Insulating external walls & EPC ratings
With the price of gas and electricity rocketing, we are all looking for ways to reduce our energy bills. But what can you do once you’ve insulated the roof and sorted out those draughty windows? In more modern homes, you can add some cavity wall insulation. Not only will it reduce your bills, you may also need it if you want to install any kind of heat pump. More importantly, it could soon be essential for rental properties - from 2025, they will need to achieve a minimum EPC rating of C or it will be illegal to rent them out. The problem is, for the majority of properties built before the 1920s, the walls will be solid and there is no cavity to fill. Fortunately, there are a couple of alternatives.
One option is to use external wall insulation (EWI). This is essentially an insulating jacket on the outside of the house. The good thing about it is that it causes very little disruption to your domestic arrangements, as all the work happens on the exterior of the house. It is a very simple process - insulating material is fixed to the outer walls and you can then choose your covering finish, the most common of which is either render or timber boarding. There are some drawbacks - due to the extra layers, the outside dimensions of your house will change and that means you may have to adjust things. Window and door openings will be reduced and gutters and downpipes may need to be repositioned. The other main drawback is that it is not ideal for brick houses, period ones in particular, as the original finish will be covered over.
If you are thinking of having some EWI fitted, there is some debate as to whether or not it requires planning permission.
The safest thing to do is to check with your local planning authority first, especially if you live in a conservation area or your house is a listed building. The costs will vary greatly depending on the size and complexity of the job. As a rough guide, according to Checkatrade, it is around £100/sqm or £7,000 for a typical mid-terrace house and £20,000+ for a detached house. And don’t expect instant returns. Your heating bills will come down, but it is estimated that you may have to wait up to twenty years before you recover your costs.
The second option is to add some internal solid wall insulation. In this instance, insulating material is fixed to the surface of internal walls and then covered by a plaster finish. This is a much more invasive process and is likely to cause disruption in almost every room in the house and so is probably best done during a major renovation. Like EWI, it will alter the dimensions of your house, reducing room sizes by between 60mm and 100mm per external wall, which, for small rooms, can be a serious problem. Also, like EWI, it may require you to reposition things, such as light switches, sockets, and radiators. Another disadvantage is that it can cause condensation problems within the walls themselves. This is normally cured by using special plasterboard with a damp-proof membrane but if you subsequently fix any pictures or shelves to it, you will probably hammer a nail straight through the membrane.
The cost of internal solid wall insulation is half the price of EWI at approximately £50/sqm and will take up to ten years to pay off. It is, though, the only real option for period brick houses.
If you’re a landlord and are looking to expand your portfolio we, at Homesite can help – all you need do is to have a look at all the fantastic properties we have coming up on our website and across our socials
How is the property market in Notting Hill reacting to the rising cost of living?
The latest data shows both buyers and sellers are adapting to the changing financial conditions more quickly than many had anticipated. Normally, at this time of year, asking prices show a marked increase as spring approaches. This year, the rising cost of living and mortgage rates mean budgets are being squeezed, slowing the previously frenetic pace of the housing market. In response, sellers have shown surprising restraint, keeping their asking prices down at more or less the same level as January. As a result, sales volumes are holding up well at just 11% below their typical pre-pandemic levels (2019) - a marked improvement on the 30% drop that occurred just after Liz Truss’ mini-budget.
It would be reasonable to assume sales to first-time buyers would be most affected by the current conditions, but their 7% fall is notably lower than the 11% average. That may well be because high rents and the lack of supply in the rental sector are making purchasing a property an increasingly attractive option.
Tim Bannister Rightmove’s Director of Property Science says:
“The frantic market of recent years was unsustainable in the long term, and our key indicators now point to a market which is transitioning towards a more normal level of activity after the market turbulence at the end of last year. Agents are reporting that they are now increasingly seeing buyers who have more confidence and more choice albeit with revised budgets to accommodate higher mortgage rates.”
The other main indices are all painting a fairly similar picture. Although Nationwide’s figures, show prices fell by 1.1% last month, they also reveal consumer confidence in the economic outlook is improving. Nationwide therefore believe the market will remain subdued for a while but that “Conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”
Halifax’s index shows prices rose by 1.1% in February but despite their more positive figures, they also believe the market will remain subdued.
