UK Property BOOM! Why House Prices Are Surging Already…

Halifax HPI is out.

And house prices are up. Significantly.

Has the trend changed or is this a false dawn for the property market?

Let’s discuss.
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I did say that the perception of interest rates coming down was probably going to cause a little spike in the UK property market and indeed we’ve just seen well both Nationwide earlier this week with a uh with a month-on-month price rise and Halifax comeing stay with another month-on-month fact the third

Month-on-month price rise in a row so I wanted to a quick live uh it’s Friday afternoon before I shut down for the weekend it has been a long week I can tell you first first week back to give you my reaction on the Halifax’s house price index uh let’s crunch the numbers

See what’s going on and I want to answer the question have we actually troughed in terms of nominal house prices or is this a little bull trap that’s happening is this the Calm before the storm is this a perception Le mini rally before we go into 2024 and we see some further

Issues systemic issues in the UK housing market so let’s have a look at that let’s dive in um without any further Ado so when we look at the uh the Halifax HPI we can see we’ve had a monthly change of 1.1% up okay I’m not so fussed about the

Quarterly but it gives us an annual change of plus 1.7% now don’t forget this is December so what this gives us is for 2023 according to the Halifax house price index house prices Rose by 1.7% in 2020 3 now let’s face it team right this is completely against what all the

Narrative was at the beginning of 2023 and for most of the Year where we’ve had you know very strong narratives of massive property crashes Doom mongering um and of course we’ve that’s been tempered by the other side but I would suggest in the YouTube sphere the majority of the narrative has been

Extremely large Falls now I’m not saying that is not going to still happen right I’ve always said that because of the fundamentals that we’re looking at there’s going to be a Temperance of um uh of uh nominal house prices with a long and shallow decline um and as

Always I don’t want to read too much into month on month but we we are now three months worth of house price increases but before we actually look at the graphs okay I just want to zoom in and look at what the actual narrative this the statement from Kim kin Ed the

Director of the mortgages um so I want to just highlight it so you can see it here we go the growth we have we have seen is likely being driven by a shortage of properties on the market rather than the strength of buy or demand and I think for me that is

Probably the key part of if we read in between the lines okay this is not everybody’s flooding back into the market of course there is going to be a perception boost um let’s face it there is also right an increase a slight increase in housing transactions or

Mortgage transactions if we look at the mortgage approval data um and the last set of data we have here is showing a slightly increase slightly increase I think we’re like 49,000 if I go into um let’s go into the the column actually so we can see the figures better no that’s

Still not giving me the figures very well there we go that’s what I wanted uh 47 888 in October to 067 in November the problem is when I look at this when I look at this data I’m like we’re looking we’re looking at September October November this sort of data um I would

Suggest that the lag in the perception or the lag in the system from inflation coming down let’s not forget the first large or unexpected drop in inflation was the print we got in November and then the second was the print we got in December and this data is November 23 so

This data is the uh is the mortgage approvals um for uh the same month and don’t forget the CPI print comes out near nearly the end of the month so that that first large drop in inflation probably came out near the end of uh of November I can’t remember the exact date

So it’s unlikely that this uptic in mortgage approvals is due to the public perception of inflation coming down and interest rates coming down more quickly that really happened in December okay so if we look at the lines uh and we go if we go Max and we go line you know I look

At that graph and it’s not like we’ve got a massive Spike okay so as far as I’m concerned yes month on month we’ve seen us we’ve seen an optic right in in um mortgage approvals however we are still well below the historical averages so the market is still frozen and when

We look at the narrative right even the director of mortgages over at Halifax says the growth Recine is likely been driven by shortage of properties rather than a strength of buyer demand so that’s the figures we’ve seen um here from Halifax and also from Nationwide is almost certainly a lack of supply and

When we’ve looked previously at things like the zuper HPI which gives that flow of new Supply we’ve seen for the last few months the slow of new flow of new Supply even though the supply the actual supply has got more because nobody’s buying the flow of supply has been

