House Price Index 2nd Qtr 2009

Jersey House Price Index

Second Quarter 2009

Statistics Unit: www.gov.je/statistics

Headlines

• The overall mean price of dwellings sold in Jersey in the second quarter of 2009 was 2% greater than a year earlier;

• this latest annual change represents the  lowest annual rate of increase seen in Jersey for four years;

• flat prices have remained essentially stable over the last twelve months whilst the mean prices of 2- and 3-bedroom houses have returned to levels similar to Q2 2008, having fallen slightly from those recorded in Q3 2008;

• in  the  second  quarter  of  2009,  the  mix-adjusted  average  price  of dwellings sold in Jersey was £488,000;

• in Q2 2009 a quarter of properties sold for £340,000 or less;

• the seasonally adjusted turnover in the latest quarter remained more than a third below the long-term average seen prior to mid-2008;

• the Jersey Private Sector Rental Index shows that the mean rents of new rental consents in the private sector in Q2 2009 were about 8% higher than those in Q2 2008 and about 4% higher than in the previous quarter, Q1 2009.

Overall mix-adjusted Index

The Jersey House Price Index measures the combined average price of 1- and 2-bedroom flats and 2-, 3- and 4-bedroom houses[1].

Figure 1 - Jersey House Price Index (Average for 2002 = 100)

200 180 160 140 120

100 80 60 40 20 0

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2002 2002200320032004 20042005200520062006 20072007200820082009

Table 1: Mix-adjusted average dwelling price and Jersey House Price Index.

Price s are rounded to the nearest £1,000.

The Jersey House Price Index was effectively flat during 2002 and 2003, increased at a rate of about 3% per annum in both 2004 and 2005, at almost 7% in 2006 and at 13% in 2007 on a year-on-year basis. Calendar year 2008 saw a greater rate of price growth; the overall average price of dwellings sold in 2008 was 20% higher than in 2007.

The annual rate of increase of the Jersey House Price Index has declined in each of the last six quarters, with the annual increase standing at 28% in Q1 2008 but then falling to 10% in Q4 2008 and to 7% in Q1 2009. The latest quarter recorded an annual increase of 2%, the lowest rate seen for four years (since Q2 2005).

The overall mix-adjusted price of dwellings sold in Jersey in Q2 2009 at £488,000 is similar to the average recorded for calendar year 2008 (£486,000).

On a quarterly basis, between Q1 and Q2 2009, the Jersey House Price Index decreased by 4%, corresponding to about £20,000.

Individual property types

The mean prices for the individual categories of dwelling are shown in Figure 3 and in Tables 2 and 3. Notwithstanding a degree of volatility which can occur quarter-on- quarter in the mean prices of individual property types, some themes are apparent from the data:

1-bedroom flats

The average price of 1-bedroom flats was essentially stable throughout 2008 and the first half of 2009. The mean price of 1 bedroom flats sold in Q2 2009 was £225,000.

2-bedroom flats

Similar  to  the  behaviour  of  1-bedroom  flats,  the  mean  price  of  2-bedroom  flats remained essentially stable during 2008 and the first six months of 2009. The mean price in Q2 2009 was £321,000. It is worth noting that the higher mean price level seen during 2008 and early 2009 has been driven somewhat by new developments coming onto the market.

2-bedroom houses

The mean price in Q2 2009 (£380,000) was at a similar level to that recorded a year earlier in Q2 2008, having risen to £447,000 in Q3 2008 and remaining above £400,000 for the two subsequent quarters.

3-bedroom houses

This category of property accounts for almost half of all residential transactions in Jersey. Following a small ongoing increase in mean price from 2002 to 2005, the period 2006 to mid-2008 saw a greater rate of price increase. Most recently, Q2 2009 recorded a mean price of £516,000, which is similar to the average for calendar year 2008 but is down slightly from the figure of £541,000 recorded in Q3 2008 and also compared with the two subsequent quarters.

4-bedroom houses

Q2 2009 recorded a mean price of £712,000, a similar level to that seen a year earlier, in Q2 2008.

Figure 3 - Mean prices (£,000) for individual property types

800 700 600 500 400 300 200 100 0

4-bed houses 3-bed houses 2-bed houses 2-bed flats 1-bed flats

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009

Table 2: Mean prices (£,000) for individual property types.

Table 3: Annual mean prices (£,000) for individual property types.

Lower quartile price[2]

A widely used indicator of relative housing affordability is the lower quartile property price.  The  lower  quartile  price  is  determined  by  ranking  all  property  prices  in ascending order; the lowest 25 per cent of prices are below the lower quartile. Figure 4 compares the 25th and 75th percentile values (the highest 25 per cent of property prices are above the 75th percentile) with the average mix-adjusted price over time.

