I had an interesting conversation with a local SE15 accountant the other day. He is quite an observant chap (I know this because I have known him for a few years.. but I suppose you have to be to be an accountant!). He knew property values had increased in the area, but wasn’t sure by how much. He also thought the number of properties for sale in SE15 (and more importantly ones with sold slips on them) had slightly decreased over the last couple of years.
The rate of house price inflation in SE15 continues to slow with growth of 12% in the 12 months to December 2014 compared to annual growth of 17.4% just over six months ago, according to sold house price data. However, there is considerable local variation in London, with annual house price growth ranging from 7.8% in Kensington and Chelsea to 13.8% in Wandsworth.
SE15 has seen property values rise by 22.9% over the last two years, although it has also seen a 2.3% reduction in the number of properties sold throughout 2014 (when compared to 2013), which has accelerated in the first quarter of 2015 (vs Q1 2014) where there has actually been a 52% drop in the number of transactions within this postcode. This is an indication of a tempering of the house market as affordability and tightening rental yields start to kick in. However, now the uncertainty of the Election is over we expect the number of property transactions to recover significantly and there will be a busy second half of 2015.
When you compare London with the rest of the UK, you could be looking at two different countries. In London, its early teens house price to earnings ratios are impacting demand (i.e., the average property value is often 12 or 13 times the average wage in London .. in fact in SE15, the ratio is 17.84 to 1). However, prices have remained strong because the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run-up to the General Election has resulted in lower mortgage approvals for home purchase.
Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the rest of UK, as pent-up demand returns to the market supported by low mortgage rates and an improving economic outlook.
It might be interesting to note though, the number of SE15 property sales in 2014 are still 22.9% lower than the level seen in 2007 (when property values were rising at an impressive 17.09% per annum), now we had had a positive outcome to the General Election, we believe the ongoing housing recovery is far from stalled. In fact, I believe the market will become focused on the middle to higher value areas where households have equity and find it easier to access mortgage finance.