This week ground rules were debated, consequences applied to empty homes, and tax incentives awarded to those repurposing land. Surveyors showed optimism, lenders pessimism while others reflected on lending and building with both concluding 2023 was a year best forgotten. Welcome to your weekly UK Property News Recap – 15.03.2024.
Empty home crack down
In an effort to crack down on the amount of empty homes, the government is giving councils the power to double council tax on properties that have stood empty for 12 months, rather than the current two years. Exemptions only apply to “empty properties that are uninhabitable due to extensive renovation, second homes that are not available for use year-round due to planning restrictions or for up to a year on homes that have been inherited to prevent families who are grieving from having to pay.”
Inheritance tax break for land owners
Chancellor Jeremy Hunt may not have scrapped inheritance tax in the budget but he did help those with land to avoid incurring it. From April next year those who turn farmland back into forests, manage grassland for flood resilience or connect river and floodplain habitats will be exempt. This incentivises the wealthy to do their environmental “bit”, but runs the risk of disincentivizing agricultural production at the same time.
Lenders rethink rates…again
Despite swap rates falling, Halifax, Santander and NatWest all increased their rates again this week. This made the average five-year fixed rate mortgage 5.35%, 0.5 percentage points higher than it was two weeks ago. Despite this ongoing rate tease, expectations are for them to reduce again in the next few weeks. So for anyone looking to buy, hope remains that by the time they come to exchange, they will have readjusted down. However for those looking to remortgage now, this inconsistency will cost them.
ONS labours on and GDP gets a boost from New Year Sales
The UK Labour market overview for March 2024 showed unemployment remained unchanged on the quarter while the employment rate fell by 0.1pps. Meanwhile businesses made do with what they’ve got; vacancies fell for the 20th consecutive period by 43,000 while earnings growth slowed to 5.6% and 6.1% excluding bonuses. Will this prove enough to make the Bank of England consider its first step down off Table Mountain? Unlikely.
The 0.2% increase in GDP for January 2024 was largely driven by shoppers looking for a bargain and a construction boost driven by an uptake in both new work (1.1%) & repair & maintenance (1.2%) which increased volume by 1.1%.
This, while also encouraging, means next to nothing. As we’ve learnt over the last few years, a course can be set but it doesn’t take much for it to go awry.
Mortgage lenders and administrators statistics 2023
The Bank of England’s Mortgage lenders and Administrators Statistics showed borrowers took a sabbatical in Q4 of 2023. The value of new mortgage commitments decreased by 6.6% from the previous quarter to £46 billion in Q4. High loan to income ratio borrowing also decreased by 2.6pp along with the buy-to-let market which fell by 0.5pp from the previous quarter to 7.0%. Only mortgage advances for house purchases for owner occupation increased, up 1.0pp. This demonstrates the impact of higher rates on financially stretched first time buyers and wannabe pension pot landlords.
Interestingly, despite new arrears falling 2.6pp on the previous quarter, the value of outstanding mortgage balances with arrears increased by 9.2% to £20.3 billion – 50.3% higher than a year earlier. Meaning for those already struggling, things are only getting worse.
Ground rent deemed not legally or commercially necessary by the Competition and Markets Authority
Back in December, Michael Gove commissioned a consultation on ground rents to determine the merits of this antiquated feudal system. Unsurprisingly, the Competition and Markets Authority concluded:
“Ground rent was neither legally nor commercially necessary, and we saw no persuasive evidence that consumers receive anything in return.
We can also see that the UK government’s broader view that the housing market has to be modernised, and released from anachronistic practices, is a highly relevant consideration in its decision-making.”
This should have been a slam dunk for Gove, who is considering capping ground rents. However, the Residential Freehold Association and the British Property Federation are having none of it. They claim any changes without freehold compensation would result in legal action, both of which would be paid out of taxpayers money.
Jeremy Hunt reflects on first time buyers incentives
On Wednesday, Jeremy Hunt told MPs at a Treasury Committee that he wanted to help first-time buyers “at a future fiscal event.”
“I would have liked to have had some measures to help people get on the housing ladder but it is difficult to do that unless you are absolutely confident that property prices are back on the up, because otherwise you are encouraging people to get on the housing ladder with the prospect of house prices falling and therefore them falling into negative equity,” he said.
Halifax backtracks on maximum borrowing age
Halifax backtracked on the maximum age at which it would allow customers to borrow, reducing it from 75 years to 70 years. As a result of this, those borrowers looking to increase the size of their mortgage, or who have weak credit ratings, will have to reduce the length of their terms in future, increasing their monthly mortgage payments as a result.
End of year results for Persimmon and Vistry
Persimmon’s profit before tax was dented at £351.8 million for the 2023 calendar year, down 52% on the previous year. Expectations are for a subdued 2024, with completions expected to increase to between 10,000 & 10,500, before a more buoyant 2025.
Over at the Vistry Group, things were considerably different. The group delivered a total of 16,118 new homes in 2023, down only 5.4% on proforma prior year and, with the exception of the former housebuilding business, delivered year on year growth in revenue. This demonstrates it pays to partner up.
RICS Residential Market Survey for February 2024
The outlook from the RICS Residential Market Survey February 2024 showed a market attempting to work its way up the gears, stalling occasionally when hitting a rate increase or election bump, before motoring into 2025, after taking some “base” cut.
Sellers who held off last year are more hopeful in 2024, causing an increase in listings. This piqued buyers’ interest but they remained cautious; agreed sales remained flat in February.
Prices however remain downbeat but not broken, with RICS surveyors predicting growth in both prices and agreed sales by the end of the year. Northern Ireland, Scotland, the North/NW & London are forging ahead.
The Competition and Markets Authority (CMA) investigates Barratt’s proposed acquisition of Redrow
The UK’s competition watchdog (CMA) has said it will investigate the country’s biggest housebuilder Barratt’s proposed acquisition of its rival Redrow for £2.5 billion as it is expected to result in a substantial lessening of competition.
And that concludes this UK Property News Recap – 15.03.2024. Should you have any comments or suggestions, as ever, please get in touch here.