Kim Kinnaird, Director, Halifax Mortgages, says:
"Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December. Still, with the cost of a home down on a quarterly basis, the underlying activity continues to indicate a general downward trend.”
HOUSE PRICES AND STATISTICS
Of the three most up-to-date indices, only Nationwide’s was negative. Rightmove’s and Halifax’s show the market stabilising.
Nationwide: Feb: Avge. price £257,406. Monthly change -0.5%. Annual change -1.1%
Halifax: Feb. Avge. price £285,476. Monthly change 1.1%. Annual change +2.1%
Land Registry: Dec: Avge. price £294,329. Monthly change -0.4%. Annual change +9.8%
Zoopla: Jan: Avge. price £260,800. Annual change +5.3%
Rightmove: Feb: Avge. price £362,452. Monthly change +0.0%. Annual change +3.9% (asking prices on Rightmove)
BUY-TO-LET
The small declines in national average rents over the last few months came to a halt with February’s 0.3% rise. It means rents have risen by 10.2% over the last two years, reaching £1,175pcm.
Andy Halstead, HomeLet and Let Alliance CEO, notes, though, that something different is going on in the capital. Unlike the rest of the country, the average rent decreased for the third month in a row. Back in November, rents had briefly risen above £2,000 pcm for the first time. There is no doubt, affordability is far more stretched in London, so rents may have hit a temporary ceiling, although demand remains incredibly high, supply constricted and voids are falling. In mitigation, tenants’ average salaries are also rising, but not as fast as rents.
Halstead says:
“It is still a little early to predict whether this will be a sustained pattern or whether London will follow the pattern of the wider country and see prices rise again in the coming months.”
What is clear is that the government needs to act soon to dissuade any more landlords from selling up, or shortages will become even more acute and rents will rise even higher.
Do gardens add value in Notting Hill?
It would seem a simple enough question. However, the answer is far from straightforward as there are so many different types of gardens and so many different types of properties. Size does matter, but only if your garden is larger or smaller than average for the area and big is not necessarily better. A large garden that requires a lot of upkeep is bad news for the busy owner of an urban flat and a tiny courtyard garden is bad news for the owner of a 4-bedroom house full of kids. The garden needs to suit the house. One thing you can be sure of is that a badly kept garden is going to have a negative impact on the saleability of your house, especially if it's the front garden, as it is key to the property’s kerb appeal. To complicate matters further, everyone’s idea of the perfect garden is different. For example, most of us want a low-maintenance one, but keen gardeners and retirees may want something more challenging. So, if you can’t be specific about garden values, how can you at least maximise its potential?
Designer or tidy up?
Should you get in a landscape designer? It depends. If you are preparing your house for sale, it’s normally best to just give it a really good tidy-up. Get the bins out of sight, clear away the dead leaves and trim the hedges. If you have a lawn, give it a mow and dig up those weeds. If your garden is a real mess or, conversely, if you are planning on staying a while, you may want to do something more radical and that may entail bringing in some professional help. Whatever your plans, to appeal to the widest possible audience, experts advise that maintenance should be one of the key considerations. And bear in mind, if you spend a lot of money, you are unlikely to get it back when you sell.
Outside living
In more urban environments, where space is tight, the benefits of a decent garden are far clearer cut. A good way, therefore, of maximising its value is to turn it into extra living space, which you can use for both cooking and socialising. Those types of gardens are even more desirable if they link seamlessly to the internal spaces. As an added bonus, they also tend to be low maintenance, as they are mostly made up of hard surfaces such as decking or paving, and only have planting on their peripheries. If you then install some lighting, you will also be able to use them at night.
Rooftop gardens
In the very heart of towns, any outside space is a major bonus. If you don’t have any, one option is to build a roof terrace. However, before you start, you will almost certainly need planning permission and you should also get professional advice about whether the roof can take the extra weight. Once you are over those hurdles, just imagine how much better (and more valuable) the apartment will be. Especially during the summer months. And, if there are a lot of similar flats for sale at the same time, it could well be a deciding factor.
