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11/06/2007All the evidence says we are in the midst of a slowdown, writes Edmund Conway

I can't have been the only person who laughed when I saw the front pages late last week.

The Daily Mail and the Daily Express devoted them to the housing market. The only problem was that one of them said the boom was over - the other that house prices were soaring.

More intriguingly, both of them based their stories on the same report - the Land Registry's Housing survey.

In reality, the reports weren't so contradictory - they merely seized on different figures from the report; one, the fact that house-price inflation around the country as a whole remains close to 10 per cent; the other that prices are now actually falling markedly in a few pockets of the country.

The very fact, though, that two papers could have such different takes on the same numbers is more evidence that we are in the midst of a slowdown. It generally takes much longer than most people think for a housing market to turn around, and when it does eventually slow, it does so in fits and starts.

In different parts, too. The market in the nicest parts of London is booming, thanks to the big bonuses received by City workers. Scotland is doing well partly because it missed out on some of the price increases in England, while Northern Ireland is soaring - thanks to renewed hopes for the area's economic regeneration, and also to a deluge of government subsidy over the past decade.

The story throughout the rest of Britain is rather different. In many areas, prices are flatlining, if not falling. Values in Yorkshire and Humberside, for instance, are tumbling at their fastest rate in at least seven years. Many potential sellers there have seen their homes languish on the market and been forced to take the galling decision of cutting the advertised price, or accept a lower offer.

Meanwhile, according to the Bank of England, the number of new mortgages being approved has fallen to the lowest level for 12 months, while the amount people are borrowing outside their mortgages is the smallest in a decade.

These are pretty convincing signs of a slowdown. So, while it is still early days, I would be inclined to side with that version of events.

However, it is important to remember that these processes take time.

Unlike stocks, which rise and fall relatively quickly, housing markets move in slow motion - after all, it takes far longer to buy a flat or house than a few shares.

It will take more time, then, for this to be reflected in the most closely watched statistics from Nationwide and Halifax - particularly if London and Northern Ireland keep growing and drag up the national average. However, bear in mind that even though they are still in double digits (just), they are far from the 25 per cent peaks they hit only a few years ago.

That said, even if rates don't head all the way to 6 per cent, as many economists expect, this summer will not be a hot one for housing.

29/01/2007UK home price 'up £1,000 a month'

Britain's housing boom will continue in 2007, with average prices rising by £1,000 a month, a report by a leading think-tank suggests.

The Centre for Economics and Business Research (CEBR) said it saw no evidence that increased interest rates would hit the cost of homes.

House prices will increase by 7.6%, the CEBR told The Observer newspaper.

However, slower growth is predicted in 2008 and 2009 before acceleration again in 2010.

'Shortages'

There have been warnings that a string of UK interest rate rises - including a shock January hike from 5% to 5.25% - would cool the market.

The CEBR does not share the fears from some experts that there will be a correction in house prices of between 15% and 20%." The underlying fundamentals of the housing market continue to support prices," John Ward, one of the report's authors, said.

" Even though interest rates may act as a dampener on the market people are spending considerable less of their incomes on mortgages than in the early 1990s.

" Furthermore, in many parts of the country, shortages remain acute."

The average UK house price was £187,000 and was likely to be £225,000 by 2010, the CEBR said.

Recent research showed homeowners in Northern Ireland were 2006's biggest property winners, with towns in the region seeing the largest house price hikes across the UK.

The survey from Halifax Estate Agents also found London and the south east of England registered strong price growth, buoyed by high City bonuses and a shortage of housing supply.

From BBC News.

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29/10/2006Construction Industry Review

Growth in the construction industry has been boosted by booming property markets but doubts have emerged over long term stability due to high energy prices and future prime ministerial changes, says a report published today by RICS, 5 October 2006.

Growth in workloads slowed fractionally after increasing for three consecutive quarters. Workload growth is still high, well above year ago rates and the long run average of the survey, with 21% more Chartered Surveyors reporting a rise than a fall, down from 24% in Q2.

The strongest activity was within commercial and private housing - both growing above their long run average for the fourth consecutive quarter. For the third consecutive quarter Scotland and Wales saw the fastest expansion in workloads.