Figure 4 - Analysis by quartile

700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009

25th percentile mix-adjusted average 75th percentile

The overall price increase from 2002 to  the start of 2008 was similar for each measure shown in Figure 4, at almost 50%.

From mid-2006 to Q4 2007 the lower quartile price remained relatively stable at about  £300,000.  There  was  then  a  sharp  increase  in  the  first  quarter  of  2008, followed by a decline during the remainder of that year and the first quarter of 2009. The lower quartile price level in the latest quarter, Q2 2009 (£340,000), is similar to the average for calendar year 2008.

Turnover

Table 4 shows that 196 eligible properties (see Notes) were reported as being sold in Q2 2009.

Some interpretation is required in making comparisons between quarters due to variation in the frequency of sittings of the Royal Court and hence in the number of Jersey Property Bulletins published per quarter. It is also necessary to account for the seasonal nature of the raw data (apparent in Figure 5).

Figure 5 - Property turnover

350 300 250 200 150 100 50 0

80 70 60 50 40 30 20 10 0

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009

s.a. = seasonally adjusted.

The  last  six  months  of  2008  saw  a  marked  decrease  in  turnover  of  properties compared with previous years. This behaviour has continued in the first six months of 2009, with the seasonally adjusted turnover in Q2 2009 (at 25 properties per bulletin) being more than a third below the long-term average seen prior to mid-2008.

However, both 3- and 4-bedroom houses have seen increased turnover in the most recent quarter, returning to levels last seen in early 2008.

Table  4: Number  of  dwellings  included  in  the  HPI,  by  property  type,  and number of Jersey Property Bulletins published.  

Comparison with the UK, Guernsey and the Isle of Man United Kingdom

The mix-adjusted average prices of dwellings sold in the last six quarters in Jersey and the UK (overall and by region)[3] are shown in Table 6.

Table 6: Mix-adjusted average price of dwellings sold in Jersey and the UK.

Price s are rounded to the nearest £1,000.

In Q2 2009 the average (mix-adjusted) price of dwellings sold in the UK fell on an annual basis by almost 13% and was down 1% on the previous quarter. Price s fell in all  regions  of  the  UK  on  an  annual  basis,  with  the  largest  fall  being  seen  in Northern Ireland (down by 22%).

The average (mix-adjusted) price of dwellings sold in Jersey during the second quarter of 2009 was about two and a half times that for the UK and over one and a half times higher than in Greater London.

Guernsey

The overall median price of dwellings sold in Guernsey[4] in the second quarter of 2009 was £346,275, less than 1% higher than Q2 2008 but up almost 20% on a quarterly basis.

Isle of Man

The most up-to-date published information on dwelling prices in the Isle of Man[5] is for calendar year 2007; the simple mean (i.e. not mix-adjusted) dwelling price was £264,000, 11% higher than the average for 2006.

Jersey Private Sector Rental Index

The Private Sector Rental Index was introduced for Jersey in the third quarter of 2007 (see Note 7).

It is important to note that this index is derived from the average rent of those properties for which rental consents have been granted during each quarter and not from all private sector rents in the Island.

As well as an overall mix-adjusted index, separate indices are also produced for "Flats" (bedsits, 1-, 2- and 3-bedroom) and "Houses" (1-, 2-, 3-, and 4-bedroom).[6] There are about 1,800 and 700 private sector lease transactions per year for flats and houses, respectively. The index is weighted accordingly, with flats accounting for almost three-quarters of the total index.

Figure 6 - Jersey Private Sector Rental Index (Average 2002 = 100)

150 125 100 75 50 25 0

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009

Average rents in the private sector, as measured by the Jersey Private Sector Rental Index, increased by about 4% between 2002 and 2003. Rents were then essentially stable between 2003 and 2006 before rising in 2007 (up by 8% on an annual basis) and in 2008 (up 10%).

Average  rents  (from  new  consents)  in  the  second  quarter  of  2009  were  about 8% higher than the average for the second quarter of 2008 and about 4% higher than the previous quarter.

Table 7: Jersey Private Rental Index (Average 2002 = 100).

Annex A: First Time Buyers

There are a number of sites in Jersey which have had dwellings built exclusively to be available at a more affordable price to First Time Buyers (FTB). Due to the relatively small number of such transactions taking place in a given quarterly period, FTB properties are presented in Table 5 on an annual basis and only at a combined flat and a combined house level (see Note 6).

Table 5: First Time Buyers' properties, 2002-2008.

The fluctuations apparent in the annual mean price of FTB properties seen for both types of property may be ascribed to two factors: firstly, there is a relatively small number of transactions of such properties taking place each year; secondly, specific FTB sites vary somewhat in designated price and since the majority of each site is made available to purchase at a similar time, the annual figures reflect which site has come onto the market in a given year. For example, flats in Woodville Apartments in 2002 were available at a lower price, generally, than those in Albert Place in 2003 and 2004.

