Household income and average house price



APPENDIX 5

HOUSE SALES PROFILE

Summary

The following profile provides information on house sales and house prices throughout the Inverclyde Council area and provides comparison with Scotland as a whole. The key evidence set out in the following sections can be summarised as follows:

• The housing market in Inverclyde is very polarised with significant variations in house prices across the various LHS sub areas.

• There are pockets of Inverclyde that have been particularly affected by the recession and by underlying social and economic problems, which is reflected in house prices and in sales behaviour

• There has been a drop in house building activity reflecting reduced demand for new housing for sale due to difficulties in accessing lending and the need for higher deposits for house purchase.

• There are supply issues in relation to larger, family sized houses with a low rate of new building and low turn over of properties in the second hand market.

• A growing older population and the formation of smaller households will ultimately be reflected in house sales and new build activity as the market adjusts to meet changing need and demands.

• There are early signs of recovery in the housing market however the much more cautious approach to lending and the continuing unsettled economic situation will affect sales of new build and second hand houses for quite some time to come.

Detailed information and supporting evidence on house sales are provided in sections 1.0 and 2.0 below.

1.0 House Values

1.1 Table 1 below provides the mean, median and lower quartile house values for the LHS sub areas in Inverclyde. The median house price is a common measurement of house values as it is less biased than the mean price since it is not as heavily influenced by small numbers of high or low priced sales. If the mean house price was significantly higher than the median house value then this would indicate that there have been a large volume of higher priced house sales that is influencing the mean house value. Lower quartile values are the price of the house that is one-quarter of the way up the ranking from the cheapest to the most expensive and they provide an indication of entry-level housing. The cheapest available property prices should not be used for entry level housing since these often reflect sub-standard housing quality or environmental factors[1].

Table 1: Mean, Median and Lower Quartile House Values for Inverclyde 2009/10

|LHS Sub Area |HNDA Sub Area |Mean |Median |Lower Quartile |

|Port Glasgow |Inverclyde East |£81,988 |£72,500 |£23,500 |

|Greenock Central East |Inverclyde East |£86,410 |£76,500 |£60,000 |

|Greenock South West |Inverclyde East |£87,203 |£76,000 |£65,000 |

|West Greenock |Inverclyde West |£134,707 |£115,000 |£93,000 |

|Gourock |Inverclyde West |£121,384 |£106,000 |£79,501 |

|Inverkip and Wemyss Bay |Inverclyde West |£189,111 |£175,000 |£147,000 |

|Kilmacolm and Quarrier’s Village |Kilmacolm & Quarriers |£329,722 |£262,500 |£120,000 |

| |Village | | | |

|Inverclyde | |£126,244 |£94,750 |£68,000 |

Source: Registers of Scotland Download from University of West of Scotland

• In 2010 the Scottish median house value was £135,000[2], which is 43% higher than the Inverclyde median value of £94,750 in 2009/10.

• There are large variations in house values across Inverclyde. Median house prices are lowest in the regeneration areas of Port Glasgow, Greenock Central East and Greenock South West while the Inverclyde West coastal towns all have a high median house value. In particular, Inverkip and Wemyss Bay have a median house value higher than the Scottish median house value. Kilmacolm and Quarrier’s Village has exceptionally high median house value and is the highest in the GCV Region.

• The lower quartile house value is one the lowest in the GCV Region and Scotland.[3]

• Port Glasgow has an exceptionally lower quartile house value and this is a reflection of the large volume of lower value property sales in regeneration areas.

• Inverkip and Wemyss Bay has the highest lower quartile value in the authority and it is higher than the Kilmacolm and Quarrier’s Village lower quartile value which would suggest that there is a smaller range of house values in Inverkip and Wemyss Bay and the majority of dwellings are in a similar price bracket. Exceptionally high lower quartile values suggest that affordability for first time buyers is likely to be an issue in these areas.

1.2 Table 2 below shows the house values in Inverclyde by size and by type from 2008.

Table 2: Inverclyde House values 2008 by house type and house size[4]

| |Median Value |Lower Quartile |

|Flats |New Build |2nd Hand |New Build |2nd Hand |

|One bedroom flat |- |£67,500 |- |£58,500 |

|Two bedroom flat |£155,000 |£73,000 |£142,000 |£55,000 |

|Three bedroom flat |£170,000 |£99,000 |£105,000 |£79,000 |

|Houses | | | | |

|One bedroom house |- |£74,000 |- |£63,000 |

|Two bedroom house |- |£112,056 |- |£87,500 |

|Three bedroom house |£176,495 |£98,000 |£167,995 |£85,000 |

|Four bedroom house |£159,000 |£149,995 |£145,000 |£98,000 |

Source: LHS Housing Data Pack, Centre of Housing Market Analysis 2009

• Unsurprisingly, second hand dwellings are more affordable than new build dwellings. The value of new build dwellings is far higher than the median overall house value in Inverclyde (in 2007/08 this was £105,000).

