In much a similar way to life, birth, youth, adolescence, middle age, old age, death the housing market goes through a cycle. Anyone who has studied economics or anyone who has spent time looking at their environment knows that we go through these “seasons.‟

UK House Prices

Property prices and trends relating to the local and national variances of any given location have a important impact on the state of the UK economy. These trends provide a snapshot which highlight how the economy in general is performing, shown through house price surveys.

Land Registry has been recording completed sales and the price at which the property transacted in England and Wales since 2000 although you will be able to track sold prices dating back to 1995. Commercial properties and a small number of residential sales are not included such as council homes sold at a discount and some property transfers following a divorce to avoid skewing data.

The proceeds of all the sold transactions are tallied up and then divided by the number of sales to reach an average sold price for the whole of the UK.

The Government have their own monthly index issued by the Department for Communities and Local Government (DCLG).

The date covers the whole of the UK but is based on the data supplied by the Council of Mortgage Lenders. Cash sales are not included, only those transactions which utilised a mortgage are included. Its important to note that this this index is more weighted to show house prices by the total amount of money spent. This means areas of London where house prices are the highest will influence the Government’s index more strongly.

The Halifax and Nationwide indexes both cover the entire UK and are based on a sample of each of the lenders agreed loans each month.

However the prices are measured when the mortgage is approved, and not at the later point when the transaction completes.

By contrast the Royal Institution of Chartered Surveyors (RICS) survey reflects confidence in surveyors, albeit subjective, the RICS survey is the first to show any major swings in the market.

Hometack collects data from estate agents offices throughout England and Wales in order to get a feel of whether asking prices are rising or falling and are asked to report on the achievable selling price for the standard property types in each given area.

Rightmove’s survey on house prices is completely different and collates asking prices for houses placed on its website over the previous month.

Current and historical UK house price information:

▪ The Nationwide Building Society holds historical data back as far as 1973

Halifax (part of Lloyds Banking group) holds data back to 1983

▪ The Department for Communities and Local Government (DCLG) publishes statistical data on various property topics

▪ The Land Registry House Price Index has the facility to generate lists of average house prices in any area of England and Wales for any range of months since January 1995

▪ The Office for National Statistics House Price Index publishes figures for mix-adjusted average house prices and house price indices for the UK

▪ Knight Frank publishes a range of residential research reports

The Private Rental markets

▪ The Association of Residential Letting Agents (ARLA) produces a quarterly Survey of the Private Rented Sector

▪ Knight Frank also publishes a range of papers which provide a snapshot of the rental market, data on London prime sales and lettings

▪ Savills publishes a range of residential research reports

▪ The Department for Communities and Local Government (DCLG) publishes statistical data on various housing topics including the rental market

Historical House Prices

The figures for England and Wales from Land Registry have shown that house prices have tripled in the 20 years between 1995 and 2015.

However, although growth was almost continuous during this period, there was a period of decline around 2008/09 as a result of the banking crisis and the recession.

Property cycles

A property cycle is a term used to describe a sequence of recurrent events reflected in factors such as fluctuating house prices, voids, rentals and demand in the property market.

The property cycle can be broken into two parts: the first relates to the physical cycle of supply and demand which usually determine rental prices. Secondly is the financial cycle where capital and liquidity flows affect capital values.

The peak and troughs in the residential market are commonly referred to as boom and bust, property cycles have durations ranging from 4-12 years with an average of 8 years.

Fluctuations in house prices:

There are a number of reasons why fluctuations in house prices occur and knowing these can be beneficial as you will be able to stack the property market odds in your favour:

What causes house price increases?

  • Higher Demand
  • Lower supply
  • Relaxed and favourable mortgage lending
  • Cheap/easy credit
  • High employment
  • Rising wages

What causes house price decreases?

  • Increased supply
  • Deceased demand
  • High unemployment
  • Low economic growth
  • Reduced availability of affordable mortgages

Buying in Boom and Crash

Successful investment does not rely on the market. To become wealthy, successful, free and independent in the Property game you need to be shrewd. You need to go against the tide sometimes. You need to be flexible. You need to educate yourself; gain experience and knowledge.

What the market does will not determine your long term outcome. It may have some short term implications which can be both positive and negative [depending on how you look at them] and you will learn from them. Ultimately you are the one in control. The more you stick to the strategy you are building the more likely you are to profit.

In the times of a market downturn, skilled investors will make money. Skilled investors will make money regardless of the marketplace.

You should look forward to the times when other people have stretched themselves, got it wrong, or been unfortunate, because that is when your superior knowledge will serve you well.

You can help them and profit yourself. You can create those ‘win-wins’. Remember whatever the economy, money has to go somewhere.

When prices are not moving or going down some will sell. The flock mentality will kick in. Some will panic. They will do what everyone else is doing. Many will do what the papers and the guys down the pub tell them. There will be chaos.

And what will you be doing?

Sitting. Waiting. Being patient. Not panicking. Sticking to your strategy whilst being flexible. Watching the market. Whether you make your money when you buy or whether you make it in growth [or even both], matters not. Always be moving forward. Always be making money.

Things can be easier when the market is in bull mode.

All of the properties you have amassed will be growing nicely [because you have taken decisive action] with steady capital appreciation and you can release the equity to fund more deals or take the increased equity and sell up to buy a bigger house or bank the profit. Either way the educated investor/buyer wins and the educated buyers make money.

Mark Homer
Mark Homer

Co-founder at Progressive Property, 600 + properties bought & sold. Full time property investor/analyst/geek & World Record Holder Author of No.1 Amazon best-selling book Uncommon Sense, Low Cost High Life and Commercial Property Conversions.