BBC News Headlines: Prices of flats rising faster than houses, says Halifax
One of our landlords called up recently regarding an article he’d seen on the BBC News website. The headline that grabbed his attention was that capital growth in flats had out-performed houses over the last 10 years, having increased in value by 60%. As he has both flats and a house that he rents out in Crawley, he was wondering if the same trend applied to his properties. If you’re interested, here’s the link to the article on the BBC News website http://www.bbc.co.uk/news/business-34444201.
On reading the BBC article further and looking into the information it was based on, it became clear that the main reason for flats out-performing houses was due to what we term as the “London Effect”. Because of the sheer size & value of the capital’s property market, the “London Effect” often skews house price information for the whole of UK. This can make it difficult to determine trends outside of the capital, unless London prices are excluded.
The BBC News report was based on research by the Halifax. If you want to take a look at their report, here’s the link http://www.lloydsbankinggroup.com/globalassets/documents/media/press-releases/halifax/2015/150923-property-types-final.pdf. In Table 1 below we show the property prices from the Halifax report.
The Halifax data in Table 1 shows that the price of flats have indeed increased UK wide by 60%. In addition, it should not be forgotten that during this period the UK suffered from a credit crunch from 2008 onwards, which saw UK property prices plummet after their peak in 2007. The Halifax data shows that all types of property have similarly shown an increase in value over the same period, with the next highest being terraced houses (41%), then semi-detached (32%), bungalows (28%) and lastly detached houses (21%).
To see if the same or similar trends apply to Crawley, we looked at the change in flat & house prices using Land Registry data. The results are shown in Table 2.
The property price trends for flats in Crawley in Table 2 are very different from those reported in the BBC News & Halifax headlines. In contrast to the 60% UK wide increase in the price of flats over the last decade, flats in Crawley have only increased by 26%. One reason for the lower price increase is the “London Effect”, which is obviously not present here in Crawley. In fact, looking at the data in Table 2, we see that the price of flats in Crawley have in fact underperformed houses by at least 15% over the last decade.
In Graph 1 below we show how average prices for houses and flats in Crawley have changed year on year over the last decade. The effects of the double dip recession in the UK economy on prices can also be clearly seen for both types of property. One aspect that is also very clear from this graph is the divergence in prices between flats and houses from 2005 onwards. In 2005, for example, the average price paid for a house in Crawley was 49% higher than for a flat. Over the intervening years this difference has increased. In 2010, it was 73% and in the current year it has increased to 113%. The main reason for this divergence is that the price of flats in Crawley over the last decade have remained relatively subdued compared to houses. Again, this trend is clearly shown in Graph1.
So what conclusions can we draw ?
The first is that the BBC News & Halifax headlines that flats had outperformed houses over the last decade, does not apply to the Crawley market. In fact, by detailed analysis of the Land Registry sold price data, we have shown that the reverse is in fact true for Crawley.
The second conclusion is that price increases seen for flats & houses in Crawley have diverged over the last decade. Flats have performed relatively poorly with only a 26% increase in their value compared with 41% for houses.
In later blogs we will look more closely at the possible reasons to explain the relatively poor capital appreciation achieved by flats in Crawley market over the last ten years.
*Average Flat & House prices calculated from Land Registry data
The Crawley Property Blog 