House Price Surveys Explained – It’s Not All Guesswork

Well, here at the Big Property List we seem to be reporting on house prices going up and down every other week so we thought we would take a look into the house pricing process and what it all means.  How are these figures generated and do they give an accurate picture of what is happening in the UK with regards to house prices.  If you are looking to move home in the near future, it pays to check out the latest properties in your area and get a good idea of what is going on.

Land Registry

The Land Registry has been recording property prices since April 2000 and records all completed property sales in England and Wales.  Their data however goes back as far as January 1995.

Using a process called Repeat Sales Regression, the Land Registry measures the changes in property prices over time.  This means it will only measure the change in price of properties that have been sold in the past.  This gives a fair and proper comparison.

Most property sales are included in the Land Registry survey except the sale of commercial properties and ex-council properties sold at a discounted price.  Any property transfers or repossessions following a divorce are also excluded to avoid misleading the statistics.

A report is published each month on the Land Registry website and a quarterly survey is also published on the BBC News website.

An average price is reached by adding up all the transactions in any given month and then dividing the total number of sales.  Almost all residential sales are included and recorded providing a really unique picture of national and also local property prices.  The Land Registry can actually give a fairly accurate insight into prices at postcode level.

Government Price Survey

The Government also produces its own monthly house price index.  This is issued by the Department of Communities and Local Government (DCLG).  The survey covers the whole of the UK and is based on the data received from the Council of Mortgage Lenders.

As a result of data being supplied by the Council of Mortgage Lenders and including the number of mortgage-based sales, cash sales are not included.

Nationwide and Halifax

Both surveys provided by the Nationwide and Halifax, cover the whole of the UK and are based on a sample of their loans each month.

Property prices measured in these surveys are those which are agreed with a mortgage is approved and not later when the sale is at completion stage.

Just like the DCLG survey, the Nationwide and Halifax surveys are based on mortgage-based property sales so no cash sales are recorded.

Royal Institution of Chartered Surveyors (RICS)

The RICS survey reports on confidence in the property market and not the latest changes in property prices.  A survey is conducted of 250 estate agents in the UK (all members of RICS).  They are asked whether they feel the prices in their areas of business have been rising or falling over the previous 3 months.

Whilst this might  not appear to be a reliable way to measure the property market, it is actually quite useful in reflecting changes and how professionals feel the market is developing over a given time period.

As well as house prices, respondents are also asked how they feel about a number of other subjects such as the number of property buyers falling or rising.

The data provided by these house surveys is very useful and helps those in the industry determine the latest trends and property prices and those looking for a new home to strike whilst the iron is hot or hold back until situations improve. 
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Ex-Council Property Could Save You 25%

If you’re desperate to get out of the rental game and onto the property ladder, there could be a way to save at least 25% on the house price in the process.  Rising numbers of local authority houses and flats are being released onto the market in metropolitan areas and many can cost at least 25% less than comparable properties in the same areas.

However, it’s important to know exactly why these properties are so greatly reduced in price.  There are often notable differences in the nature of ownership of the property and these financial aspects need to be taken into account.

David Kempster, a directory of property search company SearchFlow, says “If you buy a local authority house, the chances are you will do so as a freeholder.  But in the case of the flats, the council tends to retain the freehold so you can only buy on leasehold.

“This is a vital distinction, because leaseholders are liable to pay not only a service charge, but potentially maintenance costs too. The legal principle of ‘caveat emptor’ or buyer beware means owners have no come-back if they unwittingly take on liabilities when purchasing a leasehold.

“For this reason, it’s important to check exactly what the service charge covers and if possible, to see previous bills. It’s also essential to check for scheduled maintenance as service charges don’t cover major maintenance and renovation work. In some cases, leaseholders can become liable for as much as £60,000 to put toward lift and roof repairs.”

If you’re going to consider one of these ex-authority properties you might also need to consider the proportion of private ownership on the street or estate.  If there are other like-minded people who have bought into ex-council properties you might be welcomed a little better than if you were the only non-tenant living on the block.  There is also a chance that prices on these properties might rise quite quickly.

