This week sellers flocked to market only to find buyers browsing. Confused by persistent base rate cut speculation that yo-yoed from June to August, and beyond, after inflation slowed but not at the rate hoped, buyers are taking their time to assess the stock on offer. The IMF provided some advice for the UK, which none of the political parties wanted to hear. Rental growth slowed but continued to creep up, further reducing the size of the property renters once could afford. And Rishi Sunak discovered that things “can only get better” when you have an umbrella when announcing a general election on July 4th. Welcome to another UK Property News Recap – 24.05.2024
Rightmove HPI May 2024
Gardens in bloom, those at the top of the ladder demanded more for their homes in May pushing up the average asking price to a record £375,131. This late spring frivolity wasn’t reserved for those just at the top of the ladder but hope, born from a 17% increase in sales in the first four months of 2024 when compared with last year, has spurred those sellers with more sq footage to their name, into action after being forced to retreat in 2023 after rates squashed buyers ability to reach.
With signs of rates being on the turn, and sales taking an average of five months to complete, sellers and buyers keen to be in for Christmas are making moves but only if the price agreed, not asked, is right.
Hamptons Rental Index April 2024
Better the devil you know. 88% of tenants renewing their existing contract saw a rental increase in 2024, however, they paid 13.4% or £178 pcm less on average than someone who moved into a new home.
The price gap between newly rented properties and renewals may be closing but April’s rental increase of 0.8% in May, the largest this year, suggests annual rental growth may settle around this level.
As a result of strong rental growth over the past 20 months, renters have lost the equivalent of a bedroom, in price, on the open market. The average one-bed home now costs the same as the average two-bed. Likewise, the average two-bed is now at the level the average three-bed was to rent 20 months ago.
This has meant that it remains more cost-effective to stay put than search for more expensive and potentially smaller pastures.
Rental growth nationally may continue to increase but London prices appear to have stalled; affordability issues limit tenants’ ability to reach much further, resulting in newly let properties falling 2.8% on the same time last year.
Interest rate cut speculation
The Bank of England deputy governor Ben Broadbent gave a speech saying that a rate cut at “some time” over the summer was “possible”. Inflation figures followed shortly after with figures slightly higher than hoped for. As a result the markets who a few days earlier were betting on a June base rate cut, were now putting down money on an August cut. If correct, this won’t bode well on the campaign trail for Sunak.
Things can only get wetter
Rishi Sunak braved the elements and a protester’s nearby sound system to address the nation; telling them to save the date for the next general election on July 4th. Bedraggled, he returned to seek sanctuary within number 10, before his eviction in six weeks.
IMF – United Kingdom: Staff Concluding Statement of the 2024 Article IV Mission
THE IMF report card for the UK was full of do’s and don’ts for the future, none of which would fill any chancellor, no matter the party colours, with joy. Whether the UK government will listen to the IMF on fiscal issues remains to be seen.
RECOMMENDATIONS – THE DOS:
-Tax higher carbon & road usage
-Increase inheritance tax
-Rework capital gains
-Increase property tax
-Stick to climate policy deadlines
-Upskill UK workforce
-Cut the base rate to 4.75% or 4.5% by the end of the year & 3.5% by 2025. This will be good for the property market but in the interim expect more uncertainty.
THE DON’TS
-Borrow your way to growth – the £30bn fiscal hole apparently can’t be filled this way – (curtailing many an election promise)
-Cut NI
-Provide tax cuts
-Keep the triple lock on state pensions
Angela Rayner lays out Labour’s blueprints for housing
Rayner, keen to assert herself in housing, reeled off a list of aims, dreams and aspirations in a speech given at the UK’s Real Estate Investment and Infrastructure Forum in Leeds. Many sounded not dissimilar to what we’ve been hearing from Gove, over the last few years ….
-Set up an independent task force created to identify sites (settlements) for development – deadline 12 months
-Settlements to be thoughtfully designed to be in keeping with surroundings, adhere to nutrient neutrality rules, include public services & have viable transport links
-AIM to include affordable housing in developments by 40%
-Reintroduce housing targets
-Fast-track planning on brownfield sites
-Unlocking grey belt land for development
-Unlock government grants to deliver new homes
-Make the Affordable Homes Programme more…flexible
-Ban no-fault evictions
-First-time buyers to get ‘first dibs’ on new developments
-A mortgage guarantee scheme
Getting the numbers to add up for private developers, who they are relying on, may require them to sharpen their pencils.
ONS – House price index for March 2024
Average UK house prices crept up by 0.7% in March 2024 to £283,000, giving sellers, on average, an extra £5,000 in their pocket than they otherwise would have, 12 months ago.
All regions saw annual increases; England increased 1.0% to £299,000, Wales rose 1.3% to £214,000 & Scotland climbed up 6.7% to £192,000.
For Northern Ireland in the year to Q1 2024 prices also increased by 4% to £178,000.
The English region to top the highest annual house price inflation leaderboard was Yorkshire and the Humber, where prices increased by 5.0%.
At the bottom of the leaderboard was London where prices decreased by 3.4%.
ONS – rental price index for April 2024
Average UK private rents in the 12 months to April 2024 continued to increase, up 8.9%, but at a slower rate.
BY COUNTRY
England rose: 8.9% to £1,293, Wales was up 8.2% to £730 and Scotland 10.0% to £952. (For Northern Ireland prices increased by 10.4% for the 12 months to February 2024)
In England, rent inflation was highest in London (10.8%) and lowest in the North East (5.8%)
Knight Frank global rental review
According to Knight Frank out of 15 global cities analysed, rental growth stood at 3.7% in the 12 months to March 2024, down from the 5.3% growth seen in the final quarter of 2023.
Rental growth has been spurred on by several factors:
Post-pandemic rental price catch-up + landlord increased buy-to-let mortgage payments passed on to renters + additional demand from those forced out of the sales market + increased migration + lack of building = rental price growth. These pressures continue but momentum is slowing as affordability is stretched to breaking.
The Leasehold Reform Bill becomes Law: What made the cut & what didn’t.
On Friday, the Leasehold Reform Bill was hastily passed through the Lord’s marking, change for both leaseholders and freeholders. Despite being passed many will have to wait till 2025/26 as some of the legislation may not be in place till 2028. Within that time, expect some freeholders to take a turn in the courts.
IN:
– Excessive building insurance commissions for freeholders & managing agents
– Transparency over their estate charges
– Leaseholders to take over the management of their property if they want to. (Commercial limit restricting this lifted from 25% to 50%)
– Freeholders who manage their building to be part of a redress scheme
– Divorced from Marriage value – deferment & capitalisation rates are yet to be set by the Gov, these will determine how beneficial this is to leaseholders or not.
– 990-year lease extensions
– 2y ownership condition abolished, speeding up the process
– Abolish new leasehold houses but retirement homes don’t count apparently
– Share lease extension/freehold purchase professional fees – not popular with landlords. Some may take legal action for being forced to extend a lease and be out of pocket, legally, for the privilege
– Ability to buy out of the ground rent without having to extend the lease term
OUT:
– Capped ground rent
– Prevention from forfeiture
– Leasehold isn’t abolished
To be continued….
And that concludes another UK Property News Recap – 24.05.2024. Should you have any comments or suggestions, as ever, please get in touch here.
