I blogged earlier this week about the problems of the house market in London. I was interested to see some of the facts issued this week about how our house prices have changed in the last year.
The headlines from the Office for National statistics:
* UK house prices rose by 8% in the year to the end of March (the newspaper headline)
* The annual property price increase in London stood at 17%
* Excluding London and the South East of England, prices were up by 4.7%
* Prices in Northern Ireland increased by 0.3%, and by 0.8% in Scotland
* The average home is now worth £252,000
So, as always the statistical headline is a nonsense. An average of 8% doesn’t really apply – London is skewing the figures. The regions are rising – but at nowhere near the rate of the Capital and South-East. Northern Ireland was hit hard in the recession and hasn’t recovered.
One of the ‘big ideas’ to lam this all down is to increase the base rate. There is a rise on the horizon – but it is a relatively crude tool. In London it has potentially less effect as it is reckoned that 40% of purchases are in cash!
I don’t know what the answer is. I listened to a debate on Radio 4 where it was clear that the new tightened Mortgage lending rules are causing some issues. There are some anomalies when ‘computer says no’ to a number of people who clearly, on a common sense basis, should be suitable security for lending.
We have, of course, had an issue with building houses (the supply side). There were 112,630 houses completed in England in the last year, a rise of just 4% on the previous year. We are told that we need to build 250,000 homes a year to meet demand. More supply should, in theory, assist.
There is no simple and easy answer but there are different problems in the regions to those south of Watford! One size does not fit all…
Labour rent capping?
There is a major problem, in particular in London, for people who rent their homes. Many of them are reluctant tenants – they simply cannot get on the rising buyers market. It’s a major problem.
Yesterday Ed Milliband announced that a Labour Government would intervene in the market – effectively placing a cap on rent rises. He wouldn’t interfere with the initial market setting – but would attempt to benchmark the uplift and then apply this notional figure in annual rises.
So in order to make this actually work he would need to alter the basic terms of an agreement. As now, a tenant would be able to terminate a tenancy after the first six months, with one month’s notice. A landlord could only do so with two months’ notice and if certain conditions were met – such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways. After the six-month probationary period, contracts would automatically run for a further 29 months – so a total of 3 years.
Milliband has suggested the RICS were helping with setting the average rises – something that has been denied by the RICS. This seems a little sloppy. I do know from the Institution that they do not take political sides. The RICS is apolitical.
I think this is a poorly thought out policy.
I have sympathy with those renting – and the inexorable rise in rents. But this is partly as a result of a lack of supply – and the market sorts that out itself. We do have a number of policies to provide more accommodation in the private rented sector. There are millions of pounds being currently placed in the market. Enough to make a difference. These investors and developers could easily be spooked by rent caps. Historically they have not worked.
What will potentially happen is that there will be a reduction in the numbers of houses coming forward. The market hates Government intervention and Governments of all colours think they can buck the market. In the majority of cases they simply can’t.
Engaging with people!
I’m always interested in how technology can be used to engage with people – especially if they are customers. Well McDonald’s is trialling a way of letting people put their avatars in it’s high profile digital screen in London’s Piccadilly Circus.
In essence you download from LittlePicca.com your artwork or animation and then digitally sign in to the screen!
You can create your own character on the site and once you are in the vicinity of Piccadilly Circus, you upload the image!
McDonald’s claims it is the world’s first digital advertising screen to be fully interactive 24/7, 365 days of the year.
Once posted to the screen, your character can introduce himself / herself and interact with others. The site detects the default language setting of your smartphone and flashes up a greeting from your character in its native language. Your character can dance, high five with others and perform magic tricks on the big screen. The sign is also updated according to the time of day, time of year, and the local weather.
This reminded me of the Bristol Hello Lamppost project I blogged about a few weeks ago (see here).
I like this sort of technology – it requires some input and is more than just a series of images being projected at you. Very clever!
The market headlines…
It’s all go go go. The market has shifted. Recession – what recession?
As you can see from the graph (taken from PropertyData) the world is smiling – especially in the property game. The dark years of 2008 are behind us. The flat-lining I have been talking about is … behind us. We should celebrate.
Or should we?
It seems that all of us need not celebrate. Those inside the M25 can – as the figures are so horribly skewed towards them.
Although the figures and statistics here don’t say a lot for the regions, We have noticed (as a firm) that there is a slight spring in the step of the market. There are more enquiries. We will always lag behind London but it does seem to be not as bad as it was!
I think I have what it takes
I was asked in a lift on Friday whether I was a hard or soft centre person. I was horrified and mortified – I was the only bloke in a lift of 12 women – two are clients. They enjoyed the moment far too much. I was told, “well it is London”. Yes, maybe, but what was a bag lady doing in a lift?
I got in last night to catch the tail end of The Voice – one of those appalling TV shows that seek to humiliate people.
But there is a theme…
1. You need to be on a journey.
2. Ideally you need ‘issues’. I have issues now (see the opening paragraph)
3. It helps if you work with old people or children. I work in the property industry – which ticks both boxes.
4. It helps if you didn’t come with a silver spoon. A struggle helps.
5. You need to cry. Or at least weep a bit.
6. Your family need to be gobby. And scream at the judges (even though they can’t hear).
7. Music needs to have ‘moved you’.
8. A bit of death helps. Someone close (sniff).
9. Since they can’t see you, being a looker is not important (my mates all say I have a face for Radio)
10. Being able to sing is optional.
I feel as though I have lots of these qualities.
