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RESIDENTIAL MARKET
COMMENTARYMay 2019
A Cushman & Wakefield Insight Publication
1Cushman & Wakefield | Residential Research
ECONOMIC OVERVIEW
Economic Overview
ECONOMIC INDICATORS 2019 2020 2021 2022 2023
GDP growth (%) 1.5 1.7 2.0 2.1 1.9
Household Disposable Income –
Current prices (%)3.0 3.9 4.4 4.2 4.1
CPI Inflation (%) 1.9 1.7 1.6 1.6 1.7
Exchange Rate (US$ per £) 1.31 1.38 1.46 1.49 1.50
Exchange Rate (Euro per £) 1.14 1.16 1.18 1.20 1.20
BoE Interest rate (%) 1.00 1.25 1.50 2.00 2.50
Source: ONS / Oxford Economics / OBR
Strong Q1 2019 data releases continued, with
quarterly GDP growth in the quarter up to
0.5% (from 0.2% in Q4 2018). However, it is
widely acknowledged that there may be a
significant skewing in this data due to the
stock building of companies fearful of the ‘no-
deal’ Brexit that looked to be a very real threat
in March. This should therefore result in Q2’s
figures showing a corresponding fall as this
skew unwinds itself.
With stronger growth forecasts, it is expected
that the BoE will become a little more bullish
on interest rate rises in coming months, with
most predicting one 25 basis point rise in
2019, although another delay to Brexit would
almost certainly rule this out.
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
CPI Inflation & Average Earnings (y-on-y change)
Average Earnings (exc bonuses) CPI Inflation
Boosted by energy/fuel price increases, inflation took a notable uptick in April 2019’s figures, rising above the
2% target for the first time this year. However, with most economists agreeing that the contributory factors
are temporary, it is expected that this measure of inflation will start to cool once again later in the year.
After a prolonged period of wage growth, average wages (excluding bonus) took a slight downward turn in
March, but with the jobless rate at its lowest for 45 years, we would anticipate future data releases to show a
plateauing of this rate, rather than a decline.
With the above in mind, we do not anticipate a convergence of inflation and wage growth any time soon, and
that real wage growth will be a constant factor over the coming 12 months.
2Cushman & Wakefield | Residential Research
National Market
OVERVIEW
Sources: UK HPI
Nationally, house prices continued their downward trajectory with the UK HPI’s average house price down
2.4% in the six months to February 2019. With 60% of English Local Authorities recording month-on-month
price falls during February, and Brexit clarity failing to emerge, we would anticipate this direction of travel to
continue in coming months, with the possibility of a bounce once the UK’s future relationship with the EU is
settled. When broken down regionally, the recent status-quo has shifted of-late, with the North West
overtaking the Midlands as the region experiencing the highest rate of house price inflation. As of February
2019, year-on-year rates of house price growth in the North West were at 4.0%, with the West Midlands and
East Midlands recording 2.9% and 1.6% respectively. Yorkshire & The Humber, the North East, the South
East, and London all recorded year-on-year falls in February 2019 data.
TRANSACTIONS
Complete data for 2018 highlights stark contrasts in the English market from a transactional perspective. By
stripping-out new home sales data, and then applying second-hand sales figures to existing housing stock
levels, we can clearly see that the true fluidity of a number of London markets is at record low levels. Less
than 1-in-50 houses in LB Brent sold during 2018, where in contrast, Northamptonshire appears to be the
most functional market, with three of its Local Authorities appearing in our top 15. On average, 1-in-20
homes in the County were sold during 2018.
