May, but this was still below the average £25.5 billion a month in the six months to February 2020. Repayments on consumer borrowing were broadly stable in June, at £18.1 billion, below their pre-Covid February level of £24.6 billion.

So gross borrowing is picking up.

As a point of note it is the credit card sector which really felt the squeeze.

Within total consumer credit, on net there was a further small repayment of credit card debt (£248 million) and a small amount of additional other borrowing (£162 million). The annual growth rate for both credit cards and other borrowing fell back a little further, to -11.6% and 0.2% respectively.

Maybe it is because in a world of official ZIRP (a Bank Rate of 0.1%) the reality is this.

The cost of credit card borrowing fell from 18.36% in May to 17.94% in June, also the lowest rate since the series began in 2016.

By the way if we switch to the quoted series the overdraft rate is 31,53%. Mentioning that at the Bank of England will be career ending as it was an enquiry at the FCA ( boss one Andrew Bailey) that was so poor it drove them higher as opposed to lower.

Comment

Can the UK housing market leap Lazarus style from its grave one more time? Well the UK establishment are doing everything that they can to prop it up. Meanwhile the business lending that the policies are supposed to boost is doing this.

Overall, PNFCs borrowed an additional £0.4 billion of loans in June. Strong borrowing by small and medium sized businesses (SMEs) was offset by repayment by large businesses.

The borrowing by smaller businesses would ordinarily be really good except we know a lot of it will be out of desperation and of course as the bit I have highlighted shows is nothing to do with the Bank of England.

Small and medium sized businesses continued borrowing a significant amount from banks. In June, they drew down an extra £10.2 billion in loans, on net, as gross borrowing remained strong. This was weaker than in May (£18.0 billion), but very strong compared to the past. Before May, the largest amount of net borrowing by SMEs was £0.6 billion, in September 2016. The strong flow in June meant that the annual growth rate rose further, to 17.4%, the strongest on record (Chart 5). This strength is likely to reflect businesses drawing down loans arranged through government-supported schemes such as the Bounce Back Loan Scheme.

This bit is really curious.

Large non-financial businesses, in contrast, repaid a significant amount of loans in June. The net repayment, of £16.7 billion, was the largest since the series began in 2011 and followed a net repayment of £13.0 billion in May.

So we see a complex picture in an economy which is now awash with cash. If we switch to the money supply then it ( M4 or Broad Money) has risen by 11.9% over the past year. Of this around £174 billion has come in the last four months.

Me on The Investing Channel

32 thoughts on “Are UK house prices rising again?

  1. As I mentioned yesterday, the local market is very active and decent houses are selling very quickly plus the ‘offers over x’ has reappeared. There is most definitely a shortage of suitable property coming to the market and a backlog of buyers chasing them. I think in time this will ease, and when the effects of unemployment etc hit the market, it will cool down. It’s going to be interesting to see if that is uniform across all of the market or just lower priced properties that first time buyers go for. I remember a market situation around 20 years ago when flats were ten a penny but decent four bed homes were in high demand. That created a very distorted market and we may see a similar situation again with good quality housing commanding a premium but lower priced units falling in price.
    I do wonder if the £550k stamp duty threshold will become permanent. If they pull it next year the market will die and they wont want that to happen!

    • Ahh the old supply shortage, but did you know the lady (forget her name) who came up with that line now even claims its a nonsense as to why prices are absurd.

      As someone who works all around the planet and meets priced out plebs who are priced out i can confirm their govt/media also play the housing shortage line.

      This includes Norway, OZ, NZ, Holland and many more.

      • Apologies for the bad England.(priced out plebs who are priced out)

        If they keep the SDLT around the 500K mark they will have to tax wealth somewhere else. As they’ll be losing billions of taxation.

      • Arthur

        I cant speak for the the whole of the UK but round here there is definitely a shortage and loads of buyers chasing what comes to market. Prices are definitely absurd but if you want what you see, you have to pay it as others will if you don’t.
        It’s a shortage of ‘nice property’ in a ‘nice area’ near ‘nice schools’ that defines the market – thats what the money is chasing.

        By the way I have just noticed a typo above – it’s £500k stamp duty not £550.

        Unfortunately housing is a big part of the UK’s economy as it employs people involved in the transaction and moving, tradesmen who do a roaring trade around here doing up newly bought housing, companies making and selling furniture, fittings, bathroom and kitchen suppliers and so on. The government are going to keep that going for as long as they can.

        I look on with amazement at what sells around here and for how much.

        • My view is the reason prices are high is due to cheap loose credit, and having a parasitic middle class who profit from high house prices thus govts do all they can to continue this.