Negative right so we’ve we’re still seeing that property Market in paralysis now that is not to say that over the next quarter we are not going to see uh you know an uptick of interest and uptick of buyo activity with now the perception of mortgage rates coming down

We know um that swap rates are down we know that bank banks are competing for mortgages and I’ve said that I would probably hypothesize over the next quarter a tick up in the hpis as we see um you know some of that pent up demand probably being released as the

Perception that we’ve bottomed or topped if you like in ter terms of mortgage rates um has has occurred however what I want to ask the question of right is regardless of month- on-month quarter on quarter for me this is a dangerous time this is a dangerous time um for

Unfounded optimism and perception coming into the housing market because of course the reality of the housing market is it’s going to be completely linked to what happens to the economy in 2024 so regardless what’s happening with swap rates and mortgage rates and all that sort of stuff and I don’t want to go

Over the Gap and how many people are coming off the cheap fix rate debt in 2024 still over a million people for me the real key of what’s going to macro affect the housing market this year is what happens with the economy now of course will that be artificially popped

Up as we go into election cycle so let’s actually go into the um uh uh the uh the actual figures okay so I’ll come back to questions at the End by the way um as we look at the graphs okay you look at that graph uh can I zoom in on

That I probably can because I’m on PDF mode there is a clear a clear Direction in Trend here in terms of all of the lines which is annual month- on-month and monthly percentage change um the big one that we can see that’s really showing very obvious here is that annual

Change right so some might say we have bottomed in terms of nominal terms um here however you know I would say we have broken the trend line and if we come down and look at the actual um uh nominal in a graph format been talking about the trend line the channel we’ve

Been charting down here okay I don’t know if you can see the cursor we’ve got a channel charting down here I would say that trend line has been broken so from a purely trend line point of view I would say this is a reversal in Trend

Okay for the prices please do not forget however that we are looking at the hpi’s house price indices for lenders lenders have an agenda they have an agenda to get people eyes on you know their their bank so they can get money out the door okay so that’s the first thing second

Thing this is based purely on mortgages right and it’s also a honic regression model this is not actual house prices this is a model that gets put together and it has seasonal seasonal Effectiveness to it by the way I started to research this um before coming on

Here I haven’t had a lot of time I had about 10 minutes to put the uh not the slides together but to put the um uh the windows together here and I found the actual methodology the X11 procedure that um that is used to do the seasonal

Adjustment um model and if you look at it right I I just want to try and make this kind of obvious um the whole point of the seasonal adjustment model is to smooth things out when you’ve got a lot of changes in seasonal um seasonal transaction volumes or um sales or

Values or things like that and clearly we’re going to see big differences in the property Market in spring when everybody’s out buying versus you know sort of depths of winter or August when everybody’s on holiday so the whole point they just smooth it out what that does inevitably is it causes skews in

The data and it causes anomalies in the data and if there are um big skews and it even says here right if we look at this uh there’s a paragraph here that talks about the inherent problem with the X11 method um is the revision of the

Seasonal factor and if we go back into last last um this time last not this time last year but if we go back in dece December November 22 don’t forget there was a big uh change in things when the mini budget happened and effectively it just sort of threw a hand grenade into

The property market and I still think when you look at year on-year basis okay that’s going to have an effect on all of this so that’s something to bear in mind so honic regression models are not actual house prices is a model with a lot of things

Going on so therefore these will be affected by things like pound per square foot transaction volumes and all the models have said that the transaction volumes are still so low the data is not you know the models are not actually accurate so we have to take all of this

With a pinch of salt however when we take it with a pinch of salt right these are the headlines this is what’s going on in the headlines right now and therefore if that’s the headlines this will change perception and we we cannot underestimate the power of perception to

Move markets at least on a temporary basis okay so if I if we go and have a look at um at the news if I just show you my my news speed quickly okay if I do I need to just bring that down so you

