This week showed the ripple effect that ‘higher rates for longer’ is having on the market as a whole. Habits, investments and moves are all being revisited along with house price forecasts. First time buyers are keeping the home fires burning but only through necessity, leaving the rest of the market to wait with tepid optimism for the New Year. Welcome to another UK Property News Recap – 29.11.2024
Knight Frank House Price Rewrites
As each year passes, over the top Christmas perfume and aftershave ads creep into prime Ad slots earlier. The same goes for house price forecasts. This week Knight Frank revised down its previous prediction of growth of 20.5% over the next 5 years to 19.3% as a result of rising inflation, stalling the delivery of base rate cuts.
All UK regions are predicted to take baby steps forward from 2025, but in the capital affordability will continue to suppress significant growth,
In turn, rental predictions were also amended, only in the opposite direction, upwards. This is due to supply levels falling as demand continues to grow; not helped by wannabe buyers forced back into the rental market queue as a result of affordability issues. This, Knight Frank predicts, will drive growth in both PCL and POL to 3.5% in 2025 – up from their previous forecast from only 3 months ago, of 3% & 3.5% to 4% in 2027.
Khan’s best laid rental plans
The London mayor, Sadiq Khan, launched a consultation for plans to create Rent Control Homes in the capital with the aim of creating at least 6,000 homes by 2030 with rents based on 40% of their average key worker household incomes after tax. The sticky issue remains; finding sites in London that are affordable to buy and develop while also accessible for tenants where developers can take the hit.
Higher inflation deflates developers’ recent optimism for 2025
Since the Labour government’s first Budget on October 30, the value of the six biggest listed housebuilders by market capitalisation is down by an average of about 18% while real estate investment trusts have fallen almost 5%. Things are definitely on the move but not necessarily in the right direction.
Londonmetric warehouse spend
Londonmetric is offloading its old office space and high street stock in favour of warehouses that hold more rental profit as users switch online. Currently the group has sold off £234m in assets and intends to raise another £300m for reinvestment.
Airbnb’s answer to the rental crisis – subletting
Tenants looking to make the rent or supplement their income can now WITH PERMISSION from their LANDLORD and LEASE and LENDER PERMITTING, sublet their apartment for a limited time on the condition 10-25% of the revenue goes to the landlord in London. Cue opportunists looking to circumnavigate their landlords, hoping not to get caught.
Interest rates eat into Nationwide’s margins
Nationwide’s pre-tax profits fell to 43% to £568m in the six months to 30 September, down from £989m in the same period the year before. The lender remained upbeat though as their recent takeover of Virgin Money softened this financial hit with a £2.3bn gain.
Halifax breaks the remortgaging mold
Halifax broke away from the lender norm by launching a new 1.5-year fixed-rate remortgage product. The deal will only be eligible to customers who use their own conveyancer but comes with £250 cashback. For those who are hoping for more favourable long term rates past 2025, this offers up an alternative or another fee for the lender when it’s up for renewal.
Barclays retraces its rate steps
Barclays reacts to a fall in swap rates by shaving off 0.2% from mortgage rates. Given the seasonal slow down, other lenders may follow suit to keep the home fires burning.
First time buyers moves
First time buyers in more expensive areas, where the average home costs over £300,000, are rushing to beat the stamp duty deadline before it reverts back from £425,000 at the end of March 2025 while those in more affordable areas take a step back till rates improve. As a result first time buyer activity is up in the Capital and the East of England – many banking on the property of choice to be sold chain free to avoid a protracted sale that could “stamp” on any discount.
7 year rule breaks records
In an attempt to dodge inheritance tax, parents are gifting their homes to their offspring early. The era of cheap money and opportunity is over, so parents who are able to safeguard the next generation against increased costs, which could prevent their children’s children from getting on the ladder, are taking action.
According to a freedom of information request by Hamptons submitted to the Land Registry and seen by Bloomberg; over 220,000 homes are on course to change hands – either fully or in part – for no cash in 2024, up about 45% from last year. In London, more than a quarter of homes will go for nothing.
New housing flatlines
New housing supply remained consistent from 2021-23 at 212,570, down by only 70 dwellings, or 0% in 22-23 vs 21-22. Once again, it is falling short of the government’s 300,000 housing target.
There was however an increase in applications for change of use – permitted development for office and agricultural buildings to residential on the previous year, was up from 534 to 598 and 7,093 to 8,381 respectively while new build homes increased by 212,570. In addition, 4,500 were from conversions between houses and flats and 640 from other gains (caravans, house boats, etc.), offset by 5,470 demolitions.
Household cost indices for UK household group
Higher interest rates continue to empty out renters’ and borrowers’ pockets while those in the money remain so. In the latest ONS household cost index to September 2024, private renters households were shown to have the highest annual inflation rate of 3.0% in the year to September 2024, reflecting rising private rental payments; followed closely by mortgage and other owner occupiers with a 2.6% inflation rate, in the year to September 2024. Outright owner occupiers experienced the lowest annual inflation rate by tenure type at 1.0% in the year to September 2024; social and other renters had the next lowest at 1.9%.
Halifax reassures borrowers the cost of servicing a mortgage is down in the hope of drumming up more business
Halifax, part of Lloyds Banking Group, claimed the average house in the third quarter of 2024 cost 6.55 times the mean annual full-time income, down from 6.62 in 2023 and a record high of 7.24 in mid-2022. Meanwhile, the cost of servicing a new mortgage dropped to its lowest in just over two years at 29% of average income, down from 33% a year ago, based on a mortgage with a 30-year term, a five-year fixed interest rate and a 25% deposit.
Zoopla HPI for October 2024
Zoopla’s latest house price index showed that over the last 12 months, the average house price increased by 1.5% to £267,200 (an increase of £3,900). Higher wages have managed to prevent house prices from falling further and return to sluggish growth. In those regions where house prices are more affordable in the North, Zoopla expects growth to be more pronounced while southern areas will continue to lag behind. Overall, house prices are predicted to grow by 2.5% over 2025, and by 7.5% over the next three years.This news along with the stamp duty threshold being reduced at the end of March 2025 has first timers on the move, As a result, the number of transactions is predicted to increase by by 5% over 2025, to reach 1.15m sales completions.
Money and Credit – October 2024
According to the Bank of England’s latest Money and Credit report – Those buyers looking to be in for Christmas and the New Year, and keen to avoid paying additional stamp duty next year, boosted net mortgage approvals for house purchases, which rose to 68,300 in October, the highest level since August 2022 (72,200). Similarly, with rates fluctuating, those looking to remortgage opted to fix on a term increasing approvals by 500 to 31,400.
A new home in time for Christmas at a discounted summer price.
UK monthly residential transactions ticked up in October 2024 to 100,410, 21% higher than October 2023 and 10% higher than September 2024.
And that concludes another UK Property News Recap – 29.11.2024. If you have any comments or suggestions, please get in touch here
