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UK Property News Recap

It was clear that the first full working week, sans les enfants, meant business for UK Property. After 6 weeks of speculation on what the market would do, there was an eagerness to report on how it had fared during the holiday season. To kick start this weeks UK property recap the first bombshell came from the Bank of England which released:


Mortgage Lenders and Administrators Statistics for Q2 2023

This provides factual data on what is going on with lending in the current market. Reflecting buyers and homeowners behaviours as well as the cost implications.

For Q2 it showed mortgage lending had slumped by nearly a 3rd year-on-year – this was the direct result of interest rates increasing, squeezing affordability.


Noticeably, the value of outstanding balances with arrears increased by 13.0% over the quarter and 28.8% over the year, to £16.9bn in 2023 Q2. This equates to 1.02% of all outstanding mortgage balances. So despite the percentage increase, homeowners…so far… are managing to keep the wolf from the door. 


Interestingly, there was a 3.9% increase in owner occupier purchases in the second quarter, showing buyers who were thinking  mid to long term were still keen to move, or get out of rented. However, buy-to-let purchases were at their lowest since 2010 at 8.1% – I expect the majority of buyers still looking to invest in this sector will be buying at a discount with cash. 


Adapt or let your profits wither. 


Post annual review, UK developer Vistry concluded that its current stagnant house building sector will merge with its in demand, affordable-housing business. ​​Claiming “affordable, sustainable homes are at the core of the Group’s social purpose and vision.” To translate – we need to salvage our profit margin and keep the shareholders happy.


Meanwhile…SME builders were bemoaning the excessive paperwork, costs and 2 year wait for a principle of development. Most of these developers will have taken out lending on the purchase which they will be paying the interest on whilst waiting for planning. Every month eats into their profit margin so with every set back or delay they could risk making a loss.  As a result only a 10th of developers are built by SME developers today compared with 40% in 1988. 


Curious of how developers  section 106 contributions are being spent. Research across 170 councils found that, on average, local authorities had £8m in unspent funds given to them by developers to pay for local infrastructure to facilitate new homes. Across England & Wales, this suggests councils have about £567m earmarked but not spent on affordable housing.



Over at the ONS there was mixed news.

Wages had increased in August 2023 by approximately 7.8%.  This was good news for workers as it supports rents, avoiding arrears whilst helping (not solving) affordability. On the flip side it makes the likelihood of interest rates staying higher for longer on the short end, a given. By staying higher for longer this will further hit property prices and affordability, limiting transactions. 


On the construction side; in volume terms output decreased 0.5% in July 2023, but remained flat over the 3 months to July. This was caused by homeowners & builders feeling the pinch, delaying repairs & maintenance & building and apparently…the weather?


Zoopla – which is part of the Proptech giant ZPG that owns Zoopla & Primelocation and recently rebranded its property division “houseful” – released its rental house price index which showed signs that demand was slowing (20% on last year) but rental prices were still growing. Over the last 3 years the average renter has seen costs rise £2,800. In the past year alone, prices have increased by £110 per month over the last year – an annual increase of £1,320.


According to the Estate Agent Hamptons, continued double digit rental growth means rental affordability is now at its worst for over a decade with the average rent as a percentage of gross earnings averaging 27%. This looks set to worsen as it expects rents for new lets to increase by 9% in 2023 then slow to 5-6% in 2024. 


The House of Lords voted on Wednesday on whether to scrap EU-era rules that force housebuilders to mitigate the impact development has on river health. Labour’s Angela Rayner, who recently added housing to her responsibilities, tore into the Conservatives’ plan to amend the pollution bill. The Government claimed it would add an additional 100,000 homes whilst Labour argued this would increase river pollution. After 3 hours of debate, the  peers voted 203 to 156 against.


Angela Rayners alternative suggestion was for developers to crack on with building but under Grampian conditions which would mean they COME UP with measures to counteract environmental harm before homes are occupied whilst also imposing a time limit to do this within. Why would anyone do this and risk millions on a development, if they didn’t know what measures they could implement in the first instance. 


The latest RICS surveyor report for August 2023 showed that 68% of those surveyed are seeing house prices decline. 67% believe further price falls are likely as buyers affordability & confidence remains strained. And 48% are speculating that prices will be lower next year.


In the Rental sector 60% of those surveyed believe prices will increase over the next 3 months, due to the supply/demand unbalance. This is a result of 47% of surveyors seeing an increase in demand in August and a 20% decrease in rental listings.


And that concludes this week’s UK Property Recap. As ever any suggestions or comments please get in touch here.