£236,000
£238,000
£240,000
£242,000
£244,000
£246,000
£248,000
£250,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage of English Local Authorities Recording Monthly House Price Falls
Rising (LHS) Falling (LHS) English average house price (RHS)
1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
Brent
Kensington and Chelsea
Westminster
Camden
Newham
Ealing
Harrow
Enfield
Barnet
Haringey
Redbridge
Hounslow
Islington
Hackney
Hammersmith and Fulham
Tewkesbury
Swindon
Fenland
North West Leicestershire
Kettering
Christchurch
East Northamptonshire
Gloucester
Isle of Wight
Lincoln
East Devon
Chorley
Weymouth and Portland
Selby
Corby
Percentage of Housing Stock Sold in 2018
3Cushman & Wakefield | Residential Research
National Market (cont)
Sources: UK HPI / IPHRP / Cushman & Wakefield / VOA / MHCLG
NEW HOMES
New home construction finished 2018 on a high with Q4 2018 recording the highest number of quarterly
completions for 11 years. However, with construction starts stalling somewhat, and uncertainty surrounding
the near-term future of the English property market, it is yet to be seen if this momentum will be carried
forward into 2019.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
New Home Completions
Private Enterprise Housing Associations Local Authorities
RENTAL MARKETS
Both the East & West Midlands continued the recent trend of rates of rental inflation exceeding historical
averages, with Yorkshire & The Humber being the only other region currently achieving this feat.
While the North East looks set to maintain its historical position at the foot of the rental inflation league, more
agile and current data from Rightmove, shows that asking prices in both London and the North West are
rising at a far faster rate than rents presently are. This strongly suggests that these two regions will soon
witness rates of rental inflation in-excess of historical averages.
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
East Midlands Yorkshire andThe Humber
South West West Midlands South East East North West London North East
Annual Rates of Rental Inflation
12 months to March 2019 Long-term average Rightmove annual asking price inflation (12m to March 2019)
4Cushman & Wakefield | Residential Research
PRIME CENTRAL LONDON (PCL)
Significant green shoots are evident in the Prime Central
London market, with prices increasing month-on-month,
and the average discount-to-asking price spread
contracting by 59 basis points in April 2019 (compared
with March 2019). This is the first such shift for some
time. However, Prime Central London’s hyper-sensitivity
to Brexit caused an expected drop in transactional
activity, during the months either side of what was to be
the date the UK left the EU.
PCL rental markets continue to perform solidly, with a
lack of stock placing upward pressure on prices, and
reducing discounts significantly.
Prime London Markets
Source: Cushman & Wakefield Research / LonRes
Area definitions for report: PCL = W1H, W1U, W1G, W1B, W1S, W1C, W1K, W1J, SW1A, SW1Y, SW1P, SW1H, SW1E, SW1W, SW1X, SW7, SW3, W8. OPL = NW3, NW8, W2, W9, W11, W14, SW6, SW10.
OUTER PRIME LONDON (OPL)
In an opposite trend to PCL, Outer Prime London
transaction levels have shown signs of recovery of late,
with April 2019 sales volumes up 14% on the same
month in 2018. However, prices remain on a downward
trajectory, albeit a slow decline. Average achieved £ per
square foot values in OPL during April 2019 were down
4.7% on a year earlier, but with sold-to-asking discounts
levelling out, we expect any further falls to be relatively
minor.
As with PCL, Outer Prime London rental prices continued
their ascent, with average rents in April 2019, 2.1%
above those recorded in April 2018. However discounts
opened-up, hinting at a possible stalling.
IndicatorM-on-M
(Mar-Apr)
Y-on-Y
(Apr-Apr)
Sales
Transactions-21% -21%
Capital Values +0.38% -5.26%
Average sale
discount %-12bps (6.58%) +2bps
Rental Prices +0.35% +1.53%
Average rent
discount %-59bps (3.38%) -24bps
IndicatorM-on-M
(Mar-Apr)
Y-on-Y
(Apr-Apr)
Sales
Transactions-3% +14%
Capital Values -0.46% -4.69%
Average sale
discount %-2bps (5.12%) -16bps
Rental Prices +0.59% +2.08%
Average rent
discount %+23bps (2.63%) -1bps
94.00
95.00
96.00
97.00
98.00
99.00
100.00
101.00
102.00
103.00
Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19
Cushman & Wakefield Prime London Markets Index(April 2019 = 100.00)
PCL Cap Values PCL Rents OPL Cap Values OPL Rents
5Cushman & Wakefield | Residential Research
Mortgage Market
Sources: UK Finance / CML
HELP-TO-BUY EQUITY LOAN
As we can see from the below graph, since it’s introduction in 2013 the Help-To-Buy Equity Loan scheme has
become a major part of the English new homes market, with over 225,000 loans issued, helping to purchase
new-build property with a combined value of c.£60bn. In Q4, 2018 the scheme experienced its most active
quarter, with 15,651 loans issued, representing 63% of all new homes sold. So popular is the scheme that
during 2018, the government effectively purchased an active stake of 11% in all new homes constructed in
England.
