Leadership1 publisherNot yet confirmed elsewhere2 min readPublished
Lloyds index puts the steepest house price falls in London and the South East
London house prices fell 2.2% in the year to September, the Lloyds index shows, while the UK average held flat. For employers with staff in the south, cheaper homes now come with dearer mortgages, so pay and housing decisions depend on the regional figures.
The Board Room · Leadership desk
Drafted by a language model from the sources cited here and checked against its claim ledger before publication. How we use AISend a correction
What happened
- South East prices fell almost as far as London's, down 2.1% over the year to an average of £380,829.
- London's annual decline has widened from the 1.5% recorded in the year to August.
- Mortgage rates have climbed since the US and Israeli invasion of Iran in February, and the average five-year rate passed 6% this week for the first time in three years.
- Barclays, HSBC and Lloyds were among the lenders that raised rates after last week's jump in global borrowing costs, according to Moneyfacts.
- Money markets are pricing as many as four Bank of England rate rises by next summer, and most economists expect one this month.
Compiled by The Board RoomSomething wrong?How this is made
Why it matters
- cost Staff outside the south pay the higher borrowing costs and get no price fall to offset them. A flat UK average alongside falls in three southern regions means prices elsewhere held steady or rose.
- decision Benchmarked to the UK index, a London weighting would show housing costs unchanged. The capital's own figures show cheaper homes bought with dearer loans.
- exposure Recent buyers in London and the South East face two risks at once: a home worth about 2% less, and a higher rate when their fixed deal ends.
Lloyds' mortgages director reads the September index as evidence that prices have held up. "While the market overall has been fairly subdued, property prices have so far proved resilient during a period of higher mortgage rates, which has been driven by changing expectations around the future path of Base Rate," Andrew Asaam said [6]. That fits the national figure better than the southern ones. City AM's report puts the falls in London and southern England down to rising mortgage rates and stamp duty [17].
An employer setting a London weighting, or deciding where a team sits, will find the year's falls small next to the gaps between regions. Using the index's rounded percentages, the average London home lost about £12,000 over the year, from roughly £543,500 [12]. The South East average lost about £8,200 [13]. It is still £150,719 below London's, about 28% less [14]. Eastern England's average, down 1.6% to £330,151 [5], is about £201,000 below the capital's [15].
What a staff member pays for housing depends on two things: the price and the loan rate. In London the two have moved in opposite directions this year [c1, c8]. Lloyds publishes the index and is also one of the lenders Moneyfacts listed as raising rates [c1, c9]. The report does not give the average rate before February, so it is not possible to work out from it how much a London buyer's monthly payment has changed.
The dates that could move both prices and rates are weeks away. The budget is due later this month. Jason Tebb, president of On The Market, said: "We already know that there will be assistance for first-time buyers buying new-build homes" [10]. Andy Burnham announced a new equity loan scheme for first-time buyers last week [11].
For an operator with staff in London and the South East, the trade-off is timing. A housing allowance or London weighting fixed this quarter is set against September's prices and current rates, before the Bank of England's decision and the budget [c10, c11]. Waiting a few weeks gives a firmer number. Settling now gives staff certainty sooner, but next quarter the figure will be judged against borrowing costs that money markets expect to be higher [9]. I'd set it against the London and South East figures. Over the year, the UK average has not moved [3].
What to watch
- Whether the Bank of England raises rates this month, as most economists expect, and how many further rises markets then price.
- The budget later this month, and whether its help for first-time buyers extends beyond new-build homes.
- October's Lloyds index, and whether London's annual fall widens past 2.2% or the UK average turns negative.