Estimated Read Time: 15 minutes
Editor: Shaun Callacher
Calm Down – Nobody Knows Yet What Property Prices Are Doing!
After the Brexit referendum in June, there are a lot of uncertainties in the marketplace. There seems to be a lot of fear pumped from all different sources of media that as a whole nation property prices are dropping due to the Brexit results. In my opinion this is too early to predict and nobody can really know which way the property market will go yet. I won't go into it in this post, but fundamentally there are only two powers that can really take dramatic action to dictate the future of the property market: bankers & government (both of which, to some extent, depend on each other & also on other extrinsic actions). Therefore, any other source that tells you Brexit has made property prices drop, or the whole economy drop for that matter, is nothing more than a Chicken Little screaming ‘the sky is falling’. As I will show you, the stats just haven't come out yet to prove it.
Now that I have got that cleared up, for this post I would like to share 3 tools I use to see any changes in the marketplace as they happen, which ultimately will allow you to find out for yourself if the media is telling the truth on property prices and the property market. By understanding what the property market is TRULY doing, you can act accordingly with your investing – just like I have.
I will be sharing some technical analytics which will put you head and shoulders above the majority of the population in terms of understanding the property market and what is really happening on a national and local level.
Okay, so let’s get cracking…
Below are the three tools I use to read the property market truthfully. I have ranked each one in order of effectiveness and expanded on why they are the best places for REAL information.
Tool 1: Land Registry
Land Registry is the government-run portal that tracks all residential transactions since 1990. Land Registry provides absolute facts when it comes to residential property prices. By law, all residential transactions have to go through Land Registry, which means, for us investors, if you track property price changes over a given time, you can see which way the property market is going.
The Land Registry website is a confusing place, and to get the best out of it for understanding house prices in an area, you can create reports by going through the following link: http://landregistry.data.gov.uk/app/standard-reports/report-design
The reports allow you to pick and choose the postcode area you want and the format you want it in, plus much more. From the Land Registry reports, you can then see the sale of property figures and see if they are higher or lower whether demand is increasing, staying the same or decreasing month on month, year on year or quarter on quarter, depending on how you choose to create your report.
So for example, above is a screenshot of the May 2016 report on L17 (L17 is near where I live) in Excel format. I have also downloaded May 2015, which you can see in the screenshot underneath May 2016. You can see that between May ’15 & May ’16, average house prices have increased over the year by a total of: £1,640. Therefore, property prices have slightly increased over that period, even though less properties were sold, which was probably due to the uncertainty of the referendum!
Below is a graph taken from rightmove.co.uk, which, using the land registry information I am sharing with you now, puts together a graph of the area of average house sale prices in an easy-to-read format:
The one downside of Land Registry is that unfortunately Land Registry is always two months behind in updating the sale prices. What this means is when studying it, you are always two months behind in what's happening in the marketplace.
However, with the next two websites you should be able to get a good grasp of the marketplace before Land Registry updates.
Tool 2: Mortgage Approvals
A very large factor in property price changes, because wages haven't increased accordingly with house prices for the majority of the population, is that most people have to borrow to buy a house. Therefore, the more lending that gets approved by lenders, the more properties that are bought – and the more properties that are bought, the higher the price of the ever undersupplied property! And vice versa if the amount of lending applications drop.
Now that we have ironed out the amount of money lent to borrow can control the outcome of property prices. How can we tell if there is a drop on the lending in the property market or not?
The Bank of England produces a monthly report called: Money & Credit Statistical Release. Within this document, The Bank of England have collected information from hundreds of the biggest lenders in the nation to produce a monthly report from the previous month’s statistics.
Within this report there is a section called ‘Mortgage Approvals’.
See screenshot of Mortgage Approvals from the Money & Credit Statistical Release, May 2016:
Cut bare, what this shows is the number of approved mortgage loans accepted by most lenders in the country. So, to put it simply: the higher this amount goes, the more likely property prices will increase too.
Below you can see the number of mortgages approved over the last 10 years. Prior to the 2007 crash, notice how many approvals there were!
Graph was taken from www.tradingeconomics.com as they put it in an easy-to-view format:
You can see prior to 2007, mortgage approvals were high; this effectively pushed the prices of property to rocket in that period. You can see since 2010 it has been quite steady, meaning property prices have been increasing or staying the same.
Tip: If you notice the mortgage approvals drop drastically, you can almost always predict that property prices you will see from the Land Registry will reflect this, and dip also. Just like what happened in the 2007 crash.
Tool 3: Rightmove
Rightmove is the biggest online portal in the UK for selling and renting property. They have eight hundred thousand properties on at one time, teaming up with thousands of agents, which surpasses, every other property portal. This means Rightmove is a big player when it comes to seeing the movement of the property marketplace. Rightmove is in the absolute frontline of it all.
Rightmove only gets its sold house prices from Land Registry, so it is still reliant on that. However, the key information Rightmove can show to investors is the following;
The average time to sell: If the average time to sell goes down, it becomes more likely that prices will go up (supply and demand), & vice versa if the average time to sell goes up.
Screenshot of the monthly average time to sell. Source: http://www.rightmove.co.uk/news/house-price-index
The average asking price: Rightmove can track the average asking price each agent has put on their properties. As you can see from the graph below, the average asking price has increased over a five year period. This reflects the slight increase in property prices. Normally the asking price will come down if enquiries come down.
Screenshot of monthly national asking price graph. Source: http://www.rightmove.co.uk/news/house-price-index
A lot of factors contribute to the future of property prices. Not any one person can truly see the future. However, by using the tools above, you can keep ahead of most people by seeing the market changes in real time as they happen.
I hope you get value from this post. If you use any other tools/sources to help you with your property investing prices, please share in the comments below.
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