BUY-TO-LET (BTL) INVESTOR ACTIVITY
Buy-To-Let lending activity continued to decline, with just 15,200 new loans for property purchase issued in
Q1 2019. This is the lowest quarterly total since Q2, 2016, which was the period immediately following the
introduction of the additional 3% stamp-duty surcharge on the purchase of property in addition to a main
home. This slowing inflow, coupled with a number of landlords selling current BTL properties, has resulted in
early data recording growing upward pressure on rents. With options for returns on cash limited, we would
expect a bounce in BTL appetite as initial yields increase for the first time for many years.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Q2,2013
Q3,2013
Q4,2013
Q1,2014
Q2,2014
Q3,2014
Q4,2014
Q1,2015
Q2,2015
Q3,2015
Q4,2015
Q1,2016
Q2,2016
Q3,2016
Q4,2016
Q1,2017
Q2,2017
Q3,2017
Q4,2017
Q1,2018
Q2,2018
Q3,2018
Q4,2018
Help-To-Buy Equity LoanTake-up and scale
New home sales New home sales using HTB EL Percentage of new home sales using HTB EL
0
5,000
10,000
15,000
20,000
25,000
30,000
Au
g-1
5
Se
p-1
5
Oct-
15
Nov-1
5
Dec-1
5
Ja
n-1
6
Feb
-16
Mar-
16
Ap
r-1
6
May-1
6
Ju
n-1
6
Ju
l-16
Au
g-1
6
Se
p-1
6
Oct-
16
Nov-1
6
Dec-1
6
Ja
n-1
7
Feb
-17
Mar-
17
Ap
r-1
7
May-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Ja
n-1
8
Feb
-18
Mar-
18
Ap
r-1
8
May-1
8
Ju
n-1
8
Ju
l-18
Au
g-1
8
Se
p-1
8
Oct-
18
Nov-1
8
Dec-1
8
Ja
n-1
9
Feb
-19
Mar-
19
New Buy-To-Let loans issued for house purchase
Pre-2008 market downturn monthly average
Pre-3% stamp-duty surcharge monthly average
Last 12 months monthly average
6Cushman & Wakefield | Residential Research
Author
Lee Layton
Associate Director
Residential - Research
020 3296 4574
Contacts
Candice Matthews
International Partner
Head of Residential
020 3296 3988
Mike Bickerton
Partner
Residential – New Homes
020 3296 3837
Jack Simmons
International Partner
Residential - Investment
020 3296 4991
Charles Whitworth
International Partner
Residential - Land
020 3296 2414
Jonathan Stickells
Partner
Valuation & Advisory
020 7152 5271
Nick Jacks
Partner
Valuation & Advisory
020 7152 5264
Jonathan Godfrey
Partner
Valuation & Advisory
020 7152 5760
Matthew Duncombe
Partner
Valuation & Advisory
020 7152 5262
To automatically receive this monthly brief, please email requesting to be added to the initial
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Neil Batty
International Partner
Residential – Head of International
020 3296 4303
Jodie Jeffrey
Partner
Valuation & Advisory
020 7152 5261
Simon Capp
Partner
Residential - International
020 3296 4646
About Cushman & Wakefield
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Disclaimer
This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified,
professional advice. Whilst facts have been rigorously checked, Cushman & Wakefield can take no responsibility for any
damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should
not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be
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