This week there were a number of takedowns; first Khan took on the Oligarchs, then the CMA crushed eight of the leading housebuilders. Gove tried to make a comeback but was ripped to shreds by leasehold reform lobbyists with his exemptions. Post-2023 analytics showed the losses caused by high inflation had punctured Brickability and Taylor Wimpey’s profits, squeezed owner-occupier housing costs, floored transaction volumes and caused renters to attempt a side hustle to make up the numbers. But 2024, aided by recent rate reductions, saw new contenders entering the property ring. Welcome to your weekly UK Property News Recap – 01.03.2024. 

 

Sadiq Khan V Oligarchs 

After spending £6.3 million to concoct some overground names, London Mayor Sadiq Khan wants to close the financial trusts loophole that many an oligarch could be lurking behind. This could then be added to the £1.1 billion of property identified by Transparency International in 2022 as being bought by Russians accused of corruption or links to the Kremlin, to provide funding for over 4,000 low-cost homes. 

 

The Competition and Markets Authority house building take down

The Competition and Markets Authority (CMA) published its final report on the housebuilding market in Great Britain – finding that the complex and unpredictable planning system, together with the limitations of speculative private development, is responsible for the persistent under delivery of new homes. 

 

The CMA’s list of house building concerns consisted of but weren’t limited to:

• Planning rules: they take a protracted amount of time for builders to navigate before construction could start.
• Speculative Private Development: Developers are producing houses at a rate they can be sold without the need to reduce prices, rather than diversifying to alternative housing.
• Land Banks: Purchased land, which hasn’t been built on, was predominantly due to planning issues.
• Estate Management charges: Reportedly high which would then escalate with unplanned works into the thousands of pounds.
• Quality of some new homes: Increased prolonged snagging issues and a deterioration in quality.
• Investigation into eight developers for information sharing – This could be influencing the build-out of sites and the prices of new homes.

In response to this take down the FTSE 100 & 250 responded to the CMA investigation hitting the developers’ share prices.

Buy-to-let rates

According to Moneyfacts, Buy-to-let fixed rates continued to fall month-on-month on two and five year fixed terms along with product availability. Rates are expected to fluctuate due to the volatility in swap rates, so what’s here today may not be tomorrow.

 

Despite increased rents and this attempt to lure landlords back to the market, it is unlikely rates will be low enough, for those in need of a sizable mortgage, to engage. 

 

UK housing costs prove to be a wage drain

 

Average UK household costs, as measured by the owner-occupiers’ housing costs in the Household Cost Indices, UK : 2023, showed an increase of 5.0% in the year to December 2023. This following a 12.4% increase over the same period in 2022; on a cumulative basis, household costs increased 24.7% since December 2019.

 

 

The main driver of increased OOH costs was higher interest rates plus increased prices as a result of the stamp duty holiday. This gave rise to higher mortgage interest payments, larger deposits and mortgages.

 

Fraudulent tenancy applications on the rise

 

Homelet released a report that showed a fourfold increase in the number of tenants submitting fraudulent tenancy applications over the past two years. Stretched affordability and the need for a roof forced many to make desperate decisions. However, fiddling the numbers to make rent could only lead to more defaults for both tenants & landlords. 

 

England’s National Housing Federation and Shelter social housing report

 

Research by England’s National Housing Federation and the charity Shelter found that if the government spent £11.8 billion to build 90,000 new social homes, they would recoup their investment within 11 years through savings on public services and extra tax revenue.

Perhaps if more councils had invested in housing as opposed to commercial property, which they know nothing about, they wouldn’t be in the financial mess they currently are.

 

Michael Gove denies the elderly leasehold freedom

 

The leasehold reform bill, after forgetting to include bans on leases on new homes, made its Commons comeback. Much anticipated, the review was muted when the exemptions were disclosed:

-Retirement villages to continue to sell new leasehold houses

-Existing leases granted on the land to remain, even if no property has yet to be built 

 

Clearly, Gove should invest in some earplugs to muffle the developer lobbyists. 