The only issue is that Jesse J talks to you – even if she doesn’t pick you. For this reason alone, “I’m Out”. But I think I could win it.
London 2013 – getting around
I had two days in London this week – visiting EcoBuild. This is a giant built environment exhibition out near London Docklands Airport and aimed at saving the planet.
EcoBuild may be huge and planet saving but it is energy sapping in terms of accessibility. I was at St Pancras yesterday and it took three changes on the tube to get there – allowing around 50 minutes.
But earlier in the week I was near the Houses of Parliament and was able to use the river boat – at least to Canary Wharf. where I got on a shuttle bus. The latter should be applauded as this is the second time in the last 25 years I have ventured on these beasts of public transport. The planet must surely be safe now?
It seems that the River Tames has been in the news this week. There are proposals from Boris Johnson and TFL to double the amount of passengers using the Thames to get around – and all by 202. He has a budget of £10m for new piers and stops. In fact the proposals are wider than just transport as it is hoped that the River can host other land based uses – parks, cinemas and houses.
The trip along the river is amazing – it gives you a great perspective of the city. It wasn’t cheap (£5.40 with my Oyster discount) but the view was well worth the price.
But what was really impressive was the time saving. I think for a similar distance to my trip yesterday by tube I save 20 minutes.
Free wi-fi?
Today’s blog post is a bit later than usual! The reason is that I’m in London and had intended writing a post last night…
When I stay in London I ordinarily choose a hotel with free wi-fi, but foolishly forgot last week to check. And in the Cavendish Hotel you have to pay. 10p per minute might be within my reach – but I object on principle.
When you have paid £200+ for a room for the night it’s a bit rich to charge for what has become on of life’s essentials.
Wifi costs these hotels nothing really.
I know that life has become all about squeezing those extra pounds out if customers – but there’s a danger that adding a few pounds to a hundreds of pounds bill looks rather petty.
I shall not be staying here again!
High Speed Train 2013 news
I met the Transport Minister The Rt Hon Patrick McLoughlin last week. He was speaking at an event in London organised by those in favour of HS2 Rail.
He was appointed Secretary of State in September – and he is due to make an announcement on the route for the “Y” section of the line – the one that heads from Birmingham through to Leeds. As someone who represents the Derbyshire Dales he also has a keen eye on the route through or neck of the woods!
Derby have been making noises to the HS2 Company to try to get the line to head through their City (the touristy place). Nottingham are keen too – but appreciate that you can’t run it in town. There is a fairly logical place – between Nottingham and Derby, close to the end of the tram line and at the junction of the M1 and A52. That would seem more logical than choosing one or other city.
I did speak to Patrick after his talk – but he wouldn’t commit on the location!
The other person I met at the event was Peter Waterman (of Stock Aitkin Waterman fame). He is a really genuine guy – with a passion both for railways – but also for training young people. He sees major opportunities for young people and apprentices in particular. He employs lots of them in his steam railway engine business! He did ask the un-askable question of the Minister.
“Can we please ensure that the rolling stock is built in Britain”. A sentiment liked by the assembled crowd. Although Siemens (who had sponsored the event) went a bit pale!
So we have to wait to hear about the line location and stations. I have a pound each way on Toton Sidings. I have nothing on Derby.
The Market – an update (more of the same)
Last month I blogged about the state of the market – you can read it here. It was all about London.
My latest edition of Property Data has arrived and it’s a familiar story – as you can see from the graph below. The market is better than the same period in 2011, but not quite as good as 2010 – in terms of volumes.
But once again the skew towards London is marked:
So it doesn’t really tell us much of a story. The only real difference from last month was the fundamental shift in the average net yield – it has shifted to 7%. This is a real weakening of the trend that had seen a steady improvement. In my example last month – had you used the initial average yield to value your £100,000 income (worth £1.602m a year ago) the value today would be £1.43m. These are averages and don’t really mean very much!
Locally I think we are as busy as we have ever been. I have a number of properties under offer (both buying and selling) and I seem to be looking at lots of opportunities. The latter can be quite speculative – but that is quite a good sign.
I am reasonably upbeat about 2013 – even though deals are harder to do than ever.
London romps – we follow
The latest figures from Property Data show an interesting story. On the face of it the number of transactions for the equivalent period looking back over the last four years looks health – as you can see from the graph.
And yields are going down (pushing prices up). Average yields have shown a slide as follows:
Last month – 5.82%
Last 3 months – 5.98%
Last six months – 6.19%
Last 12 months – 6.24%
To put this in perspective if you had an income of £100,000 in rent and valued it on the initial yield basis 12 months ago – it was worth £1.602m. Six months ago it had increased to £1.615, 3 months ago to £1.672m and last month to £1.718m. These are averages so you can’t really apply the figures to every part of the market. But it does show you the effect of the slight changes in yield – £116k profit for doing nothing!
The other fact is the skew that London has on the figures. In terms of volume of transactions the London office market accounted for £11.4bn of property. Compare that with the rest of the UK – which managed £3.6bn!
It really is a story of two-halves. London continues to attract investment (and there may be some influence still of the Olympics). The provinces bump along the bottom!