Can see the top of it uh this is now the cement that is going through the newsfeed and don’t forget I talked about the scops last week I talked about the misinformation I’ve talked about the narratives and implanting story lines we’re go to election cycle um let’s just

Look at some of the headlines here okay we’ve got buyers return to housing market as mortgage rates decline uh we’ve got exact dates interest rates could be cut in new mortgage boost for Millions um we’ve got um uh eight reasons to be cheer about the UK economy

Okay when you look at this we’re looking at positive storylines in the mass media and that will of course influence perception so I would not be surprised as I’ve said before to see people going back into the market okay on a short-term basis but it’s dangerous I feel we’re at

A very dangerous time for people because if the economy tips if we go into recession okay people could be even more exposed if they’re taking on debt on on higher interest rates right um right now or locking in or or whatever it is right the recession could still take it down

Uh I’m not making any predictions about that by the way I do not make predictions I just look at the data um the only other thing I wanted to highlight right if we go back over here um on the uh where does it say it on the

Actual HPI there we go um this is the forecast from the Halifax and so regardless of what’s happened regardless of them saying we’ve gone up in 2023 statement our latest forecast suggests house prices could fall between 2% and 4% during the coming year although as with recent years forecast uncertainty

Remains High given the current economic climate what they’re saying is what I’ve been saying for the last couple of months that we are all over the place with the data there is no definite Trend there’s no definite logic at the moment because all the data is so small in

Terms of data set it’s making it very difficult to come up with accurate uh moduls and therefore we have to take everything we see with a pinch of salt and I would rather go anecdotal right now and see what’s actually happening on the front line in terms of the amount of

Properties having price reductions and all that sort of stuff then these sort of hpis um there was one more thing I wanted to uh drag out of this I’m trying to remember what it was uh it was uh oh no I’ve lost it for some reason it was

The real if I go uh Nationwide is that it there we go this is the thing that I always come back to team this is the thing as an investor that I actually care about this is the inflation adjusted um house price index by Nationwide and even though every every week every month

We talk about inflation and we talk about um the issue and you know what inflation means and if it’s real or if it’s not real or if it’s being under blown or overblown and so many times I come on and said right if we’re looking at house prices I know that most people

Do not care about inflation adjusted house prices if you’re if you’re a homeowner right then if yours is going up or down for inflation then everybody else is around you is going up or down inflation so relative you’re pretty much going to be staying the same right so

It’s not as it’s not a big an issue although it creates the perception of adding wealth again perception is such an important thing in the market as an investor and a developer this is what I care about okay I hope very soon we’re going to have um Q3 sorry Q4 2023

Results uh from the Nationwide it might be out already I haven’t been able to um find it I did just do a very cursory look okay but when you look at that graph okay when you look at that chart there is no doubt that we have seen a significant correction in house prices

On an actual inherent Value Point of View because we still have even at inflation where it is now it’s still twice two and a half times above Target right with nominal house prices effectively sitting you know sitting pretty pretty flat yes all right year on year we’ve said 1 Point whatever that’s

Flat right we’re pretty much flat with inflation high that means again over 2023 the actual inherent value of your properties have eroded with inflation okay so nominal uh is being propped up by the strong wage growth this is what I mean if we go into recession and if

People start to go unemployment I’ve seen the forecasts are not going crazy but unemployment to go up if we’ve gone to peak of wage growth right that’s going to start to affect um those nominal nominal wage growth and therefore that will start to affect the nominal house prices as well so I just

Wanted to do that I I don’t want to go um go go long today um very quick one before we knock off for a Friday I am aware it is uh it is Friday and I think I’ve got a gin and tonic waiting for me

Somewhere um I just want to go to um some of the comments uh some R saying some YouTubers predict 35% drop in 2024 it might happen rap um I’m not I’m not going to say yes or no I I don’t make predictions I think anybody makes predictions fundamentally we’ll probably

Get it wrong unless you make lots of different ones and then you pick the one that actually happened and put that on your on your highlight rails at some point anyway I’m not just being nasty to other YouTubers I’m just saying I think I think nobody can call it nobody can

