30th July 2015

Housing Market Note

Residential Research

CAUGHT IN CHAINS Housing Transaction Chains The UK Government is focused on home-ownership (see my previous note http://sav.li/4eq) and so it appears likely that most future housing supply will continue to be for market sale. With affordability constraints and new build prices dictated by the market, most developers will inevitably target buyers towards the top end of the market within any particular area.

This approach raises an important question for the housing prospects of all households: can supply that is heavily weighted to higher value new build homes open up the supply of other existing more affordable homes by increasing mobility through the housing market? This is a complex issue and unfortunately data that could answer it is not publicly available for England. However, with the help of my Scotland based colleague Faisal Choudhry, we have begun to look at whether Scottish transactional data can help answer the question.

To highlight the potential of the Scottish data, I have selected a recent housing chain at random (I promise) that also fortuitously shows some of the issues in the market. The fairly complex chain in question involves four properties, four households and Taylor Wimpey.

Mr & Mrs A wanted to move house and had found a nearby Taylor Wimpey new build on the market for £228k (Property 4). They had prior experience with new builds having bought their existing mid-terrace home from Barratt in 2012 (Property 3). Their original 2012 purchase price for Property 3 is unclear as it may have been done part-exchange or bought with an equity loan but would have been in the region of £150k.

Unfortunately, Mr & Mrs A did not have a buyer for their existing home (Property 3). To ensure the sale, Taylor Wimpey offered a part-exchange value of £150k for it. Mr & Mrs A then paid the remainder of the full asking price, £228k, for their new home (Property 4). Taylor Wimpey were then left holding Property 3 but they quickly sold it on to Mr & Mrs B for £136.5k. At £13.5k below the price Taylor Wimpey paid for it, that effectively equates to a 6% discount on the asking price of Property 4.

The new owners of Property 3, Mr & Mrs B, had been living on the other side of Glasgow in a flat they bought back in 2005 for £108k (Property 2). After advertising it for two months, it was sold to Mr C & Ms D for £106.5k which was 7.6% above the ‘offers over’ asking price. Details for the home (Property 1) that Mr C & Ms D were previously living in are less certain but, from information available, it was most likely a flat owned by a housing association. It is also unclear who moved into Property 1 at the end of the chain.

Neal Hudson Associate Director

07590 531150 nhudson@savills.com

@resi_analyst

The images below reflect the type of property but not the

actual one purchased, hence no image for Properties 1 & 2

Fig 1 – Randomly Selected Housing Chain, Glasgow 2015

Source: Crown Copyright, Registers of Scotland, MyHousePrice.com, Rightmove, barratthomes.com, taylorwimpey.co.uk

Mr & Mrs A 2015

£228,000

Mr & Mrs B 2015

£136,500

Mr C & Ms D 2015

£106,500

Mr & Mrs B 2005

£108,000

Mr & Mrs A 2012

~£150,000

Taylor Wimpey 2015

£150,000 Mr C & Ms D

Unknown

Previous Moves Part Exchange 2015

Housing Chain 2015

PROPERTY 3 3 bed mid-terrace house,

1,134sq ft built 2012 by Barratt

PROPERTY 2 3 bed flat on top floor of

converted house, 1,044 sq ft, built 1930

PROPERTY 1 Housing Association? Flat

PROPERTY 4 4 bed detached house, 1,279sq ft, built 2015

by Taylor Wimpey

Unknown

30th July 2015

Housing Market Note

*Who Gets What and Why? Vacancy Chains in Stockholm's Housing Market Lena Magnusson Turner, 2008

The above example suggests that building a new home helped at least four households move, including one in social housing. per new home in Swedish data demonstrate the usefulness of the data. if anyone wanted to collaborate or sponsor further investigationAlongside the ability to track housing chains through the market, the Scottish data also allows us to perform more detailed analysis of below show all residential transactions in Edinburgh durinjust those with border buyers in the central buyers in central Edinburgh we(top left of the map) and 96% of buyers in Musselburgh (top right of the map) were from Scotland.

Fig 2 – Residential Transactions in Edinburgh by

Source: Crown Copyright, Ordnance Survey, MyHousePrice.com

Previous Issues Crisis of Home-Ownership

http://sav.li/4eq

House Priceshttp://sav.li/4bn

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor prospectus, agreement or other document without prior consent. Whilst every effort has

any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or par

The above example suggests that building a new home helped at least four households move, including one in social housing. That appears to broadly match the average of 3.7 family movesper new home in Swedish data from 2000 to 2002*. However, the chaindemonstrate the usefulness of the data. More detailed work is required and we would be delighted if anyone wanted to collaborate or sponsor further investigation into this important questionAlongside the ability to track housing chains through the market, the Scottish data also allows us to perform more detailed analysis of buyers in the market. For example, tbelow show all residential transactions in Edinburgh during 2014 while the yellow

those with buyers from outside Scotland. The higher numbers and concentrationsborder buyers in the central Edinburgh market is apparent. The data suggests that around 25% of buyers in central Edinburgh were from outside Scotland. Meanwhile, 93% of buyers in Queensferry (top left of the map) and 96% of buyers in Musselburgh (top right of the map) were from Scotland.

Residential Transactions in Edinburgh by Previous Location of Buyer, 2014

MyHousePrice.com, Registers of Scotland

House Prices http://sav.li/4bn

The Value of Land http://sav.li/45e

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any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without 2

The above example suggests that building a new home helped at least four households move, atch the average of 3.7 family moves

the chain is just one example to More detailed work is required and we would be delighted

into this important question. Alongside the ability to track housing chains through the market, the Scottish data also allows us to

For example, the red bubbles in the map g 2014 while the yellow bubbles show numbers and concentrations of cross-

apparent. The data suggests that around 25% of re from outside Scotland. Meanwhile, 93% of buyers in Queensferry

(top left of the map) and 96% of buyers in Musselburgh (top right of the map) were from Scotland.

Peak Loneliness http://sav.li/43c

may it be used as a basis for any contract,

been made to ensure its accuracy, Savills accepts no liability whatsoever for t of it in any form is prohibited without