STAG-BREXIT

On the list of cities with most expensive housing, London is quite high up. However, the city has a history of rising prices and an expected bubble that never exploded. During the past ten years, the housing market has experienced the most disrupted property cycle on record. In the midst of Brexit uncertainty, house prices in London dropped for a short bit after only to recover a few months later.

The house price growth has decreased and the number of houses sold in London has plunged. The housing market in London is more sensitive to the Brexit Saga than the English housing market.  

Uncertainty and fear after UK voted to leave the EU have stagnated house prices across the United Kingdom. The majority of news articles in the UK is concentrated around Brexit and the market sensitivity to the political clutter is now higher than ever.

Back in early 2016, England’s housing market flourished, when the average house price was £220,361, or approximately 9% higher than early 2015 and 0.1% higher than late 2015.

In June the UK voted to leave the EU and in July 2016 the annual and the monthly house price growth started its descent. Since then, the number of transactions fell as annual price growth slowed to less than 1%. Fears over Brexit caused English house prices to all but stagnate in 2018, rising by the smallest amount in almost six years.

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According to  the Financial Times, the Bank of England has claimed that London house price drop is unlikely to create a Domino effect on the rest of the country. Brexit related uncertainty is higher in the capital than it is in the rest of the country, causing a sharper drop.

With Brexit ,net migration from EU is expected to fall which in turn pushes demand for houses down which pull prices further down. Other related reasons to the slowdown of price growth are related to rising interest rates and the disproportionately increase in the rate of stamp duty, which makes buy-to-let investments less attractive.

However, what about house prices within London? Have all areas within London experienced the same price change? How do these compare with the rest of England?

Data and Insights

The figure below shows the average monthly price volatility of house prices in England, London and two neighborhoods of London, namely: Camden and Kensington & Chelsea.

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In general, the UK housing prices have not been as volatile as those of London’s boroughs. In Kensington & Chelsea, right before the vote the average house prices went up to an all time high at the time. In July 2016, Brexit played a role as house prices went down and so did the demand the coming months.

 

If on average an average house in Camden becomes almost £3000 more expensive each month, after Brexit this monthly increase went down to £2500. The story of Kensington & Chelsea is even more dramatic. An average house increases with £4500 and this increase went down to £2000.

What about the number of houses being bought?

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On the left hand-side the axis, the number of houses sold in England is shown, while London is on the right side. The remarking insight from the figure above is the almost hand-to-hand movement of houses sold in the England with those in London. The movements of the two correlate highly along time (r=0.9).

The figure above illustrates a sudden increase in the house prices of both London and UK in the beginning of 2016 which can explain the market flourishing during this period. This could have been driven also by uncertainty on what would happen after the vote which triggered fast buying. And then Brexit happened, and number of houses sold dropped for both London and England.

What confirms the predicted dynamics from the Bank of England, is the part after: London is showing a substantial decrease in the number of houses sold and so is England, but the drop in London was much harsher.

On the 15th of January 2019, House of Commons voted down the Brexit deal proposed from the government and uncertainty over the economic outlook will appear to be more dominant  in London than it is in England.image (2).png

More specifically within some areas of London, namely Camden and Kensington & Chelsea, the number of houses sold has gone down since June 2016 and if it keeps with the same trend, potential home buyers will not be lucky.


Download the full report: Stag-Brexit

Winters Have Become The Most Unsafe Times, But Why?

On Friday, August 31st a stabbing attack occurred at Amsterdam Central Station. Two people were reportedly injured and police forces shot the assailant and took the two victims and the suspect to the hospital. How unsafe has The Netherlands become? Are some months more dangerous than others?

Safety is vital to our well-being. We all want to feel safe in our home or work and would like to live in crimeless neighbourhoods or cities. Unfortunately, that is not always the case as some parts of our surroundings have a higher crime rate than others and some months are more dangerous than others.

The following data comes from private and public source. The safety score index is built up from a mix of burglaries, CBS data and nuisance reports and it ranges from 0 to 10. The data is collected since January 2018 and does not inform us about the long-run movement of the safety score.