Pick it at the moment the market is entirely illogical or is it is it actually entirely illogical or it’s actually panning out pretty much what I’ve been saying for the last six seven eight months since I started this channel that the fundamental factors right of high inflation High nominal wage growth will

Lead to a complete propping up of nominal house prices in the mean time real housee prices are crashing in value because that’s the way it works um to me it’s kind of pretty much where we are I am slightly surprised we’ve seen the Halifax Point put have three house price

Rises in a row and again just to go back to that graph just to illustrate the point I am slightly surprised that we’ve we we’ve popped out the channel so early um and if we look at this channel channel down here um but don’t forget we

This is not stocks and shares we’re not charting um you know apple or crypto or Bitcoin this is a property Market which has got so much lag in the system um so much inurture in it uh we we you know we can’t use traditional charting I kind of

Used that as a um you know as a sort of 50,000 mile 50,000 foot view from down so we have broken that trend line but that does not mean that it won’t flatten off and come down even Halifax predicting 24% drop in 2024 and looking at the you know my

Suspicion is wage growth will now stall um more people are coming off cheap fix rate that Gap is still widening right so there’s more people coming off cheap fix rate dat so The Debt Service ratio aggregate Debt Service ratio for the UK is going up still not as much as it was

Last year um and uh the economy is not looking good so you know my my suspicion is we will still still see small nominal price Falls over the next 12 months that will accelerate if we go into a full full-blown recession okay and we just don’t know if we’re going to get there

Or not so that’s my thoughts on it um Stafford says uh oh sorry just just to make the point there so so my overall point is I don’t think this is really defying Logic the only thing that is defining logic is maybe higher than expected bounce in

December but let’s just zoom out team right it is a small data set it is a skewed data set if we look back at the data in fact I’m going to I’m going to bring this up right now right bear with me team I said I was going to not take

Long but I just want to try and make the point here um so I’m going to get zuper stuff okay so that’s December if I get November I wonder if they just have them all published like that zuper there we go yes we have that and if I can find October

October should have had this prepared beforeand team but bear with that it there it is right so there’s December November and October right and let’s just plug on over here so uh let’s go back December so this is by the way I really respect um the model that zuper

Have and one of the things I’ve been talking about a lot is not not the stock for sale right because everybody’s going stock for sale is going up it’s right compared you know we’ve got loads more stock for sale compared to 2022 where there’s no stock for sale right um the

Reason there is no stock for sale is because people aren’t buying the thing that I’ve been watching is that flow of new Supply because the flow of new Supply if if we’re not getting new Supply on right then it shows there’s a massive Supply demand imbalance so if

You look at December okay we’ve had so we’ve got 1% compared to December 2022 which is straight off the mini budget and it’s flat compared to 2019 um if we go to November we’ve got a negative uh flow of new Supply year on- year compared to 2022 um if we look at

October flow of new Supply is you know minus 6% so really what we’re seeing here is we’re seeing we’re seeing a very low amount of new supply of stock coming onto the market so there’s been a huge supply demand issue so if you filter that through right that is without a

Doubt not propping up the market but it just means the whole Market is frozen so because the transaction volume is so low you know we we have to take these skes with a pinch of so especially as they are seasonally adjusted SKS right and the seasonal adjustment black magic

Would quite likely put this 1.1% up um for um for December there we go uh yeah trade it saying uh what if I missed 1.1% seems huge yeah I think we’ we’ve covered that trade it perception doesn’t improve affordably it it your your correct Trade It perception doesn’t improve

Affordability however um have there been you know have there this is not just about affordability there are probably still people with a lot of liquidity I would suggest in there um who can borrow less but still have liquidity whether that’s you know post postco liquidity whether

That’s Bank of mom and dad liquidity um whether that’s savings from uh nominal nominal wages going up so I had uh very anecdotal um and uh I’m sure you might even be watching this I had a a lovely call today um with somebody who has seen