          As we live in a nation with some of the worlds strictest planning laws when it comes to building residential property, along with the fact planning laws are designed to make it pretty much impossible for an ordinary person to get planning permission on the same plot of land the Oligopoly of builders can with the assistance of expensive legal teams; does not help supply matters but that is secondary.

          See Spain/Ireland/USA prior to the 2008 crash, they built vast amount of housing, yet in the decade prior house prices just went up and up.

          If the govt/BoE didn’t do all they could with QE. Help to Buy 1,2 and 3 + 40% for London, £30bln in Housing Benefit, Term Funding Scheme, Funding for Lending, ZIRP for a decade and counting, bank bail outs etc etc… then the price of property would have fallen through the floor, despite the fact we’d still have more or less the same amount of housing.

          • A bit rough calling the middle class parasitic! They are after all the main tax payers in the uk and regularly get squeezed for more. They only benefit from house prices if they own more than one or downsize and that’s a small percentage. If I were to sell my over valued house now I would just end up buying another over priced place to live so where’s the gain? I do know one young man who would definitely identify as working class and he makes a good sideline out of buying property, doing them up and selling on for a nice profit – so it’s not just the middle class! His full time job is a kitchen / bathroom fitter.

          • Might be harsh stating the middle class are parasitic, but its accurate. They’ve borrowed and spent like no generation/class of people in the history of planet earth over the last 3 decades living a life they were entitled to.

            Quite clearly its the asset owning class who have the means to borrow in the first place, that have created such a private debt bubble, thats been passed onto the govts. credit card.

            Just look at the reaction of those boomers who were expected to pay for what is in essence private health care in old age out of their house price inflation. It resulted in Corbyn almost getting the keys to No.10 such was their disgust at having to pay their own way in life.

            Stick it on the tab and let the young pay for it was the popular but unspoken opinion.

        • There is always a shortage of things going up in price. So I see Arthur’s comments too and they dance around the same topic from a different perspective.. It is possible there is an oversupply of property nationally and certainly if you froze people in their home (such as in lockdown). I went to Cornwall regularly during lockdown, it was like a ghost county, and that was not because the locals observed stay at home.

          should there ever be a concerted fall residential, such as is overdue now for commercial property I don’t think many people would be able to “buy the dip” or catch the falling knives such is the manipulation of this asset class.

          Its a marginal purchase market and undoubtedly the removal of stamp duty for “cheap” homes, like £1/2 a mill is lighting the touch paper on prices. The MP’s have skin in this game and they need the musical chairs to continue, a wide audience of multiple property owners also love a growing asset portfolio.

          I think with those key powerful influences, rich middle class, MP’s and rotten boroughs (tory conservatism) then housing is the only thing left in the UK, since most everything else has been sacrificed to protect it. Now, perversely they are sacrifcing the revenue that comes from it to try and save its trajectory.

          You would have thought we have to be near the end, but I guess if we can print money to prop up “the economy” then it is meant to be printed to preserve high house prices, arguably these are the same thing.

          • i take issue with only blaming the middle class for this.! I come from a VERY working class background in Wallsend and most people there own their own homes and have moved up the property ladder when they could. I now live in Gloucestershire where many more folk would be classed as ‘middle class’ ( how I hate these categorisations !) and see little difference between the actions of friends and family back on tyneside ( over the decades ) to those here in Gloucestershire – only maybe the level / price at which they buy and sell. They’re all in it to ‘move on up’.

          • We don’t, as individuals, choose the system we live under.
            Do our best whilst working for change is all that should be required.
            As such, I don’t see individuals as parasites, per se.

  2. Joe Public may be looking to buy while they have a job put when furlough ends it will be a different matter.

    There was bound to be more interest after lockdown eased but we are now being warned by Borris of a second wave, this will unnerve the market once again.

    With regards to more buyers than sellers don’t forget the ban on evictions and most banks wont call in their mortgage for a year or so !

    Its early days at the moment to second guess where the mortgage market is going but all things being equal and 10% or more expected to be on the dole that tells me whatever happens to the bank rate the market will fall.

    • Hi Peter

      As furlough is already winding down it cant be reliance on that which is keeping things going. I find it hard to see the party keeping going for the reasons you state. We could be like the cartoon characters which race off the edge of a cliff and hang in the air for a bit before gravity takes control

  3. The distortions pile up as central bankers hose their economies with money printed out of thin air, the Fed meets this afternoon and will no doubt give details of how much more free money they intend to throw around and possible extensions to existing programmes, in fact a large number of the US workforce are actually better off since the $600 they are getting is more than they used to earn before the Fed made working for a living “soooo 1980’s”. RobinHood the phone app that allows these people to then “invest” their new found wealth in the stockmarket, with zero commissions what could go wrong? Their favourite targets are companies declaring bankruptcy, I think this defines their level of knowledge and sophistication as regards trading, but hey the Fed has made it cleat they are never going to allow the market to go down so there is no risk -right?.