Family gardens
The best family gardens combine several different functions. Just as with urban gardens, you should ensure there are areas for eating and drinking, but also places for children to run around in, for playing football, paddling pools and climbing frames. Ideally, there should also be space for an extension or a garden office. Mind you, if they are too big, they can be intimidating, as they require a lot of upkeep. Finally, water features may be popular in garden makeover programmes, but if you are putting a pond into a family garden, you should be aware that they are frequently seen as a dangerous hazard by buyers with young children.
If you are looking for a property where you can add value in Notting Hill, please do give us a call
Do road names really matter?
We attach a surprising amount of value to the names of the roads we live in. 3% of us are
willing to pay as much as £50,000 for a house with the right road name, according to a survey
by property portal OnTheMarket. And what we want most of all is anything that sounds like it’s
got some kind of regal connection, such as Royal, Palace, King, Queen or Crown, even more
so if you live in some of London’s prime locations, such as Marylebone, Mayfair, Hyde Park or
Regent’s Park.
Just under 40% of us would also be willing to pay a more modest £5,000 premium for a home in
King’s Road, Prince’s Avenue or Bishop’s Drive. 10% would be willing to part with an additional
£30,000. And our favourite? Royal anything. According to the survey, up to 14% of us would pay a
premium for a house with the word Royal in its road name.
According to the poll of more than 1,000 UK buyers, 30% said the reason why they were willing to pay
more for certain names was that they liked the extra prestige it added to their address. They did also
find, however, that there were regional variations and it seems people in the North East are either
more canny or less prone to snobbery, as only 19% of them were prepared to pay a premium,
compared to 43% in London.
A similar survey carried out by rival portal, Zoopla discovered that there was also a value placed on
the type of road name. They found the highest value properties tended to be called something ‘xxxx
Hill’, where prices were 50% above the average property price. Next was ‘xxxx Lane’ at 37%, ‘Mews’
(35%), ‘Park’ (29%) and ‘Green’ (23%). Houses on a road with ‘Street’, on the other hand, were worth
29% less than average, which was probably because it is the most common name and so covered a
wide variety of properties and locations.
In truth, these types of street names are not genuinely comparable to the ones that OnTheMarket
were looking at, as they tend to have a direct bearing on the quality of the properties, ie mews tend to
be in expensive areas and therefore have more expensive houses, as do Greens etc. However, a
Royal Mews has got plenty of snob value, as does King’s Hill. There are some road names that have
the opposite effect, such as Staines Road, Slag Lane (yes it does exist – it’s in Lowton Lancashire),
Crotch Crescent (Marston, Oxfordshire) and there is even a Minge Lane in Upton-upon-Severn,
Worcestershire.
Ultimately a name is not a criteria by which you should be choosing your next home and
OnTheMarket points out,
“There is no question that location is one of the most important elements when buying or renting a
new home, but it is interesting that a prestigious sounding street name can help to influence a buyer
or renter’s idea of price and worth.”
The top street name prefixes that house hunters would consider paying more for a property are (by
preference):
- Royal (14%)
- Palace (6%)
- Crown (5%)
- King (7%)
- Queen (6%)
- Prince (4%)
- Princess (4%)
- Duke (2%)
- Duchess (2%)
- Lord (3%)
- Lady (2%)
- Saint (2%)
• Bishop (2 per cent
What’s in store for house prices in 2023?
We thought you might be interested in what all the experts are saying about house prices in 2023. However, to put it into context, it’s to start with a review of 2022. The year began with mounting concern over inflation and, as a result, commentators expecting modest house price growth of between 3% and 5%. However, with three prime ministers, the war in Ukraine, spiralling energy costs, a new monarch, the cost-of-living crisis and a rising base rate, 2022 defied all expectations.
Driven by the disparity between supply and demand and the ongoing race for space, the housing market began the year briskly and prices rose by 0.3% in January. In February, growth accelerated to 2.3% - the largest monthly increase in 20 years. War, however, was looming and in March, Russia invaded Ukraine and the price of food and energy soared. Despite it all, house prices continued their upward trajectory, rising by another 1.7%. By May, although the base rate had hit 1.0%, house prices had reached a record high of £367,501 (+2.1%), the fourth record-breaking month in a row. It wasn’t until August that there was any kind of fall, but it was only the usual summer slowdown, as many buyers put their purchases on hold while they took their first holidays since the onset of Covid.