Their wages uh kind of um go up significantly over the last two years um and like you know accelerating away over the last two years I believe Financial Services or or or some sort of you know Services based and that actually ironically for those people who are not

Right now dependent on mortgages or have mortgages on high interest and don’t forget there’s still huge amount of people on cheap fixed rate debt so if you’re on cheap fixed rate debt and your um uh your wages are going considerably that’s giving you a buffer to save so

You’re going to have more liquidity in there so you don’t actually have to borrow so much in the first place to go and buy something right so with the perception that interest rat is coming down I suspect there been a lot of people sitting on the sidelines and this

Is one of the issues right both sellers and buyers sellers aren’t selling buyers aren’t buying people selling sitting on Sidelines waiting for interest rates to come down because inevitably there will at some point with the perception of interest rates coming down and swap rates are coming down because of the

Perception so the markets are betting that we’re going to drop quite a lot um this year with that with the swap rates coming down mortgage rates coming down it’s your affordability actually increases so people getting new mortgages now can afford to borrow more because the interest rates on mortgages

Have come down so actually we can afford to borrow more and the perception means they could be out there shopping so that’s my thoughts um Robin how you doing um my perception is that let me put this on uh Robin uh my obession is that people are prioritizing housing

Cost over other purchases used car prices have crashed I think mortgage stress tests have worked so far but economy on BR possession I agree completely rubbing in terms of um uh what you’ve said over the mortgage stress tests have worked I think you know mortgage stress tests have been

Have been very high uh I believe over the last couple of years like 8 n% they’ve been stress testing so that has worked um so far it will come at a at a time it will it will end if we go into recession right people if they lose

Their jobs doesn’t matter what their income is if they they lose it it’s going to go down the the reason used car prices have crashed um is from my point of view because there was so much pent up um lack of Supply a year year year

And a half two years ago with the semiconductor crisis um and there was such a you know a lag period with new cars coming on therefore lack of Supply huge amount of demand that’s now been sorted so that that sort of demand has um you know has dissipated some somewhat

So I think it’s had a big factor on it uh what else we got um re call Snap Stafford reckons oh should we take some bets let’s take some bets by the way so Stafford saying here richy call Snap March election on the back of perceived

Uh bettering of cost of living um what do you reckon team put in the comments where where we reckon the election is going to be do we reckon March so there was a there was a good article that I’ll just bring up here so I I I’ve I I reckon

Back end of the summer because I think that’s when they probably got their best chance um let me just bring this up we’ve got we’ve got some a good narrative here of kind of some of the things we’ve been talking about about why they won’t do it earlier um so uh

Yeah what do you think team whack it in what do you think I think I think back into the summer personally maybe August August be a good time everybody wear on holiday and they’re probably going to you know it’s probably everybody’s in in a good mood in August aren’t they way on

Holiday or they can’t be bothered to vote and all that sort of good stuff um and you’ll probably get some good data there with inflation if it’s manipulated or not down uh as much and um of course people don’t care too much about energy and the energy price cap forecast is

That will be lowest in that in that um in that um third quarter which of course August is in Q3 so I think Q3 that’s my bet Q3 um right RAB says is deflation of possibility 100% RAB um I did a video on this I think just after Christmas or

Just before Christmas I I actually think deflation is a possibility um and I think that’s probably uh one of the more worrying aspects or when when you look at upside downside risk I think that’s the probably biggest biggest risk at the moment is deflation um and Robin says yep if

Recession is key people start losing jobs all bets are off um I agree wholeheartedly wholeheartedly there we go right um that was quick I just wanted to go quick and dirty uh it is Friday um everybody should be enjoying their Friday right now so I’m going to call it a day

Um hope you had a great week hope you have a fantastic weekend we’ll see what a logical um incredible uh data gets release from the various sources next week it’s a constant roller coaster and smoggers board of things to talk about um on uh on on YouTube um as always

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