    My son has despite my decades of advice, warnings and threats, gone and recently bought a run down ex council house in London for £400,000 and is now spending more money doing it up – I mean – for £400,000 you wouldn’t expect to just move in would you?

    And so regardless of my rantings he has gone and bought into the most expensive market in the UK at possibly the top of the toppiest top, he only told me afterwards but I told him he may as well have just set fire to at least £100,000 on his barbeque, but of course he “knows” property in London never goes down in price doesn’t he!

    Just to add to the millibars of my blood pressure I would just like to add that he and his partner are both “working” from home! As we all on here know, it is only a matter of time before companies begin to realise they do not need all these people “working” from home and start to cut back. But as old Uncle Warren says,when the pin eventually pops this bubble, he is going to learn some very hard lessons about investing and money in general.

    We on here might all be wrong about the UK housing market again, I mean the never ending prices in any bubble always make fools of those labelling it a bubble until the top finally does arrive, and no one does know when the top is is until after it has formed, so just sit back and watch this government throw money at it again as they destroy what is left of the economy and sterling in the process.

    • Crikey a father telling his son the property market is absurd, in my world that is highly unusual. Most over 50s i meet seem to think pwopertee prices are fine as you can buy a flat in Stabsville, NE England that needs renovating for a mere 70 grand.

      Of course the young today have it far easier as interest rates are low. Whereas they had to put up with interest rates of 115%, they had to walk 10 miles to work and it was uphill in both directions and then do 16 hour shifts 7 days a week without so much as a tea break.

        • This is Tyneside, im quoting what a relative said about buying in this region just a few months ago.

          Couldnt be bothered to tell him my gran bought a 4 bed house of the council for 3 grand in the 80s, such was the value of NE property back then.

          • Just another price checker for those who think property is cheap and can only go up, the estate built over the road from me in Birmingham just after the war advertised a large three bed semi with side garage for sale at a WEEKLY cost of 24 shillings and 6 pence (£565 to buy), some smaller for sale at £395 to buy-17 shillings and 9 pence per week, admittedly that was freehold but included ground rent and water and local rates, when a typical worker earned around – guessing here – £5 a week?That was when the wife stayed at home and was a housewife – how old fashioned and sexist – not! So an average worker could afford to buy a new large semi on the outskirts of town and his wife stay at home and raise 3-4 kids on his wage and possibly run a car as well.

            IF anyone can provide a price that would have included freehold please do.

  4. I thought prices were holding up remarkably well considering this is meant to be the worst depression since WW2.

    But the last couple of weeks i’m seeing drops of £10-25k on houses prices around the £300K mark, this is in Romsey, some of these have been 2nd drops.

    Add the property log app to Chrome and see for yourself
    https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E1140&maxPrice=325000&radius=1.0&sortType=6&propertyTypes=bungalow%2Cdetached%2Cland%2Csemi-detached%2Cterraced&maxDaysSinceAdded=7&includeSSTC=false&mustHave=&dontShow=retirement&furnishTypes=&keywords=

    Still need another 20% off to tempt me to buy what will still be an overpriced slave box, but i’m confident this winter is going to be a wonderful time for watching house prices get devastated, though that child Chancellor will no doubt have a few more tricks up his sleeve to slow this.

    If i do buy at £250k i’d be over the moon to see prices fall another 50%, as that would represent fair value.

    • Hi Arthur

      Yes as I have just replied to Peter it is hard to believe that prices can continue to levitate above all the bad news. But for now they are. You are right to remind us of regional issues though and it was a point well made at one of the recent official RPI seminars. There was a spell where prices were up 50% in London but down 5% in the part of the North-East where he lives.

  5. Hi Shaun

    Great article as always. just thought I’d give you an update on the S. manchester market.

    Initally after look down finished a lot of properties hit the market. This has somewhat levelled off now. But the same old houses 450k+ are not selling. One development of four ‘town houses’ has been on the market for over a year now. Looks like no-one wants to spend 650k for a semi with a small garden.

    I’ve also noticed that small developments are squeezing in all over the place. Nearby a large house is having a ‘designer house’ built in its garden. 750k for a detached overlooking a busy main road.

    As always ZIRP favours the incompetant. They can just sit the houses on the market at almost zero mortgage rates, waiting for that londoner to relocate 😉

    A lot of building work is going on in the area, as most people cant afford to trade up. It will be interesting to see who blinks first.