Richard Sexton, a director of e.surv chartered surveyors said “Historically, these properties have generated less demand than equivalent private sector stock, though as private ownership increases in a given development this effect lessens. Buyers need to consider long term prospects; one day they are going to want to move up the property ladder.

“Make sure your legal adviser investigates the property fully and takes account of any communal costs. There may be clauses which require significant contributions to parts that may not even affect your flat.”

The good news is that most local authorities will ensure potential buyers have all the facts before they buy any ex-council property.  In the case of shared areas there could be communal repairs required and maintenance bills to pay.  All potential buyers should be given an assignment pack from the council in question detailing any works that are required to the building.

Surprisingly, some local authorities actually resent private ownership of ex-authority property and may be less than happy to help obstructing your path and failing to give you all the information you need.  If you are dead set on buying an ex-council house though there is some detective work you can do.

Nicholas Ayre, a director of buying agents Home Fusion, explained: “Find out if the building or estate has a residents’ association and, if so, to get in touch.

“They might be able to provide you with a copy of their minutes from a recent meeting or talk to you about any maintenance and repair issues they are currently trying to resolve.”

When considering ex-council property it’s pertinent to ask the local authority the same questions you would ask of a private seller.  Ask about council tax, how safe the area is, where local amenities are situated etc.

As long as you ensure you get all the facts, ex-council property could be the answer for young people looking to buy their first home for less. 
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What’s in a Number? Why Living at No. 13 Could Save You Money

What’s in a house number?  Well, it all depends how superstitious you are.  Whilst many hotels have avoided using the number 13 for their room numbers, there are many streets with a house brandishing the number 13 on the front door.  There are also many streets without a number 13 such is the mistrust of this number.  However, what might be unlucky for some might be lucky for others.

Whilst superstition about the number 13 might seem a little irrational many of us do believe that this number will bring bad luck and misfortune.  But did you know that houses with this number are likely to be worth £4000 less than their identical neighbouring houses?

A recent study looking into the value of all properties in the UK found the average price of a ‘number 13’ home as being £205,085 whilst neighbouring houses were priced at £209,009.  These houses were identical all apart from the number on the door.

The number 13 has been associated with bad luck for many centuries and even has a phobia named after it – those suffering from ‘triskaidekaphobia’ are petrified of the number 13 and all that it might represent.

Some house builders are permitted to leave the number out of new council housing developments.  Lewes District in East Sussex says the number 13 can be omitted from plans if specifically requested.

The findings on home value come in research from property website Zoopla.co.uk. It said that for those looking to buy a house and who do not care about a number -purchasing an address at number 13 is a chance to save a tidy sum.

There are many reasons why the number 13 is considered less than lucky, but in some countries the number is very lucky.  If you are property hunting, not particularly superstitious and looking for a bargain then number 13 might be for you.  If you are one to not walk under ladders, open an umbrella indoors or put shoes on the table then number 13 is to be avoided! 
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Understanding Property Valuations and Structural Surveys

Once you have found the property of your dreams and have had your offer accepted, it’s time to think about a structural survey.  Not obtaining a survey might save you money, but could cost you dearly in the future.

What is a Structural Survey?

A structural survey is designed to evaluate a property and give the consumer peace of mind that there are no structural defects.  This type of survey can be very useful in identifying defects that are not noticeable to an untrained eye and can help you to make an informed decision before signing on the dotted line.

There are 3 kinds of structural survey to consider:

Basic Valuation

Homebuyers Survey and Valuation

Full Structural Survey

Each report differs in detail with the basic valuation obviously containing the least amount of detail.  The full structural survey report will be the most in-depth and many people choose to purchase this type of survey for additional peace of mind.  For example, older properties are more likely to have more defects and therefore a more in-depth report will highlight these and allow you to either accept these defects or withdraw your offer and move onto another property.  The ‘Homebuyers Survey and Valuation’ is by far the most popular chosen by consumers and gives a good amount of information.