As autumn loomed, Boris was ousted, Liz Truss became Prime Minister and her now notorious mini-budget unleashed chaos on the financial markets. The base rate shot up to 2.25% and the average fixed-rate mortgage hit 6.65%. The appointment of Rishi Sunak as Prime Minister soon calmed things down but he has inherited some serious economic challenges - double-digit inflation is generating a wave of strikes, the bank rate has climbed to 3.5% and, although average fixed-rate mortgages have now come down to 5.24%, they are still a long way above the 1.59% of twelve months earlier. And, for the first time in 2022, house prices are reacting as you might expect – falling by 1.1% in November and by 2.1% in December. They still, though, ended the year 5.6% up on 2021. (Figs: Rightmove).
So, after such a tumultuous year, what on earth are the experts predicting for the housing market in 2023? The good news is, most believe inflation and mortgage costs have already peaked and should be coming down this year. However, with real wages falling and mortgage costs still high, especially when compared to the sub 1% rates we were used to, affordability is likely to become increasingly stretched, especially for first-time buyers. As a consequence, most experts are forecasting price falls of between 3% and 10%, with low transaction volumes and an ongoing reversal of the flight from the cities. The falls, however, would only partly undo the substantial house price gains made over the last couple of years.
2022: the facts
Nationwide: Dec 21 to Dec 22: National £262,068 +2.8%. London £528,000 +4.1%
Halifax: Dec 21 to Dec 22: National £281,272 +2.0%. London £541,239 +2.9%
Land registry (3 months in arrears): Oct 21 to Oct 22: National £296,422 +12.6%. London £541,7205 +6.7%
Zoopla: Nov 21 to Nov 22: National £258,100 +8.2%. London £541,720 +6.7%
Rightmove: Dec 21 to Dec 22: National £359,137 +5.6%. London £666,507 +4.6% (asking prices).
The predictions
Please note – where possible, figures from 2022 are from the predicting company’s own indices.
Nationwide
Last year, Nationwide was expecting the market to slow and prices to go up somewhere between 0% and 2%. Although their final figure was close at 2.8%, they had not, like most others, foreseen it would come after a prolonged period of rapid growth. For 2023, they have said there is likely to be a modest decline of around 5%.
Halifax
Halifax didn’t give an exact figure for their prediction last year but were expecting the market to cool. This year, they are factoring in an 8% fall but point out that that would only mean the cost of the average property returning to April 2021 levels.
Zoopla
Zoopla had predicted growth of 3% in 2022, which was some way below their figure of 8.2% (Nov). Their forecast was, however, far closer to the other indices’ figures of between 3% and 5%. For 2023, they have predicted prices will dip by 5%, with smaller falls in the more affordable areas.
Rightmove
Last year Rightmove expected high demand and a shortage of available property to push up prices by 5% nationally and by 3% in the capital. They were very close to their final of +5.6% nationally but were less so with London at 4.6%. Of all the commentators, Rightmove is expecting the softest landing for house prices in 2023, with a drop of just 2% and some wide variation across the UK.
A selection of other predictions
CEBR were somewhat wide of the mark with their expectations of a market slowdown but were closer with their prediction of a 2% rise. This time around, they are expecting house prices to fall by 4.5% by the end of 2023, but with a peak contraction of 6.2% in the third quarter.
EY ITEM Club were rather pessimistic with their prediction that growth would slow markedly in 2022 and that prices would only just remain in positive territory. And they are also some of the biggest pessimists about 2023, forecasting house price falls in double digits.
Capital Economics went for one of the higher predictions in 2022 - a rise of around 5% - but have gone into reverse for 2023 with their rather gloomy prediction of a 12% fall.
Make The Most Out Of Your Buy To Let Portfolio
Whether you’re an experienced landlord in Notting Hill or are buying to let for the first time, maximising your profits is sure to be your top priority.
Fortunately, there are plenty of actions you can take to make sure your portfolio is as profitable as it can be. Read on for our tips on how to get the most out of your buy-to-let portfolio in Notting Hill…
Review Your Rent(S) Yearly.
It’s a good idea to regularly check that the rent you’re charging is competitive. It’s also fairer to long-term tenants if rent goes up by a small amount each year, rather than staying the same for several years then increasing suddenly by a large amount.
Keep Costs And Regular Outgoings Under Control.
