This week we were back at school. Foxtons and Travis Perkins promised to do better. Lenders, fearing they weren’t taxing enough, increased the difficulty of their papers. Hunt was marked on his fiscal delivery and lack of housing material. Halifax raised its hand but Nationwide interrupted, blurting out news of its Virgin rendezvous causing the deputy head, Dame Eleanor Laing, to call from them to settle down. Welcome to your weekly UK Property News Recap – 08.03.2024.
UK Finance Household Finance Review Q4 2023
On Monday, UK Finance Household Review took a deep dive into 2023, to assess the damage caused by high inflation to first time buyers. For some buyers, if they wanted to qualify for the same mortgages they could have obtained two years ago under 30 year terms, they’d now require loans with terms of 72 years. As a result, first time buyers’ loans dwindled to their lowest level since 2013. Despite this, there was a small uptake in loans at the end of 2023 Q4, many opting for homeownership over another year in rental accommodation.
Foxtons end of year results
With affordability stretched, many potential buyers turned back to the rental market, driving up prices under the weight of demand and weak supply. This enabled Foxtons’ lettings book to prop up their depleted sales pipeline, which fell alongside with the company’s financial arm, by 14%. Rental action boosted their adjusted operating profit by 2% along with EBITDA, which increased 6%, but their integration of Ludlow Thompson dented their profit before tax, which fell 34%.
Travis Perkins end of year results
Travis Perkins’ end of year results, showed that without financial mortar, material and tools are redundant. 2023 proved a difficult year for the company as builders laid down tools, stalling till rates improved. As a result, the company focused on streamlining and restructuring the business in the hope of a more profitable 2024.
Lenders increase rates and fee paying fixed mortgage deals increase
Just as buyers thought that rates could only get better…. Lenders backtracked on their recent discounted offers over speculation that the Bank of England will keep rates higher for longer. Barclays, NatWest, Virgin Money, Clydesdale Bank and Principality Building Society all increased their rates this week, while sparing the dormant buy-to-let sector. This could stall transactions in the residential market, in the short term, just when many sellers hoped for a buoyant spring market.
To add insult to injury, the proportion of fee-free mortgage deals also fell while the average product fee on fixed mortgage deals increased by £46 since March 2023.
Birmingham City Council Cuts
Midweek, Birmingham City Council signed off a wave of cuts to services and a 21% rise in council tax over two years after running up £2.9 billion in debt. Compounded by equal pay claims totalling around £760m and an £80m overspend on an IT system – that just kept saying “no” – left them broke.
Saying “sorry” now, while squeezing their residents for more money, just doesn’t cut it.
S&P UK Global Construction
According to S&P UK Global Construction survey for February, optimism was at its highest in the construction sector since January 2022. All three main categories of construction activity saw a near-stabilisation of business activity with house building making the biggest comeback since January. Only the commercial sector remained gloomy, with businesses not looking to invest till borrowing is more affordable.
The Spring Budget
After weeks of speculation, the spring budget blossomed and then quickly wilted. Some hoped for incentives, while others condemned them. Either way, 99% mortgages and stamp duty threshold amendments remained but a seed of an idea, following criticism they would only increase prices.
So what was left for housing…..not a lot.
Tax benefits for holiday lets and multiple dwelling relief was abolished and the higher rate of Capital Gains Tax on property transactions was reduced from 28% to 24%. The former is meant to help those towns riddled with short term rentals, leaving locals to rent further afield and the latter to help increase transaction volumes. Given this would really only benefit landlords looking to sell, Chancellor Jeremey Hunt’s property transaction boost could be at the cost of further rental stock.
OBR housing takeaways
The OBR economic and fiscal outlook for March 2024, always good for those suffering from insomnia, painted a sluggish market outlook for the short term. Property transaction tax receipt expectations for 2023-2024 are expected to fall 23.7% to £12.7 billion on 2022 levels before making a marginal comeback in 2024-2025. This will largely be assisted by those forestalling ahead of the increase in nil-rate thresholds due to come to an end in March 2025, resulting in a £1.3 billion increase to £14.0 billion.
The OBR expects housing transactions to rise steadily, with receipts reaching £22.1 billion in 2028-29.
Given this, they expect house prices to fall around 2% in 2024, a 3 percentage point improvement on their November prediction. Only in 2026 do they predict house prices to grow around 2%, and then around 3.5% in 2027 and 2028. At this point, nominal house prices would surpass their historical peak in the first quarter of 2027. This means those looking for a significant improvement to their asking price may have to wait another three years. It’s also worth noting, for those still needing to finance, that expectations are for rates to languish around 4%, even then.
Halifax HPI February 2024
Spurred on by previous rate reductions, Halifax’s February HPI showed house prices rose for the fifth month in a row increasing 0.4% (£1,000) on January, making the average property now worth £291,699. Annually prices rose 1.7% with London showing the first positive annual growth seen since January 2023. Northern Ireland, however, topped the annual growth leaderboard, increasing 5%, followed by the North West, North East & Wales. Properties in Eastern England however fell the most last month, dropping by 0.8%.
Nationwide buys Virgin Money
Nationwide announced its plan to buy Virgin Money for £2.9 billion, creating the second-largest provider of mortgages and savings in the UK after the Lloyds Banking group with £366 billion in total assets. In response Virgin Money’s share price rose 34% to 212p.
And that concludes this UK Property News Recap – 08.03.2024. Should you have any comments or suggestions, as ever, please get in touch here.