Basic Valuation

A basic valuation is usually performed by your mortgage lender.  They need peace of mind that they are making a sound investment in your property and that in the event of you defaulting on your mortgage they will make their money back.  This valuation isn’t really a survey as such and the inspection criteria is very limited.

Homebuyer’s Survey

A homebuyer’s survey is the most popular of all three types of survey.  The format of the survey and the criteria within are areas which have been defined by the Royal Institute of Chartered Surveyors.   Designed for properties that were built within the last 150 years, this survey report focuses on urgent or significant problems or causes for concern.  These might include:

The general condition of the property

The value of the property on the housing market

Comments about drainage, insulation, roofing, damp proofing

Results of any tests such as dampness

Any defects which may affect the value of the property

Urgent problems which need attention before you exchange contracts

Full Structural Survey

If you are buying an older house or you have cause to believe there are some structural defects then a full structural survey is a good idea.  Whilst this survey is the most expensive of the three it could save you money in the long run.  Armed with a list of surveyed defects you could approach the seller of the property to negotiate a lower price.  For example, if the survey makes a recommendation for a new roof you could negotiate the price of this work off of the asking price of the property.  The surveyor will have estimated the rough total for any works required and this can out you in a great bargaining position.   On the other hand, many people get the results of a full structural survey and choose to walk away from a property if the works required are too extensive.  A full structural survey can give peace of mind and also save you a lot of heartache.

The Biggest Purchasing Decision of Your Life

For most people, buying a house is the biggest purchasing decision they will ever make.  Buying a home is expensive and for this reason many people choose to scrimp on the survey and rely on the information given in the basic valuation.  This could turn out to be a costly mistake and spending a few hundred pounds before you buy the property could be much more cost effective.   Paying out £1000 for a full structural survey may sound like a lot of money, but imagine moving into a property only to find you need to spend £15K on re-roofing.  Remember, once you have exchanged contracts, the seller is no longer responsible for the works on the property.

There are many companies offering surveys with prices differing wildly.  Obtain some quotes and more information before you go ahead, but try to get the best survey you can afford.  It could save you money in the future.

Click here to compare survey quotes from local surveyors

 
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Property Prices In Yet Another Tumble

Once again the housing market has taken a tumble.  The average cost of a home fell 1.4% last month – a drop that hasn’t been seen since July 2009.  The Halifax house price index reports the latest plummet has led to property values being 3.7% lower in April than during the same period last year.  This is the biggest decrease since October 2009.

What’s the Cause?

Well, Halifax have blamed the recent fall on fragile and cautious consumer confidence.  The economic climate is still relatively uncertain and this has decreased demand on property and caused a downward pressure on property prices.  Since the low that property prices hit in April 2009, they have only risen 4% whilst they are still 20% below the peak they hit before the credit crunch struck back in August 2007.

During the past year, house prices have been particularly volatile and if you’ve been keeping track of the Big Property List blog then you’d have seen our reports of house prices going up and down like a yo-yo.  House prices have dropped in seven months, risen in four and remain unchanged in one month and that volatility looks set to continue.

Often seen as a slicker and better indicator of property market trends, the quarter on quarter indicators showed acceleration in the rate of falling property prices.  During the three months towards the end of April, homes lost 1.2% of their value.  That’s double the 0.6% drop that was recorded during the three months to the end of March and also the most dramatic quarterly fall since October last year.

Regardless of these miserable figures, the Halifax has said that they expect the rate of falling property prices to slow down.  Martin Ellis, Halifax’s housing economist, said “Signs of a modest tightening in property market conditions, an increase in the number of people in employment, and a relatively low burden of servicing mortgage debt are all factors that are likely to provide support for house prices, curbing the pace of the decline.”

Are the signs there?

Martin Ellis also went on to say that he thinks the signs that the housing market is stabilising are there albeit at a lower level than the historical average.  However, Howard Archer, chief UK and European economist at HIS Global Insight showed less optimism saying, “We believe that house prices are likely to end up in decline by around 10% overall by the start of 2012 from their peak in 2010.  This implies that they will fall by about 5% more.”

