Economic data – house price fall ‘normal for November’, Rightmove; architects see volumes fall but hold onto staff, RIBA
Housing market. The average asking price of property coming onto the market dropped by 1.1% this month, which despite the weight of financial uncertainty is in line with the average 1.1% drop recorded in November during the pre-pandemic years of 2015-2019, according to the monthly Rightmove House Price Index (link). The M/M rate compares to +0.9% in October, pushing the Y/Y figure from +7.8% to +7.2%. There was a 13% Y/Y increase in new sellers coming onto the market; the time to sell in October extended to 40 days, from 36 in the same month last year (London shortened from 57 days to 54). The proportion of properties seeing a reduction is only slightly up on pre-pandemic levels, though a slowdown in activity from last year’s frenetic market has led more sellers to be willing to reduce their asking price to agree a quicker sale: In October, 8% of unsold properties on Rightmove were reduced in the month, in line with the 7.5% of properties that were reduced in October 2019, but double the 4% in October 2021. Buyer demand is still up by 4% on the more normal market of 2019, but down by 20% on October last year. First-time buyer properties continue to be the most affected sector, with Y/Y demand down 26% in October, while ‘second stepper’ demand is -17%, and ‘top of the ladder’, -15%.
Architects’ workload, a lead indicator of wider building activity fell by 8% Y/Y in October, reported in the latest RIBA Future Trends survey (link). This measure of current workload was the third consecutive month of decline, according to the architects’ professional body. Future expectations are for further declines: 32% of respondents expected a decrease over the following 12 months, while 12% project an increase, a ‘balance’ of -20% – down from -17% in September. At sector level, expectations for the next three months for Private Housing was unchanged from the previous month, at a balance of -17. Commercial fell one point to -8, the least pessimistic sector. Public Sector has deteriorated to -12 from -8. Community fell to -10 from -7 in September. Pessimism was explained by a range of issues, including planning delays and projects failing to progress past design stages as costs became clear. Interest rate rises and concerns about personal finance has held back small-scale residential commissions. The number of enquires is also decreasing for many practices; however, some practices reporting full order books and healthy levels of work secured for the coming months, albeit with concern for the longer term. According to the analysis, practices have been reluctant to lay off staff – a contrast to previous downturns. This is due to current difficulties, including Brexit, in recruiting and retaining talented staff. Viewpoint: An interesting point on staff retention, and apparently not restricted to the architectural sphere. A director of a leading housebuilder recently told me there was similar internal debate about whether to maintain staff levels should early indicators for the spring housing market showed an entrenched slowdown in demand; the inclination seemed to retain staff, even if this depressed profitability, as it has been so hard to attract and keep them.
Sources: Public announcements, Factset, ShareCast.com, Progressive Equity Research
NB Prices are as at the previous day’s close.
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