Figure 1: Average safety score in the Netherlands since January 2018 until September 20181 b

It is startling to see in Figure 1 that the average safety score is higher in the summer than it is in the winter. This might be explained  from different viewpoints. First, as seen from our report, the Dutch fly much more during summer as they take their holidays around July and August. That means that a big majority of residents are away from home and report less noise complaints from tourists which puts the index up by  0.25 basis points.

Secondly, in the summer noisy activities happen mostly outside which in turn leaves less room for the Dutch to complain about their neighbors or the student parties.

Another interesting viewpoint over this data is to see how this score change for the big cities since January. If in the summer, the country becomes safer, is this true for all the provinces and regions? Shouldn’t Amsterdam become more risky during the tourist season?

Figure 2: Safety score movement since January 2018image (28)

Compared to the average score, all large cities score lower in safety. As the Economist put it: In many respects it’s the very success of cities, in their role as global social and economic hubs, that makes them more vulnerable.

Haarlem’s safety score increases as weather gets better. Den Haag becomes safer during the summer months and the score drops back to the normal levels in September. The bigger cities like Amsterdam and Rotterdam get more dangerous with the good weather as more tourists visit. Utrecht loses some safety points during summer and has fewer fluctuations

The Forgotten Driver of the Dutch Housing Price Boom

The Dutch housing market is under pressure. Housing prices have experienced a continuous increase since an ever-low point after the financial crisis. Amsterdam noticed the highest increase in house prices among the big cities, but other cities also faced a significant growth. The reasons for this surge are numerous. At first, with a decrease in the supply of new houses, the overall supply of houses has decreased. On the demand side, low mortgage rates have made buying a house attractive as most buyers profit from overbidding once and paying low mortgage repayment for the rest of their loan. This excess demand has pushed overbidding to an all-time high, especially in urban areas like the big cities in Randstad. House price increases are detrimental on consumption capability and on urban housing affordability. As houses become more expensive, fewer people will be affording the high prices. 

Variables that affect housing prices are not usually as volatile as prices. However, the supply and demand forces have an immediate effect on the price. For example, supply shortages that are much bigger in big cities move at an opposite trend to increases in house prices. Keeping demand constant, shortage in the supply gives sellers a higher bargaining power on their asking price. Looking at this data more frequently is not only helpful to observe the evolution of houses sold or prices per house/square meter but also to analyze a potential relationship between supply and asking price. 

The following table gives details on the asking price per average house in The Netherlands in May 2018 and its percentage change as compared to April 2018:

Median Asking Price 

€ 286.948 

+2.84% 

Average Asking Price 

€ 375.793 

+2.06% 

Average Asking Price/square meter

€ 2.501 

+1.33% 

As shown in Figure 1 below, the number of houses sold per month has decreased in all big four cities after the financial crisis. After it hit a decade-high by the end of 2012 and beginning of 2013, the number of houses sold today has experienced a decrease of 70% (Utrecht) to 96% (Amsterdam). If we assume that demand keeps at the same levels, a more suitable supply of housing is needed to overcome the problem of price increase.

Figure 1

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If we look at Figure 2, when compared to January 2013 when houses sold were at its highest record, prices per square meter have increased with 55% in Amsterdam, 31% in The Hague, 29% in Utrecht and 36% in Rotterdam. When compared to January 2013 when houses sold were at its highest record, average prices per house have increased with 65% in Amsterdam, 48% in The Hague, 38% in Utrecht and 57% in Rotterdam.

Figure 2

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As interest rates are attractively higher, demand to live in metropolitan areas has been increasing and house prices have surged. Additionally, there is a shortage in new houses being built and it is granting home-owners greater bargaining power on their pricing strategy. In the case of the real-estate market, when the demand is high, supply has become a dominant driver on prices in The Netherlands.

 


Download the full report: The Forgotten Driver of the Dutch House Price Boom