Brickability Group end of year results

 

Brickability Group’s end of year results showed they had clearly been “bricking it” over 2023 as the property market downed tools. Market volumes for bricks in the UK were approximately 30% lower than 2022, and brick imports into the UK were also down 42%. On the plus side, as a result of this, pricing has become competitive given softer demand.

 

Taylor Wimpey end of yaer results

 

Taylor Wimpey’s full year results to December 2023 demonstrated how high inflation almost halved their profits.  Despite this, what they did manage to sell, cost more. Their UK average selling prices on private completions increased 5.1% to £370k (2022: £352k). Company confidence is upbeat for 2024 though, as they anticipate a turnaround in their fortunes should base rate cuts kick in. 

 

 

Rightmove released their pre-budget wish list

 

Rightmove’s pre-budget billet-doux to Chancellor Hunt was full of hope that he would provide further stimulus to the property market to justify their annual rate rise. 

 

Highlights included:

-Regional band variations to SDLT thresholds for first-timers to reflect the varying price points across the UK

-A mortgage scheme to draw a bigger pool of buyers. 99% mortgages were deemed a “positive step” but they still restricted many who couldn’t pass the stress test and loan to income ratio required, leaving renters unable to pass go.

-Green tax incentives for landlords to incentives them to improve their properties’ EPC roots

 

Zoopla HPI February 2024

 

Fuelled by downward rate adjustments, the housing market in February continued to make up lost ground with seven out of 12 regions recording positive house price inflation. London, fuelled by low growth for seven years, was out front while the South East trailed behind the rest of the UK, as buyers struggled to make the numbers add up. Caution around plateauing rates, temporarily causing activity to shift down a gear till the budget or the first rate cut, remains.

 

 

When compared against the same time last year, February 2024 displayed a market full of optimism. Many appear to want to move sooner rather than later, either through fear things may sour each month the Bank doesn’t cut rates or to avoid increased buyer competition if it does:

 

• New sellers up 21%
• Sales agreed up 15% higher than this time last year
• Buyer demand up 11%

 

As a result, Zoopla predicted a 10% increase in total home sales (to 1.1 million ) in 2024 vs 1 million in 2023.

 

 

The Bank of England Money and Credit report

 

The Bank of England Money & Credit Report for January 2023 showed people were keen to reduce their mortgage debt as £1.1 billion was paid back in January 2024, compared to £0.9 billion in December 2023.

 

As a result of the effective interest rate falling by 9 basis points, to 5.19% in January, net mortgage approvals for house purchases rose from 51,500 in December to 55,200 in January. Those who delayed their move last year are clearly ready to engage. 

 

 

HMRC’s housing transaction volumes update

 

2023’s lack of property action was demonstrated in HMRC’s UK Monthly housing transactions. Their provisional seasonally adjusted estimate for the number of UK residential transactions in January 2024 totalled 82,000, 12% lower than January 2023 and 2% higher than December 2023. 

 

When non-seasonally adjusted, transactions in January 2024 were 68,090, 10% lower than January 2023 & 20% lower than December 2023. 

 

Despite a month-on-month increase, from 80,500 in December 2023, to 82,000 in January 2024, this is the lowest level of seasonally adjusted residential transactions in January since 2013.

 

 

Nationwide HPI February 2024

 

Aided by recent rate reductions, UK average house prices made up some lost ground, increasing 0.7% month-on-month in February to £260,420. In turn, the annual rate of change returned to positive territory for the first time since January 2023, with prices up 1.2% from -0.2% last month. This left them only 3% lower than their 2022 peak, according to Nationwide’s February HPI.

 

 

Millennials and Generation Z Housing Boost

 

Lastly, all is not lost for Millennials and Generation Z. In the next two decades a “massive transfer of wealth & assets” (£2.5 trillion) will land, meaning just before retirement the dream of owning your own home could be realised. The cost of this windfall, though, comes with great loss.

 

 

And that concludes this UK Property News Recap – 01.03.2024.  Should you have any comments or suggestions, as ever, please get in touch here.