Coventry Unemployment Drops to 6% and its effect on the Coventry Property Market

Coventry Unemployment Drops to 6% and its effect on the Coventry Property Market

 

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

 

Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Looking at the most recent set of data from the Land Registry, property values in Coventry are 0.98% up month on month (but the month before that, they had decreased by 0.56%) – so is this the time to panic and run for the hills?

 

Doom and Gloom then? Well, let me consider the other side of the coin.

 

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Coventry property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. Coventry property values dropped by 0.95% in November 2012 and 0.94% in December 2013 – and no one batted an eyelid then.

 

You see, property values in Coventry are still 10.02% higher than a year ago, meaning the average value of a Coventry property today is £192,600. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years – but only slightly.

 

The Coventry housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Coventry City Council area stands at 10,000 people (6%), which is considerably better than a few years ago in 2013 when there were 14,800 people unemployed (9.7%) in the same council area.

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However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who amongst us can remember 1992 with Interest rates of 15%!

 

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Coventry (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t!

In the coming weeks in my articles on the Coventry Property Market, I will discuss this matter further!

£23.1bn – The total value of all Coventry Property Market

“How much would it cost to buy all the properties in Coventry?”

This fascinating question was posed by the 11-year-old son of one of my Coventry landlords when they both popped into my offices before the Christmas break (doesn’t that seem an age away now!). I thought to myself, that over the Christmas break, I would sit down and calculate what the total value of all the properties in Coventry are worth … and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2005.

In the last 11 years, since the autumn of 2005, the total value of Coventry property has increased by 34% or £5.86 billion to a total of £23.1 billion. Interesting, when you consider the FTSE100 has only risen by 30.78% and inflation (i.e. the UK Retail Price Index) rose by 37% during the same 11 years.

When I delved deeper into the numbers, the average price currently being paid by Coventry households stands at £181,674.… but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Coventry; the average numbers come out like this ..

Coventry Property Market
Average Value of a Detached Property Average Value of a Semi-Detached Property Average Value of a Terraced/Town House Property Average Value of an Apartment
£341,597 £196,432 £152,620 £103,321

… yet it got even more fascinating when I multiplied the total number of each type of property by the average value. Even though detached houses are so expensive, when you compare them with the much cheaper terraced/town houses and semi-detached houses, you can quite clearly see detached properties are no match in terms of total pound note value of the terraced/town houses and semi-detached houses.

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Coventry house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with continued immigration and population growth.  Secondly, with 0.25 per cent interest rates, borrowing has never been so cheap and finally the simple lack of new house building in Coventry not keeping up with current demand, let alone eating into years and years of under investment – means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Coventry has always, and will always, ride out the storm.So, what does this all mean for Coventry?  Well as we enter the uncharted waters of 2017 and beyond, even though property values are already declining in certain parts of the previously over cooked Central London property market, the outlook in Coventry remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.

In the coming weeks, I will look in greater detail at my thoughts for the 2017 Coventry Property Market.