Making sense of housing research

26th June 2018 posted in PROPERTY NEWS

Buying a property isn't an easy process. Forget about what you can afford, though; before you even start there is a minefield of statistical jargon to translate and get your head around. What does it all mean? Understanding these terms and concepts can help you determine whether now is the right time to buy or whether you should wait a while. To help you make sense of housing research, here are a few helpful explanations:

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Price fluctuations

As you'll no doubt be aware, property prices go up and down fairly frequently, caused by many factors. Drops can be caused when the number of sales declines over a monitored space of time, or upon the end of any property initiatives, i.e. the conclusion of the stamp duty holiday for first-time-buyers in 2012 resulted in fewer sales and a price drop.

Prices can be driven up if the number of buyers exceeds the number of sellers; anything relating to an unbalance between the supply and demand for properties will affect house prices. Equally, they can rise with the introduction of new schemes, such as Help to Buy. These initiatives can have a negative effect, however, if prices rise too rapidly. This is known as a 'housing bubble'. Values increase until they can be sustained no more and pop spectacularly. It is widely thought that the bursting of property bubbles around the world, including the US, were to blame for the global economic crisis, so implications are significant.

Local market volatility

Fluctuations don't occur consistently around the country either; you may hear the phrase 'local market volatility', which refers to some dramatic changes that occur in specific areas. London is a good case in point, where the property market appears to exist in isolation of the rest of the UK. This can lead to huge gaps between regions, pricing some people out of an area altogether, or worse; resulting in negative equity.

Reasons for volatility, according to the Joseph Rowntree Foundation, include the fact that housing supply in the UK is tightly regulated, there is a huge variety of properties on the market and housing is seen as a 'marker of social status'. The greatest gaps occur, naturally, between wealthy and deprived areas. Add to that interest rates and inflation - and you've got quite a volatile mix.

House price index

The house price index (HPI) maps any changes in property prices on a monthly and annual basis. It is usually the most recent indicator of property prices, based on a sample of property values and is an important tool for understanding the overall housing market, says the Office for National Statistics. It calculates any change in values compared with the previous month and year-on-year, while also providing the UK's average house price. An HPI is expressed as an indexed increment, but represents percentage changes, either positive or negative.

Stock levels

This term refers to the amount of property that is available on the market to buy or rent, otherwise known as supply. If stock levels are high, then it can be considered a 'buyer's market' with plenty to choose from. This is typically reflected in a downward house price trend. In contrast, low stock means that their is less property available and it becomes a seller's market, where prices increase to mirror the high demand for housing. Since the economic crash prices have gone up a fair bit, but stock levels remain low which is possibly an indication of sellers holding off for a peak in property prices before going to market.

Naturally, there are regional variations regarding stock levels. In areas where there's little room to build more housing - such as already busy cities - stock levels might be depleted.

Buying a property is probably the biggest purchase an individual will ever make, thus it's crucial to understand research and statistics when they are released. That way, buyers will be able to make the most informed decisions and find a property that perfectly suits their family, lifestyle and budget.