Opinion: Look behind the headlines to the data and London house price falls are nothing to worry about
07-09-2018
Charles Curran
“Facts are stubborn things, but statistics are pliable.” This refrain from Mark Twain is as true now as it ever was, especially when it comes to assessing what’s going on in the London housing market.
Headlines such as “London Falling: House prices in the capital experience lowest growth since financial crisis” might have sent shivers down the spine of a reader who takes statistics at face value, but the rest of us should know better.
We must look at where the data comes from before we panic. Land Registry figures are published three months delayed and can be misleading as completions can occur months after an exchange of contracts. A sale price published in June 2018 by the Land Registry for a completion that was captured in March 2018 could have taken place any time between November 2017 and February 2018. There is little correlation in the inputs that can make up a monthly increase or decrease.
Prices go up until only a few can afford to buy, at which point the market stalls and a correction is inevitable
It should also be noted that Land Registry changed their estimation mode in December 2017 to take into account an overestimation of the value and quantity of new build transactions, which can further skew the data, so we are not comparing like for like in Q1 2018 vs Q4 2017. And if you don’t believe me, Land Registry warns on its own website:
“Low number of sales transactions in some local authorities can lead to volatility at these levels (geographies with low number of sales transactions should be analysed in the context of their longer-term trends rather than focusing on monthly movements).”
Whilst there was a slowdown in price growth, this was found in only 16 (out of 32) of London’s boroughs, with an overall fall across London of 0.7 per cent – the average fall of the Slowdown 16 was actually -2.4 per cent. Of this number, the average property price in six boroughs (the ones in Prime Central London and affluent suburbs) was directly affected by either the increase in Stamp Duty Land Tax, which has stifled sales and led to a reduction in foreign buyers, which has had the same effect.
Prices in Westminster, for example, fell by 4.6 per cent, but the average price for a flat is still £1.5m. Whilst the average fall was 0.7 per cent overall, the gainful 15 showed an average increase of 2.8 per cent with Waltham showing no change.
But these are not inputs that affect the whole of the London Market where the average price is now £471,944. The reality is that, aside from political risk (SDLT and Brexit), there have only been approximately 10 boroughs out of 32 that have seen this slowdown. Prices go up until only a few can afford to buy, at which point the market stalls and a correction is inevitable.
Taking a snapshot of the market cannot provide a realistic or useful basis for an opinion, just as looking at company figures on Balance Sheet date would not be a basis for buying the company.
The London market is hugely diverse – across both price points and the manner in which people buy (cash vs mortgage). Mortgage company data will focus on mortgage acceptance rates, and figures from estate agents (sale price vs offered price) produces another set of data.
Londoners are understandably confused by how to interpret these statistics, so it’s up to professional property market commentators to remain cautious and measured in their commentary, rather than sensationalist.