• The median value of new build flats is comparable with the prices of new build houses and is a reflection of the number of flats that were developed along the waterfront in 2008 and in recent years.

• In 2008, there were very few second hand three bedroom houses sold therefore the average price can be easily influenced by a number of dwellings sold with low values. This low number of sales may indicate that there is a relative lack of housing of this type in Inverclyde and low turn over.

• Median house values of four bedroom house are similar for both new build and second hand properties which may indicate that larger sized properties are located in more affluent areas/high demand areas and that there is a lack of supply of this house type in the area which may be driving up prices.

• Small flats are the most affordable house type in Inverclyde and the lower quartile value for this type of housing is lower than the authority average. This type of housing is prominent in town centres and regeneration areas in Inverclyde East.

1.3 The Scottish housing system has experienced significant volatility over the last decade. A sharp increase in house prices was followed by the credit crunch and subsequent recession. This resulted in a drop in house prices and an even larger drop in housing activity levels, such as house sales and private sector new build. The decline in private sector new build was of such a scale that in 2009, despite social new build being at its highest since 1981, total new build was its lowest since 1982[5]. Inverclyde has not been immune to recent market changes and there has been a decrease in the overall value of houses since 2007/08, as shown in Table 3 below.

Table 3: Change in Mean, Median and Lower Quartile House Values from 2007/08 to 2009/10

|Year |Mean |Median |Lower Quartile |

|2007/08 |£138,206 |£105,000 |£75,000 |

|2008/09 |£134,850 |£102,452 |£72,000 |

|2009/10 |£126,244 |£94,570 |£68,000 |

|% Change |-9.5% |-11.0% |-10.3% |

Source: Registers of Scotland Download from University of West of Scotland

1.4 Figures 1 and 2 below illustrate the change in house prices for Inverclyde’s sub areas.

Figure 1: Median House Price Change by Sub Area 2007/08 to 2009/10[pic]

Source: Registers of Scotland Download from University of West of Scotland

• All but one of the sub areas in Inverclyde has experienced a decline in median house values since 2007/08. The sub area of Kilmacolm and Quarrier’s Village appears to be bucking the trend seen across the wider authority area as median house prices have increased by 11.8% since 2007/08. The sub area has one of the highest house values in the GCV Region and is characterized by high levels of household income, high levels of owner occupation and larger sized dwellings.

• Port Glasgow has seen the biggest drop in median house values in Inverclyde. Median house prices in the town have dropped by nearly 20% since 2007/08.

Figure 2: Lower Quartile House Price Change by Sub Area 2007/08 to 2009/10[pic]

Source: Registers of Scotland Download from University of West of Scotland

• Inverkip and Wemyss Bay has the highest lower quartile house prices in the authority which have remained relatively constant through the last three years, despite the drop in the authority-wide figure. West Greenock lower quartile value has also remained fairy constant since 2007/08.

• Port Glasgow has experienced a significant drop (63.3%) in lower quartile value over the last three years. Parts of the private sector in the town are subject to regeneration proposals which may be influencing the number of lower values sales that have occurred in recent years. Unlike the median house value, the lower quartile value in Kilmacolm and Quarrier’s Village has decreased since 2007/08.

1.5 Figure 3 below illustrates the quarterly median house values for Inverclyde and for Scotland as a whole from 2006/07 – 2010/11.

Figure 3: Quarterly Median House Values for Inverclyde and Scotland 2006/07 – 2010/11

[pic]

Source: Registers of Scotland, Quarterly Statistics Time Series 2011

• Over the five year period 2006/07 – 2010/11, Inverclyde’s house prices peaked in the fourth quarter of 2007/08 (£104,500) and in the first quarter of 2010/11 (£105,000).

• Before the start of the credit crunch, Inverclyde’s house prices rose steadily although they were still some way behind the Scotland median average. Since 2007/08, house prices in Inverclyde have been relatively volatile and have been subject to sharp seasonal fluctuations.

1.6 The impact of the credit crunch, economic downturn and the recession is more clearly demonstrated in Figure 4 below.

Figure 4: Volume of House Sales for Inverclyde and Scotland 2006/07 – 2010/11[pic]

Source: Registers of Scotland, Quarterly Statistics Time Series

• The number of house sales in Inverclyde has sharply declined since 2007/08. In total in 2010/11 there were 924 house sales which is a drop of 56% since 2007/08 when there were 2,107 house sales in the financial year.

• The volume of house sales reached a peak in the third quarter of 2007/08 at 585 and sharply declined to 200 sales in the fourth quarter of 2008/09. Although house sales recovered throughout 2009/10 and part of 2010/11, in the last quarter of 2010/11 there were only 159 house sales.

• Both Inverclyde and Scotland as a whole have followed a similar pattern of decline in the number of house sales although in the last year there have been signs of recovery. As with house values, the numbers of properties sold has been quite volatile recently and is subject to fluctuations.