It seems to be a tough one to call, but one thing’s for sure.  The Big Property List will be reporting on property market news as it happens and giving you access to the latest views from the industry experts. 
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A Hidden Boost for House Prices?

It’s Budget time and many of us will be frantically scouring the budget news for proposals, price hikes and changes that will affect the property business.

House prices could be set for a boost by a multi-million pound stream of buy-to-let investment by institutions, including the biggest insurer in Britain, prompted by an often-overlooked clause in the Budget.

Whilst a lot of attention has been paid to the £250m of new loans made available to help 10,000 first time buyers, less attention has been focused on the reforms to stamp duty for people looking to ‘bulk buy’ residential properties.  Not getting excited yet?  Wait until you see some of the figures.

If the Budget proposals pass into law, the tax bills for institutional investors and other buy to let landlords could be slashed by 80%.  Anybody purchasing a property portfolio of let’s say 100 homes worth an average of £200,000 each following the 6^th April would attract a Stamp Duty charge of 5% of the 20m deal value or £1m.

However, Chancellor George Osborne is proposing a change to the way these taxes are calculated.  The proposal means the rate applied will be based on the average value of the properties concerned and not their total value.  If we use the example given above, because the average price paid for the properties was £200,000, the rate of Duty falls to 1% resulting in a tax bill of £200,000.  That’s some drop!

James Moss, a director at Curzon Investment Property,  said “This will be a huge boost in the private rented sector as it will allow pension funds to buy homes in bulk without any unfair spikes in Stamp Duty.”

That’s an understatement!  When you consider the sums of money that insurance companies and other institutional investors have under their management, any increase in this allocation to residential properties could have a dramatic effect on UK house prices.

Aviva, the biggest insurer in Britain today, has confirmed they are considering setting up a £1bn residential property fund so they can take full advantage of the proposed tax break and other big names are very likely to follow suit.  Some market analysis has suggested that many properties still remain overpriced, but figures show that the rental market has held up despite the recession.

No matter how you look at it, bricks and mortar are still attractive for many institutional and individual investors.  The next few months look set to be interesting and the result on the housing market could be dramatic although don’t expect these changes to occur over night. 
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Politicians have no idea about housing

Politicians have no idea about housing, so said the press yesterday morning. Why should they, it’s a market?

No one has really got any idea, so disparate is our market, and with Labour admitting they got it wrong and CLG carrying out a review of the private housing market it’s perhaps time for everyone to go back to encouraging people to move and to stop hand wringing.

Ultimately various Governments have failingly addressed the supply side of the market, and they’ve periodically tried to encourage the demand side with the resulting boom and busts. So sensitive are homeowners as voters that it wouldn’t be that prescient to suggest that interest rates are watched more for their effect on the housing market than they are for Industry or anything else.

If it is that important why is there so little attention given to keeping the wheels oiled. It’s been an immutable law that as Stamp Duty has gone up so the volume of sales has gone down. The plethora of amateur (and apart from the Land Registry that’s all they are) commentators can say what they like about whatever sector but volumes continue to fall and we’re about to get another cynical rise that’s going to lead to a further contraction.

Is it really that much of a leap of faith for the Coalition to accept that the best way they can free us the supply side of the property market is to put Stamp Duty where it should be, at 1%? There’s little doubt prices would come down in the short term but those voters they help move and get on the ladder would, I’m sure, be eternally grateful.

Ed Mead is a regular contributor to The Big Property List blog.  An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph.  He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.

Other places you can find him online are the Douglas & Gordon blog and Twitter

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Ed Mead is carrying the Olympic torch (not literally)

For many who spent the tail end of last year trying to predict this year it must have seemed a doddle compared to forecasting now. Suddenly the press, and even me, are beginning to sense that although the year may be a dreadful dirge, it does look as if prices in London will end the year higher than they started. This is not saying a whole lot but from where I’m sitting there are occasional deals being done that simply beggar belief, whereas if you wander out of London, particularly in a Northerly direction, the stories are of a very different nature as the press are keen to let us know.

