This week everything either flatlined or dropped. Be it political pre-election housing promises, prices, GDP or CPIH, nothing was getting off the ground except potentially seller realism and market optimism for base cuts in response to the UK being in recession. Every cloud….Welcome to another UK Property News Recap.
Conservative Housing Stall
Michael Gove and Rishi Sunak started the week by trying to plaster over the dismal volume of new housing achieved, promising building and planning reform to get construction moving again.
Addressing the lack of housing, PM Rishi Sunak threw in some housing incentives, promising to preserve the greenbelt in favour of enabling planning on brownfield sites in existing urban areas, and the repurposing of commercial buildings into residential housing. This, he hoped, will keep both the nimbies and the disillusioned younger voters on side. It however totally disregards the additional hassle and cost required to clear a brownfield site for developers, as well as the potential fallout from neighbours becoming “less than good friends” as ugly extensions start feuds, or the deserted high streets, from neighbours fearful of bumping into each other amongst the few remaining shops.
Brownfield sites and commercial property aside, if Bloomberg is right about the country “needing to build almost 400,000 dwellings annually over the next 5 years to factor in stronger population growth – almost all of which will come from immigration – as well as the homes that would’ve been built had targets since 2019 been met,” then a token effort on behalf of the Government, won’t cut it. At some point, the green/grey belt will need to be redrawn. That said, no matter what the land label, no developer is going to rush to construct anything till it is more affordable to build and buy, and planning departments are on side.
Hampton January 2024 Sales Market Data Analysis
Piecing a snapshot of the January property market, estate agent Hamptons collated all of Connell Groups data, and concluded sellers were less likely to cut their asking price than at any time over the last 8 months. 48% of homes across England & Wales sold after a reduction in January, down from the October 2023 peak of 55%.
Hamptons also found that the average seller in England & Wales sold their home last month for 98.9% of their asking price, up from 98.5% in December 2023. This marks the third month anniversary of improvement from asking to achieved prices, demonstrating it pays to price right, and not that they were achieving ridiculous prices.
CPIH & CPI flatline
The CPIH & CPI inflation measures were widely expected to rise but remained unchanged from December 2023 in January 2024, rising by 4.2% & +4.0% respectively.
The largest upward contribution to the change came from housing services, owner occupier costs & transport.
The OOH component of CPIH rose by +5.4% in the 12 months to January 2024, up from +5.3% in December 2023. The OOH component accounts for roughly 16% of the CPIH, with increases in rents, sewerage collection, contents insurance, council tax, domestic & household services taking their toll.
Savills accesses Housing Values in 2023
Savills research department uncovered the true cost of the economic downturn to UK housing values in 2023. High inflation squeezed affordability, wiping £27 billion off the value of the UK’s housing stock last year, the first fall in values since 2012.
Despite Truss’s best efforts and sky high rates, the total value of housing remained around £1.585 trillion higher than it was in 2019 at £8.678 trillion, demonstrating the impact the stamp duty holiday had on the market and future generations.
UK House Price Index – December 2023
The ONS estimated average UK house prices decreased by 1.4% in the 12 months to December 2023 making the average UK house price £285,000, £4,000 lower than 12 months previously. Average annual house prices varied across the country; in England they decreased by -2.1%, and -2.5% in Wales but they increased in Scotland by 3.3%, and by +1.4% in Q4 for Northern Ireland.
Despite this there were signs of a potential thawing to house prices between November and December 2023. Non-seasonally and seasonally adjusted house prices increased 0.1% and 0.3% respectively. However the South East continued to feel the chill with average house prices falling annually by 4.6% and monthly by 1.9%.
Index of private rental prices – January 2024
According to the ONS, Private rental prices paid by tenants remained unchanged for the second consecutive month, increasing +6.2% in the 12 months to January. In England annual rental prices increased by 6.1%, 7.0% in Wales & 6.8% in Scotland.
London had the highest annual percentage change at +6.9%, while the North East had the lowest, at +4.7%.
For those in rental accommodation this provided some hope that prices may have stabilised or even been reducing. However the 2024 rental season has yet to kick off therefore caution is advisable till rates ease and more buyers can afford to revisit the ladder.
UK Recession bites
For PM Rishi Sunak, his week got a lot worse when GDP didn’t play ball, falling 0.3% in Q4 2023, causing the UK to tip into recession. Though mild, this doesn’t look good when running for re-election while promising to be the party of fiscal responsibility and growth…To be fair, Brexit, the pandemic and a few foreign wars haven’t helped but if you wanted to be prime minister now, what did you expect?
ONS data for Q4 2023 showed people spent less, neglected the Christmas & New Year coiffure, while kids skipped school – maybe due to sickness or to avoid inflated holiday prices. Manufacturing of heavy machinery slowed alongside mining & quarrying, while builders sat on plans till the Government came up with some.
Construction was estimated to have fallen 1.3% in the three months to December 2023 compared with the three months to September 2023. New work fell by 5.0% over the period, while repair & maintenance was up by 4.0%. Within new work, any motivation to build was low in new housing, down 8.0%.
In response to the UK being in recession, the money markets raised their bets of an interest rate cut from the Bank of England, now pricing in about 75 basis points of cuts this year, compared with about 70 bps before the data. Many expect Andrew Bailey and his MPC committee crew to melt under pressure by summer.
And that concludes another UK Property News Recap. Should you have any comments or suggestions, as ever, please get in touch here.