    • Hi Anteos,
      A lot of the foaming at the mouth “property can never lose” work colleagues of mine are in fact buying flats in Birmingham in anticipation of Londoners commuting from there when HS2 is completed and in fact in recent years, huge conversions of old factories and office blocks as well as new apartment blocks have been built for his very reason, so don’t just think the Tory government are getting bungs from the rail construction companies, it all feeds into the builders as well, see now why HS2 had to go ahead against all common sense and financial logic?

    • I got out of that area last December Anteos.
      Sold my ex-council, pokey, two-bed semi on the Ringway flightpath, & bought a five-bed bungalow in serene, empty, SW Scotland with the proceeds.
      Perverse!

  6. Shaun,
    Agree with other posts that distressed home sales not yet likely as evictions/ repossessions delayed for a while.
    Repayments by large non financial organisations using lower cost funds than previously available perhaps ?

  7. Hello Shaun,

    re: “Are UK house prices rising again?”

    well from other posters its patchy . Time to put Gasoline on da fire !

    ( well maybe too much will put the fire out…. )

    Forbin

  8. It is a classic case of economic events taking a long time to work through and this is where Midnight Oil kick in

    If you read the history books you’ll see the same things happen again and again
    (Repeat repeat) short memory they’ve all got a
    When are we going to play it again
    Got a short, got a short, got a short, got a short
    They’ve got a short must have a short they’ve got a short aah
    Short memory, they’ve got a.

    ‘‘Twas back in 1992 when John Major said “we have to get the housing market moving” as people were then expected to buy more stuff with which to fill their new house. That was the last stamp duty holiday and it was mayhem for six months until it all stopped, prices fell and sellers offered to pay the SD, so buyers could effectively put the SD on the mortgage. It is tough to find the figures but by 2019 (from 2013), the government has pi55ed up the wall, sorry “invested” to quote Gov.uk in 2017, £12bn to “help” just 135,000 buyers. It is easy to see why they are scaling back in 2023. The problem is that after shelling out for the mortgage buyers don’t have much left over, which is why consumption GDP has tanked. Now in another genius wheeze by Matt Hancock, who proposes a new tax on over-40s to insure against social care costs. This does of course prove Friedman’s dictum about the real cost being middle class welfare as they mustn’t lose a penny from granny’s £500k house, while tax further reduces the capacity to consume on top of those left without a job.
    The market was picking up early this year after the election provided certainty that we are headed for a massive car crash (bolerhatman has a space on his wall for the first tabloid to proclaim the wrong type of Brexit) and if you live near Ashford, a bright, shiny lorry park. Prices were set on sales pre-lockdown, which are only now working through – cue the moans about SD before the holiday. There will be variations, but flat prices are falling round here in the Borders. I suspect villages will see rises as working from home allows a move out of the major cities and down-sizing grannies will always overpay for a bungalow. The trend will be steady for a while, but the end of the lockdown scheme in October will be the true date followed by the of the SD holiday in March. Next April is looking like a good time to buy.
    My own proposal would be a sales tax on every property, as a kind of SD in reverse, but which is tough to avoid. It also captures that lost CGT not charged on main houses with all the fiddles where it might apply. It also means Inheritance tax can be levied on everything else at a lower rate.

    Anyway, I will finish with a tune that sums up Help to Inflate Prices

    One minute I held the key
    Next the walls were closed on me
    And I discovered that my castles stand
    Upon pillars of salt and pillars of sand

    It was originally a Coldplay dirge, but Youtube has given up putting Celtic Woman in my feed as I moved from Irish great-great-granny to Dutch Jews and German glass makers. So, now, as a metaphor for our times, Youtube has put in the version by German choristers Gregorian, which is much better (kudos for shots of Scotland and Vienna).

    • Hi Dave

      Your mention of Ashford reminds me of 2 things. Firstly prices were supposed to rise there when the new high speed train services arrived.
      https://labmonline.co.uk/news/ashford-given-government-funding-to-build-garden-village-community/
      Next it reminds me of this which was promised again and again and again.

      “Ebbsfleet in 2035
      Where London meets the Garden of England, on the banks of the River Thames, Ebbsfleet exploits its strategic location to continue the tradition of great placemaking in the UK; combining the best of urban and rural living and building on the ethos and pioneering spirit of Georgian, Victorian and Edwardian planned communities to deliver a new benchmark for 21st century development including up to 15,000 high quality new homes.”

      • Ah, yes, Ebbsfleet, where Shapps lifted any contribution to roads etc. and Land Securities ( Big indirect Tory donor) made a killing by just selling land they bought there. Plus ca change.

  9. Oh, look at what I have found from 2017. This is about RBS – remember the state bank that was supposed to help SMEs, but has put 75% of its lending into property. Listen to Rees-Mogg talking about “tough” stress tests at 4.25

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