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the_duke_of_hazzard

Comparing Like With Like

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I got hold of the land registry figures, and have done some analysis on them.

I was interested in seeing what one could determine from the value of properties sold more than once in a given period.

I was prompted in this by debate over the significance of the land registry figures with respect to the distribution of properties sold, one theory being that - since FTBs are relatively rare in the market now - more expensive properties are being sold more, pushing up the simple average.

I therefore compared properties that were sold more than once over the period of the figures (2000 - 2005). I calculated the average percentage yearly increase using a simple formula for each sale (see below). I then averaged these across years. The results for the UK and Greater London are below.

Comments and questions are welcome. If you'd like me to perform analysis of a particular postcode/property type/lease type, or have any questions about my method, please PM me.

Results

UK Average yearly % increase

2004-2005 533.17%

2003-2005 19.70%

2002-2005 18.41%

2001-2005 18.02%

2000-2005 16.44%

2003-2004 826.96%

2002-2004 24.86%

2001-2004 21.79%

2000-2004 18.82%

2002-2003 479.22%

2001-2003 24.74%

2000-2003 19.31%

2001-2002 420.75%

2000-2002 19.48%

2000-2001 305.82%

LONDON Average yearly % increase

2004-2005 43.92%

2003-2005 9.80%

2002-2005 8.94%

2001-2005 10.45%

2000-2005 9.99%

2003-2004 3243.72% (revised - excluding +1000%) 34.84%

2002-2004 13.63%

2001-2004 13.64%

2000-2004 12.22%

2002-2003 40.55%

2001-2003 17.00%

2000-2003 13.66%

2001-2002 49.41%

2000-2002 16.77%

2000-2001 50.52%

Comments

The first thing to note is the shockingly high percentages over one year periods for the UK figures. I put this down to expert property flipping in few months for a high return. eg a 50,000 flipped in three months for 75,000 works out at a 200%. The figures over longer periods look more realistic.

2003-2004 looks to have been the best times for the UK property market.

The London figures, however, seem quite interesting. They show a flat market over the last five years, with only c.2% a year on properties sold in 2000 and 2005. This, it need not be said, is a drop in real terms. If you imagine that you bought a property in London in 2000, the best time to sell would have been

2003, then 2004, then 2005. In other words, the capital gains value of property in the capital is (still) falling.

Another thing to note is that the sales of these properties might not reflect the market as a whole. Properties resold within a few years are more likely to be forced sales, or do-er up-ers. This might explain why property sold within one or two years appear more profitable than three or four years - as more time exists between sales the effect of development properties on the figures is lessened.

The London 2003-2004 figures are incredibly anomalous. One property appears to have multiplied its value by 9 times in two months. Can't really explain that one - I suspect a typo. When percentages over 1000% per annum were removed, I got the revised figures shown.

Conclusion

I believe these figures are a good indicator of trends in the property market, but not accurate indicators of changes in value. Returns for property are definitely falling in the UK. Compare properties bought in 2000 and sold in every subsequent year.

It has not been particularly profitable - in terms of capital - worth buying property in London in the last five years, and not profitable at all, in real terms.

There's a lot of money still to be made in flipping properties quickly!

Science bit

I took the number of months "m" between properties "a" and "b" priced at Pa and Pb. I then calculated:

mpc = monthly proportional increase (not percentage) = ((Pa / Pb) ^ (1 / m)) - 1

yearly percentage increase = (((mpc + 1) * 12) - 1) * 100

The minimum sample count for the UK figures was 35000.

The minimum sample count for the London figures was 3200.

Edited by the_duke_of_hazzard

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Fascinating research DOH thank you.

Think the flippers tend to do well for a few years then find they have to hold on to a property or take a loss and reduce their overall profitability. It appears quite similar to day trading in stocks and futures. You can be successful if you can secure finance and keep everything turning over but if you take a couple of losses and credit tightens then it's probably time to change asset class. Savvy investors particularly in premium London areas can do this - after all 10% on a £2m property over 6 months is still £100k after costs but before tax. However mere amateurs look like they will lose money in real terms - after all no woman I know would spend £2m and not redecorate and replace the kitchen - £100k at least I would have thought.

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Fascinating research DOH thank you.

Think the flippers tend to do well for a few years then find they have to hold on to a property or take a loss and reduce their overall profitability. It appears quite similar to day trading in stocks and futures. You can be successful if you can secure finance and keep everything turning over but if you take a couple of losses and credit tightens then it's probably time to change asset class. Savvy investors particularly in premium London areas can do this - after all 10% on a £2m property over 6 months is still £100k after costs but before tax. However mere amateurs look like they will lose money in real terms - after all no woman I know would spend £2m and not redecorate and replace the kitchen - £100k at least I would have thought.

Yeah, I wonder whether the absolute profitability figures on flipped properties are similar throughout the country.

I originally thought that forced sales in short periods would push the figures down - was originally very disappointed to see no negative figures in the averages!

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Nice work.

But do not forget the figures are "rigged" to some extent.

With the official Land Reg figures before rebates if any, rather than net of them

Are these mostly flats? I can take flats out of the figures and recalculate if you like. In fact, I might recalculate for London by property type.

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Guest Fiddlesticks

Are these mostly flats? I can take flats out of the figures and recalculate if you like. In fact, I might recalculate for London by property type.

Thanks DoH, very interesting figures, and a lot of hard work I guess. I'd be interested to see London by property type.

Taking out flats would tend to reduce the influence of flippers I would guess because most flippers are going to focusing on flats (certainly in the London market anyway).

Fiddlesticks

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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