From 2004 to 2007 the average price of FTB flats remained relatively stable at around £200,000 whereas the average price surpassed £300,000 in 2008. However, this was largely due to the fact that a very small proportion of 1-bedroom FTB flats were sold in 2008 in comparison to previous years.

The average price of FTB houses surpassed £300,000 in 2007, with the average price nearing £400,000 in 2008.

Notes

1. The principal data source for the Jersey House Price Index is the Jersey Property Bulletin, supplemented by information on type and size of property provided by the States of Jersey Population Office.
2. Excluded properties: Derelict  buildings,  commercial  properties  with  associated  residential  units, apparent  intra-family  transactions,  retirement  community  developments  and properties designated by the States of Jersey solely for purchase by first-time buyers are excluded from the final data set from which the average prices and the Index are determined. Furthermore, due to the small numbers of properties and high variability of prices, the following categories of dwelling are also excluded: bedsits;  3  or  more  bedroom  flats;  1-  and  5  or  more  bedroom  houses;  and multi-dwelling properties. New dwellings, other than those removed by the above exclusion criteria, are implicitly included in the final data set.
3. Share transfers:

Sales occurring via share transfer are not processed through the Royal Court and hence do not appear in the Jersey Property Bulletin. Share transfer transactions are estimated to have constituted about three-fifths of all sales of flats since Q1 2002, with the proportion varying between half and two-thirds at the quarterly level as new developments come onto the market.

Since the transaction prices of properties purchased by share transfer are not readily available such properties are currently not included in the compilation of the Jersey House Price Index. However, as such properties are a part of the Jersey housing market; the level and change in price of this element of the market are governed by economic forces in the same way as the purchase of comparable properties which proceed via the Royal Court. Therefore, the coverage of flat purchases recorded through the latter process, and used in this analysis, provides a robust indicator of the state of the overall market for flats in Jersey.

If share transfers are included at the weight of three-fifths of all sales of flats, the annual percentage change of the overall mix-adjusted index for Q2 2009 (1%) is similar to the headline annual change figure stated in this report (2%) and is consistent with statistical uncertainty.

4. The average price of dwellings is calculated by weighting together the average price for each of the following five categories: 1- and 2-bedroom flats; 2-, 3- and 4-bedroom houses ("houses" includes houses and bungalows). The resulting mix- adjusted average dwelling price (see Note 5) is converted into the Jersey House Price Index (based to 100 for calendar year 2002).

The margin of uncertainty on any quarter's average price is ± £10,000; that on the difference between the average prices for any two quarters is ± £14,000. The margin of uncertainty on any quarter's index is ± 3 percentage points.

5. Mix-adjustment:

In order that the average price in a given period is independent of the particular "mix" of properties sold in that period, a "mix-adjusted" average is calculated for each period by weighting each property type by a constant proportion. Prior to the first quarter of 2005, the weights for calculation of the mix-adjusted averages were derived from the proportion that each property type accounted for of all transactions  in  calendar  year  2002.  Revised  property-type  weights  were

introduced in Q1 2005 and again in Q1 2009, each derived from the full preceding three-year period.

The slight changes in weights produced no material discontinuity in the Index series; the difference in mix-adjusted average price between the different sets of weights was about £1,000.

6. First Time Buyers:

Due to the very small number of 4-bedroom First Time Buyer (FTB) properties, the analysis presented for FTB houses in Table 4 comprises 2- and 3-bedroom FTB houses combined. Otherwise, almost all First Time Buyer properties are included in the analysis underpinning the table. In a small number of cases the only data available is the "plot" price of a property; such transactions are not included.

7. Jersey Private Rental Index:  

The principal data source for the Jersey Private Rental Index is the States of Jersey Population Office. Due to the small numbers of properties and high variability of rents, the following categories of dwelling are excluded: 4 or more bedroom flats and 5 or more bedroom houses. All non-domestic dwellings are also excluded. The average (mean) rental price of dwellings is calculated by weighting together the average rents for each of the following categories: bedsits, 1-,  2-  and  3-bedroom  flats  and  1-,  2-,  3-  and  4-bedroom  houses  ("houses" includes houses and bungalows).

As in the methodology for the Jersey House Price Index, to ensure the average rental cost in a given period is independent of the particular "mix" of properties recorded in that period, a "mix-adjusted" average is calculated for each period by weighting each property type by a constant proportion.

The  resulting  mix-adjusted  average  rental  price  is  converted  into  the  Jersey Private Rental Index (based to 100 for calendar year 2002).

Statistics Unit 12th August 2009