This course work tried to show house price change (forecasting) next two years using previous three years data on the house market in the UK. I would like to introduce how important information it taking in and what it contain in etc.
It started analysis of house price change between 2007and 2009, including house price and its' change and I looked for main reason to fall market demand. Then I go through Supply of houses how much dropped and what is main influence, demand falls by UK inflation increases. On the any market demand determine by price of product, future price expectation, population, consumer income, economic increase etc. Economic increases bring more capital into country which means consumer income is increase directly. End of this work tried to showing house market forecast by 2012 using analysis of demand and supply between 2007 and end of 2009. This work is showing all my view of house market forecast and I collected all data from UK National Statistic, NHBC web site and some economic books etc.
LONDON HOUSE PRICE ANALYSIS
Change Since 2007
Change since 2007
House price changes Since 2007 Data Tables for London: Table1
Recent house price data as released by the UK National Statistic showed that London house prices have plunged by over 17% from the peak of June 2008, which has fulfilled much of the UK house market experts' forecast made in August 2007 for a minimum fall of 15% for the UK housing market and 25% for London.
The graph shows London house price changes last three years which are between 2007 and third quarter of 2009. House price started £153,800 at First quarter of 2007 then increased sharply to third quarter of same year and almost peaked it. Until second quarter of 2008 almost remain the same with little dip. Early 2008 house price peaked at £170,500 then plunged sharply to £144,000 in second quarter of 2009 because of credit crunch faced mid of 2008 and it affected housing market. As a result thousands of thousand people lost their job, banks were short of money, people wouldn't able to pay mortgage. All these brought dramatically decrease into UK housing market. Therefore analysis seeks to project the forecast trend for UK house prices for the next 2 years into 2012.
SUPPLY OF NEW HOUSE IN UK
UK Mortgage Supply
Most recent data, house supply has fallen so has the average value of loan offered for house purchases which peaked at £170,500 in June 2008, and now averages at about £154,600. This is serious deflationary for UK house prices and price fall of £16,000 (June,08) and therefore acts as a leading indicator for the continuing downtrend in house prices as the amounts made available for mortgages contracts in terms of salaries and Loan to Value ratios of 75% or less.
Most of resources says second quarter of 08 was great time to remortgage because of the deep interest rate cuts on face value. It seems to me, not too late home owners to seek to remortgage at this time. Reason why, trend is remain the same since end of 2009 on the Housing market.
UK house supply released by NHBC
Statistics released today by NHBC reveal that the number of new homes completed in the UK increased by a small percentage year-on-year during the period from August to October 2007.
NHBC statistics show that 44,316 new houses were completed in the three months from August to October 2007 - a five per cent increase on the same three month period a year ago (42,199), total of 37,093 related to private sector activity (i.e. excluding housing associations), showing a three per cent increase on the same period in 2006 (36,181).
Housing association completions increased in the three months to the end of October this year with completions totalling 7,223, an increase of 20 per cent on the same period a year ago (6,018).
This year, NHBC figures show that a total of 149,127 new homes have been completed, one per cent ahead of last year's figure of 147,082."
Additional figures for the three months from August 2007 to October 2007 show that the average number of new homes sold each day in the UK was 485, a decrease of 12 per cent on the same period a year ago (554).
Serious decline in number of home starts
Statistics released today by NHBC show that there was a significant drop in private sector activity during the three months from April to June 2008, with applications to start new homes totalling only 20,973 - a decrease of 51 per cent on the same three-month period a year ago (42,485).
Latest figures from NHBC show that the number of registrations to build new homes in the UK has again risen from the previous rolling quarter.
The figures reveal that during the three months from September to November 2009 NHBC received 27,124 applications to build new homes in the UK- an increase of 45 per cent on the same period last year (18,675).
Registrations for the month of November 2009 exceeded those for the previous month, with 9,766 registrations (9,163 in October 2009)- the highest figures for more than 18 months.
"However, the first quarter of 2010 will be a key time for the house building industry and it is vital that it is high on the agendas of all parties in the run-up to, and post, the election. This is the only way to ensure that the complex challenges of supply, sustainability, quality and consumer interest can be met in the years to come."
NHBC rolling quarter statistics show that all regions are reporting higher levels of registrations for September to November 2009 than the same period in 2008, and that the majority have also improved on rolling quarter August to October 2009.
In particular the Midlands showed continued improvement with 1,912 registrations in the West Midlands during the period September to November 2009, and 1,976 in the East Midlands (compared to 1,367 and 1,896 respectively for the rolling quarter August to October 2009.)
NHBC statistics for the three months to the end of November 2009 also show:
* Recovery in the private sector continues. Private sector applications were up 74 per cent across the UK to 18,617 from 10,718 for the same period last year.
* Public sector figures for the three months to the end of November were also up, at 8,507- 7 per cent higher than the same period a year ago (7,957).
* The average number of daily sales of new homes in the UK recorded by NHBC during September to November 2009 was 355- just 6 per cent lower than the same period a year ago (378).
DEMAND OF HOUSING MARKET
Home Starts Reach New Low in August 19/09/08
Latest figures showed by NHBC that they received 3,720 applications to start new homes in the private sector in August, 76 per cent lower than the same month a year ago (15,661).
Statistics for the three-month period from June to August also continued to reflect the tough housing market conditions. NHBC statistics show that were 25,097 applications to start new homes in the UK in those three months - a 51 per cent decrease on the same three-month period a year ago (51,730). Of that total, 14,665 related to private sector activity (i.e. excluding housing associations), showing a 65 per cent decrease on the same three month period in 2007 (42,071).
Future price expectation:
NHBC is United Kingdom's biggest house building manufactory, almost 80% of new home which is average 150,000 every single year.
Statistics released today by NHBC show that there was a significant drop in private sector activity during the three months from April to June 2008, with applications to start new homes total only 20,973 - a decrease of 51 per cent on the same three-month period a year ago (42,485).
House supply dropped by over 50 percent which means short of supply facing housing market. As a result, house demand increasing dramatically next year or two. Later 2009 house average price (graph 1) £154,600 and trend is upward, my future expectation is house price slightly increasing to 2012. I have three reasons to say that. Firstly UK economy almost passed depression, weak economy getting stronger. Secondly, World pointed to UK next two year because of Olympic. Thirdly, over 800,000 migrants from the Accession states who contributed towards the buy to let market bubble. These reasons make house price go up to 15 per cent for next two years.
UK HOUSE MARKET FORECAST BY 2012
Recent house price data released by UK National Statistic showed that UK house prices remain the same but trend is upward. When I had ananlysed house price change last three years then I found out house demand is inelastic because price change between 15% to 18% increase than house demand remain the same next few months, you can see table 1. Graph 2 shows big depression second quarter of 2008. This is huge crash appeared on house market since second world war, but recently news says UK economic getting stronger again by the time UK house market lost weak time and price increasing slightly, demand going to get right way and suppliers back to work on the house market.