Sadly all commentators agree that volumes will be a victim this year, and many fear this malaise will continue into next year which is depressing. But hang on a minute next year is Olympic year isn’t it?  We’re all supposed to feel good about that, and I’ve even registered for tickets as any self respecting Londoner should, but will it be enough to dispel the fog.

One thing everyone forecast, and the auspices loom good, is that rental numbers will increase in London next year because of the 2012 Olympics being here. With perhaps the worst area for sales currently being small flats, no demand from first time buyers still, it’s very likely, and beginning to be the case, that buy to let investors are beginning to lick their lips and dive in.  I sat in a meeting with some heavyweight agents yesterday and all the ones I spoke to said if they had money they’d be buying investment property now.  The fact that they can’t shows the general level of nervousness and lack of income in the estate agency game at the moment, but perhaps whilst many top end agents gloat about how many £5m plus properties are selling those who deal at the bottom end might just be about to get their own timely boost.

Ed Mead is a regular contributor to The Big Property List blog.  An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph.  He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.

Other places you can find him online are the Douglas & Gordon blog and Twitter 
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Ed Mead: Sellers need a notional interest rate rise to smack them across the face

Today was a corker. Daily Express headlines saying that the property market is set to surge this year, sadly they were narrow mindedly talking about prices only, and on the same day the FT were talking about prices set to fall.

I’m guessing that overall we know who to believe even if we want to believe The Daily Express.

But it sums up the issues puzzling any buyer or seller. It seems buyers mostly want to get on with it and most sellers exist in a world of inertia, needing a notional interest rate rise to smack them across the face and get them moving.

What I can tell you is that a couple of weeks in to the new year and it’s beginning to look a touch better here in London. A strange confluence of events, namely mortgage rates bottoming out, dollar pegged buyers from India Russia China and the US here in strength, Eurozone buyers worried about the future of their currency and looking for a safe home for their money, and the fact that Stamp Duty Land Tax (SDLT) is going to 5% for transactions over £1m (not that uncommon in Central London), means that perhaps a market that never really kicks off until the end of Jan might just be perking up a bit earlier.

More soon.

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Ed Mead is a regular contributor to The Big Property List blog.  An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph.  He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.

Other places you can find Ed online are:
Douglas & Gordon blog
Ed Mead on Twitter 
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2011 property market…early signs?

Frankly there wasn’t much appetite or excitement for predicting what might happen in 2011. It’s a mug’s game at the best of times and most of us in the business have been so worn down by the last few months of 2010 that anything would be better. So are the first signs good?

Well it depends again on who you are and what constitutes good. If you’re an estate agent the chances are it’s not looking overly good right now. More of the same grind with no sellers and a frustrated bunch of buyers who have good mortgage offers but nothing to buy.

If you’re a property owner in London chances are you’d be feeling happy with that as the lack of supply is creating the same effect as a strong demand, ie it’s keeping house prices up. Indeed for really good quality property this year is looking very good for values.

But is that what the market needs or wants? For all the people jumping up and down delighted at any woes affecting estate agents it’s worth reiterating that estate agents are the bellwethers of the wider economy. If agents are going bust (and they have been, with 40% of individual agents out of work since 2008), and companies likely to this year, then it means the entire industry that depends on property: building, decorating, soft furnishings, surveying, solicitors, movers etc etc are all in trouble. If people aren’t spending on property the chances are they aren’t spending elsewhere. That’s a universal truth whether you like it or not.

So there’s nothing much more to say as it’s early, and things may yet get busier, but if they were going to get busier I’d be seeing more sellers looking to get their properties valued now with a view to taking on the Spring market. I cannot grasp why sellers aren’t going for it with historical low rates for buyers likely to have bottomed out and price gains from the unexpected bounce last year still crystallised, and perhaps looking as if they may slip later this year. Perhaps we’re back in that dreadful spiral that potential sellers can’t find anything and so aren’t bothering to go to the market.

As usual when these situations arise it’s difficult to see who’ll blink first, and with buyers very reluctant to pay the asking prices some desperate agents are putting on property, I think it’ll be sellers who’ll blink and go to the market, the only question is can the cleverer ones avoid a possible lemming like rush later in the year. 
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