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IMPROVING THE HOME BUYING AND SELLING PROCESS
The key front line regulators are on track to bring new requirements for information transparency into force in December 2018. Other regulators have also begun to implement their own versions of the CLC’s secure badge to provide assurance to potential clients of the status of websites of regulated entities.
The CLC continues to work with government, other regulators, representative bodies and suppliers to conveyancers on the shared agenda to improve home buying. Any impact from the recent change of Housing Minister at the Ministry of Housing, Communities and Local Government has yet to be felt. The junior minister with carriage of this strand of the ministry’s work is clearly committed to delivering change and has also agreed to deliver the keynote speech at our January conference.
Digital Escrow for Conveyancing
The CLC has been supporting the development of an escrow tool for conveyancing transactions that has the potential to make transactions smoother and more secure. The project was highly commended at the recent PayTech awards. We are working with the provider and with Barclays to support further pilot transactions. We are also working with Barclays to convene other lenders to explore the willingness and appetite for adoption of such tools.
ECONOMIC AND MARKET INDICATORS
Figures and opinion remain mixed, significantly influenced by continued uncertainty around the final terms on which the UK will leave the European Union in March 2019. Reflecting that uncertainty, the trend towards remortgaging and away from new purchases seems to be continuing.
As we observed at the end of Q1, the trends across the UK could reflect the beginning of a slow rebalancing of the market between London and the UK, in part as a result of policy choices on stamp duty and help to buy beginning to have their desired effect.
EY Item Club Summer Forecast
The EY Item Club has revised downwards its outlook for growth of the UK economy in 2018 from 1.6% in its spring forecast to 1.4% now. They noted that while employment continues to rise, there has been little improvement in real pay levels and that higher utility and energy prices are likely to squeeze consumer spending.
EY is also predicting growth lower than the recent trends in 2019-2021, at 1.8% which they describe as unlikely to provide a boost to corporates. That forecast is based on an assumption of a ‘stable transition’ out of the EU.
HM Land Registry House Price Index
UK house prices rose by 3.0% in the year to May 2018, down from 3.5% in the year to April 2018. This is the lowest UK annual rate since August 2013 when it was also 3.0%.
Looking at the regional level, the East Midlands was the fastest growing region with an annual house price growth rate of 6.3%, up from 5.1% in the previous month. London was the slowest growing region, falling by 0.4% in the year to May 2018, down from 0.3% in the previous month. This is the 4th consecutive month that London house prices have fallen over the year.
The UK Property Transaction Statistics for May 2018 showed that on a seasonally adjusted basis, the number of transactions on residential properties with a value of £40,000 or greater was 99,590. This is 0.5% lower compared to a year ago. Between April and May 2018, transactions increased by 0.8%.
UK Finance – May mortgage figures
UK Finance, reporting on May 2018’s lending, found a rather more encouraging picture, which it described as a ‘pre-summer boost’. They also observed that the trend of growth in remortgages continued in May.
32,200 new first-time buyer mortgages completed in the month, some 8.1 per cent more than in the same month a year earlier. The £5.4bn of new lending in the month was 12.5 per cent more year-on-year.
There were 31,100 new homemover mortgages completed in the month, some 4.4 per cent more than in the same month a year earlier. The £6.6bn of new lending in the month was 4.8 per cent more year-on-year.
There were 36,000 new homeowner remortgages completed in the month, some 7.1 per cent more than in the same month a year earlier. The £6.3bn of remortgaging in the month was 6.8 per cent more year-on-year.
Bank of England Credit Conditions Survey – Q2 2018
The survey, published on 12th July, found that the availability of secured credit to households was again unchanged in Q2 and lenders expected no change in the coming three months to September.
Lenders reported that household demand for secured lending for remortgaging increased in Q2, and expected demand to increase slightly in Q3. Demand for secured lending for house purchase was reported to have been unchanged in Q2, and was expected to be unchanged again in Q3.
Default rates on secured lending fell again in Q2 and were expected to remain the same in Q3.
RICS Residential Market Report – June
The report published on 12th July ‘points to a broadly stable picture, at least as far as headline numbers are concerned’. RICS, in line with others, found material differences between regions, with all areas other than London, the South East and East Anglia recording house price growth, albeit generally modest. Estate agents’ stock levels remain close their historic lows.
RICS respondents also report a further growth in the time it takes to complete a property sale from initial listing. That stood at 16 weeks in Spring 2017 and is now reported to be 18 weeks.
The Nationwide House Price Index for June
Nationwide’s Chief Economist Robert Gardner observed: “Annual house price growth fell to its slowest pace for five years in June. However, at 2% this was only modestly below the 2.4% recorded the previous month. Indeed, annual house price growth has been confined to a fairly narrow range of c2-3% over the past 12 months, suggesting little change in the balance between demand and supply in the market over that period. There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.”
Rightmove House Price Index
This index looks at asking prices and found what it describes as the usual summer lull in July. The average fall in asking prices this month was 0.1% or £248. The greatest price falls were at the lower end of the market, with houses with two bedrooms or fewer falling in price by 3.5%.
Rightmove also found that the percentage of sellers reducing their initial asking price is at its highest since 2011, indicating perhaps over-optimism on the part of sellers or their agents.
Building Societies Association – Property Tracker
This month’s report marked 10 years since the beginning of the BSA’s Property Tracker survey and this prompted BSA to make some interesting comparisons with a decade ago, which reflect the very different positions on interest rates and house prices in 2008 and 2018.
Barriers to property purchase 2008 2018
Raising a deposit 47% 68%
Affordability of mortgage repayments 70% 44%
Access to mortgage finance 49% 49%
Concerns about fall in property prices 46% 15%
Lack of job security 12% 33%
It is notable that lack of job security is a significantly greater concern in 2018 than it was in 2008. This is despite historically high employment rates at the moment and may reflect a wider concern about the economy as well as a shift away from full-time, permanent employment.
The survey also asked about tenure in 2008, 2018 and aspirations for the future and the findings are set out on the next page.
Tenure: past, present and future aspiration June 2008 June 2018 June 2028
Owner occupied 54% 58% 71%
Private rented 13% 16% 4%
Social rented 10% 12% 6%
Living with family who own 17% 8% 2%
Other 3% 2% 4%
So it is clear that the desire to be a homeowner remains strong in the UK. But that desire sits ill with the findings of the English Housing Survey of a consistent downward trend in owner occupation.