1.7 Private sector completions have dropped considerably since 2007/08, as illustrated in Figure 5 below.

Figure 5: Inverclyde Private Sector Completions 2006/07-2010/11

[pic]

Source: Inverclyde Council Planning Policy Team, 2011

• From 2006/07, private sector completions dropped by 52% whilst during the same period Scotland’s private sector completions followed a similar trend and dropped 47% from 21,134 in 2006 to 11,171 in 2010[6].

• Annual new build completions are volatile by nature however there has been a clear drop in private sector activity since 2007/08. This drop has been fuelled by lack of demand by households due to affordability issues and restricted access to mortgage finance, coupled with private developers unwilling to risk development and facing their own constraints on the availability of loan finance for development. Confidence in the future economy and the housing market remains low for household consumers and for private developers.

2.0 Future Outlook

2.1 The Scottish economy has stabilised following the recession but there are a number of risks to the recovery, such as a potential recurrence of widespread difficulties in the international financial system as well as the impact of the large fiscal contraction. A recent paper by the Scottish Government[7] reports of a number of challenges to housing which can be applied to Inverclyde:

• The impact of the credit crunch on the banking sector, and the resultant policy responses, are likely to restrict the availability of mortgage finance for a considerable period. In particular, firs time buyers who do not have family assistance are faced with barriers due to higher deposit requirements.

• The private rented sector has become an increasingly important form of tenure, especially for households under 35. In 1999, 13% of young households were in the private rented sector; a decade later it is almost a third (31%), and if this trend continues the sector will house the majority of young households by 2020. Survey data suggest that there are households on below-average incomes in this sector who experience significant affordability issues, with poorer households paying on average about half of their income in rent. Although aspirations for home ownership remain, without assistance from parents or others, these households will struggle to accumulate sufficient savings for the level of deposit now required to become home owners, and they are also now faced with the prospect of significant cuts to housing benefit by the UK government.

• The number of households in Scotland and to a lesser extent in Inverclyde is rising, due to a reduction in the average size of a household as well as, more recently, an increase in the population (although this is not the case in Inverclyde). The projected increases in households are not uniformly distributed across Scotland, indicating a need to ensure that new housing is in the right areas. The population is also ageing, increasing the demand for support services, adaptations and sheltered housing. This is particularly relevant in Inverclyde as projections show that the Inverclyde Council area will have a larger proportion of elderly population and households in the future than the rest of Scotland.

• The Scottish Government resources to assist in meeting these challenges will be significantly constrained. The constraints on capital budgets, which are particularly important for housing and regeneration, are especially severe.

2.2 As part of the wider technical work for the Strategic Development Plan, Glasgow and the Clyde Valley Strategic Development Planning Authority commissioned Oxford Economics in May 2009 to provide an overview of the economic implications of the recession, and again in February 2010 to provide more detailed economic modeling. This provided useful contextual information for the HNDA as well as informing specific decisions, such as on migration assumptions. The study outlined a number of key risks and implications for planning and strategy development, which are listed below:

• The recession will have severe job and migration impacts in the short run.

• Changed attitudes and access to finance combined with much more challenging public finances will cast a shadow over the next decade at least – perhaps longer.

• In the longer run a growing UK and Scottish economy is still the most likely outcome - many of the strengths remain in place (high skills, international reputation, English language and flexible labour market, plus currently the exchange rate). But risks exist.

• Migration is most likely to be modestly lower than the recent highs, as more limited opportunities exist in sectors such as construction and as EU laws change, allowing flows into countries who previously had limited access.

• Professional services remain the most likely standard-bearer for job growth, but the sector’s fortunes have been dented somewhat by the recession. Elsewhere green jobs, tourism, high end industrial jobs, jobs relating to elderly care and lifestyle jobs offer the most likely sources of future growth (although other currently unknown sectors may emerge over the longer term).

• Occupancy rates and housing choice (private ownership, private rental, social / public rental) are likely to change as a result of the recession and the long-term legacy with respect to access to finance and debt levels (though Scotland has less exposure to this than elsewhere in the UK).

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[1] Housing Need and Demand Assessment Guidance, Scottish Government 2008

[2] Second Hand and Company Sales New Build house sales, LHS Housing Data Pack, CHMA 2011

[3] The Evaluation of Low Cost Initiative for First Time Buyers (LIFT), John Scott, Katy MacMillan

and Steven Reid, Scottish Government Social Research 2011. The report shows that Inverclyde has the lowest lower quartile value out of the Glasgow and the Clyde Valley authorities and is one of the lowest in Scotland.

[4] Data from a combination of Sasines and Assessor by provided by the Scottish Government in 2009 Housing Data Pack

[5] The Scottish housing system: selected economic and social trends. Scottish Government Communities Analytical Services February 2011

[6] Housing Statistics for Scotland - Key Information and Summary Tables, Scottish Government website

[7] The Scottish housing system: selected economic and social trends, Scottish Government 2011

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