Surveyors confidence in the future outlook for activity remains unchanged despite the August interest rate hike. A strong economy and booming housing and commercial property markets have boosted optimism. However, confidence in profit outlook over the next twelve months fell.

High energy and raw material prices have taken their toll as surveyors report a pick up in the growth in costs of their main inputs. Feelings of instability over the leadership of the Government have been expressed by some respondents as Chartered Surveyors become nervous about Tony Blair’s exit strategy and it’s effect on the economy.

Skill shortages have eased due to the influx of migrant labour from Eastern and Central Europe with the number of Chartered Surveyors reporting shortages of trade persons falling to 29% from 36% in Q2, offsetting most of last quarters increase.

RICS chief economist Milan Khatri said:
“ The immediate outlook for the construction industry is bright, as a healthy economic outlook continues to boost workloads. Interest rates are set to rise further and will cool the property market in 2007, as such we foresee a market slowdown in the construction industry. If the Government goes ahead with it’s proposals for Planning Gains Supplement there is a risk that small developers will be driven out of the market and first-time buyers will feel the knock-on effect as the property market creates another brick wall.”

28/10/2006Housing sector confidence fuels housing market

Construction activity continues to rise firmly, with the private housing sector seeing the largest increase according to the latest construction survey from the Royal Institution of Chartered Surveyors (RICS) published today (Monday, 3 October).

Housing workloads showed the largest rise in 15 months, whilst private commercial market activity continues to rise, though not as quickly as seen last year as business demand for commercial property has slowed.

Work commissioned by the public sector is rising modestly but at a slower pace than last year, though government investment funding is predicted to keep growing.

The third quarter saw construction activity across all areas pick up slightly, ensuring growth in activity remains higher than the long-term average. 17 per cent more chartered surveyors report a rise than a fall in workloads for this quarter, up from 15 per cent in the second.

Confidence in the outlook for workloads over the next year is high following August’s interest rate cut. The Olympic Games in 2012 are also expected to boost construction workloads in London and the South East over the coming year.

RICS chief economist Milan Khatri, said:
“ Housing activity has rebounded from a brief slowdown earlier in the year as stable demand has raised confidence.

“ The construction industry continues to see steady growth despite a wider economic slowdown. The lack of marked volatility in the economy has helped businesses plan ahead and kept activity rising. Looking ahead, further rises in government spending will support workloads while some support will also come from the Olympics in London in 2012.”

27/10/2006Economic strength swells national price rise ripple

House prices rose for the 11th consecutive month at the fastest pace in four years says RICS’ UK housing market survey published on 12 October 2006.

45.1 percent more Chartered Surveyors reported a rise than a fall in September, up from 34.9 percent in August, and more than double the long run average of 21 percent. RICS estate agents reported that price rises are being driven by a combination of would-be buyers returning to the market and the limited availability of property.

Price increases were again led by London and the South East, boosted by the a booming City economy, with rising investor confidence pushing the stock market to its highest level since May. Estate agents report that ‘gazumping’ is taking place amid prices in the capital rising at the fastest pace since January 2000. Elsewhere, a ripple effect is taking place across the country with house prices in the North West and East Anglia picking up sharply, while Wales, Yorkshire and Humberside also recorded price rises.

Buyer enquiries rose for the sixteenth consecutive month, the longest run on record. Above trend economic growth combined with a strengthening employment market continued to boost buyer confidence but the rise is the smallest since April 2006. New instructions to sell property fell for the fourth month in a row, at the fastest pace since June 2002, indicating that households feel under little pressure to put their property on the market.

Optimism in price rises is at its highest since October 2004. However, surveyors expect a modest slowdown in sales activity as interest rates are expected to rise again.

RICS spokesman, Jeremy Leaf, said:
“ Greater economic activity has created a ripple effect in house prices across the country. With stocks of property low and buyer enquiries on the increase, sellers remain in poll position to benefit in the short term.

“ Continuing house price rises will make it difficult for the Bank of England to leave the base interest rate level at 4.75 percent, unless the economy shows unexpected weakness. With affordability conditions for first-time buyers worsening, as price rises outstrip wages, higher interest rates will not help. However, a strong economy means that the housing market should see a soft landing in 2007.”
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