Prices of older homes rising as new housing remains out of reach for many
Price rises for homes older than two years outpaced those for new housing developments in January. However, because new housing remains more expensive, there continues to be a gap. A main reason new home sales are lagging older homes is down to the high prices.
At first glance, there appears to be a contradiction in housing sale prices. Despite the faster rise in prices for older homes, they are selling more quickly. The reason for this is obvious: New homes are very expensive. The gap between prices for old and new homes is actually widening. That is why we are seeing more sales of older homes than of new ones.
According to statistics released by the Central Bank last month, new housing prices, which covers structures built one to two years previously, rose 0.43 percent month-on-month in January. Please note the index on new housing is not yet comprised of all provinces, which are being included gradually.
Meanwhile, older homes, characterized by a construction completion date in the preceding two years, saw a monthly increase in prices of 3.25 percent. This compares with a 2.39 percent monthly rise in January 2016. Annually, new home prices rose 12.48 percent and older homes rose 13.3 percent in January.
New houses still pricey The fact that we are seeing a slower price rise in new housing does not mean that the prices are low. The new housing price index may be slowing compared to older prices due to the technical calculations of the index, but we all know that there remains a large gap between old and new housing prices.
The base effect for new housing is such that even though prices are rising at a slower pace, it is not enough to narrow the gap with older housing. In the first two months of the year, first-time sales were 89,000, while 107,000 older homes were sold. In 2016, first-time sales were 632,000 and second-hand sales were 710,000.
In February, first-time sales of housing declined 4.6 percent, for a combined two-month rise of just 2.2 percent. The main reason for this situation is undoubtedly that new housing is very expensive. This indicates we are seeing a stumble in the housing sector.
Meanwhile, the direction of annual price increases calculated for both new and old houses turned upward significantly in January. The 0.43 percent rise in new housing prices in January compares with a decline of 0.64 percent in the same month in 2016. The same is true for second-hand sales, which also fell in January 2016.
These developments show that housing prices returned to growth in January after the level they fell to in December. The supply of new housing still outweighs demand, even if demand has grown in recent months with the help of advertising campaigns. It is hard to expect this to last, and we may see very different statistics in the coming months.
According to the statement released yesterday by the Central Bank, the year of construction and the price of housing in the previous year, grouped as “new housing”, increased by 0.43 percent in January. In the meantime, note that the calculation of the index for “new houses” does not yet cover all the cities, and these cities are gradually covered in this calculation.