As well as reviewing the rent, you should keep an eye on your outgoings and see if there’s areas where you can cut back. If you pay the utility bills, for example, shop around providers to get the best deal.
Stay On Top Of Maintenance.
Keeping your properties well-maintained will make them easier to market when you need to find new tenants, and will also encourage existing tenants to stay in your property, reducing void periods (the time between tenancies when the property is empty) for you.
Kitchens And Bathrooms Are Key.
Make sure these rooms look their best – freshly decorated modern kitchens and bathrooms will enable you to ask for higher rents.
Invest In Good Quality Appliances.
It’s worth investing in high-quality appliances and white goods (if you’re supplying them), as you won’t have to spend money on frequent repairs or replacements.
Consider Allowing Pets.
The law now prevents landlords from automatically banning pets, although ultimately it’s still up to you whether you permit tenants to have them or not. But it is worth bearing in mind that tenants with pets are usually prepared to pay higher rents and are also likely to be financially stable and looking to commit to longer-term leases.
Maintain A Good Relationship With Tenants.
If you have reliable tenants who look after your property, try and maintain a positive relationship with them. Void periods mean a loss of income for you, so it pays to do what you can to keep good tenants.
Consider Setting Up A Limited Company.
There are tax benefits to operating through a limited company as well as specific legal protections. There are also a couple of disadvantages so it’s best to speak to a financial advisor before you make any decisions.
The first step towards making sure your rental properties are at maximum profitability is knowing exactly what they’re currently worth. Contact us today for an up-to-date valuation, and from there, we can offer expert guidance and help you start 2023 in the best possible position.
Get your property valuation here: valuation.homesite.co.uk
Tailored Services For Landlords
We offer a flexible approach to letting and property management, allowing you to choose exactly how hands-on you want to be as a landlord. We can simply find high-quality committed tenants, or we can provide a full management service, giving you peace of mind that your investment is in the safest hands. Our experienced lettings team are up-to-date with the latest regulations and legislation concerning the rental sector, so you can be sure you’re receiving expert guidance.
How We Market Your Rental Property
Our comprehensive marketing services are designed to showcase your property and attract high-quality tenants:
• Professional photography • EPC charts • Advertising your property on Rightmove, Zoopla, Prime Location and social media
How To Get Started
Any property questions you have, no matter how big or small – simply call our Notting Hill office on 0207 243 3535 Let’s discuss your options to get you moving in the right direction for 2023
Energy efficiency becoming a priority for both buyers and tenants
At Homesite, we try to keep you up-to-date with all the big issues in the housing market. For some time now, we have been getting increasingly concerned about our homes impact on the environment and our need to reduce it. The war in Ukraine and the subsequent rocketing of our energy bills have supercharged the issue and it is no surprise to find, as a result, both buyers and renters alike are now prioritising energy efficiency in their search for somewhere new to live. It has even reached the point where, according to research by Housebuilder Redrow, more time was spent during the world cup discussing the cost-of living and being eco-friendly than the football!
It's data, though, from British Gas that paints the clearest picture of the benefits of living somewhere energy efficient. The average home in the UK has an EPC (energy performance certificate) rating of D and that is because most of the country’s housing stock is old (70% was built before 1980) and poorly insulated. Newbuilds, in contrast, are an excellent example of energy efficient homes, with the vast majority having an EPC rating of B. If you compare the two together, the average new build uses less than half the energy (9094 kWh) of an older property (21621 kWh per year). And you can see what that means in monetary terms in the table below:
New build average home Difference
Houses £1,539.17 £4,169.97 £2,630.80
Flats £1,237.82 £2,438.94 £1,201.12
Bungalows £1,734.67 £3,564.08 £1,829.41
Maisonettes £1,510.18 £3,074.42 £1,564.24
It is not all about cost. If the 13.8 million homes currently with the average EPC rating of D or lower were brought up to the same efficiency levels as new builds, there would be a carbon emissions saving of over 31 million tonnes.
More research, this time by MyGlazing.com, shows just how much of a priority it has become. They found as many as 25% of the UK’s homeowners are planning on selling their property in order to move to a more energy efficient one. They also discovered buyers are prepared to pay a 15% premium for a property with a rating of C or above. 1 in 20 even went as far as to say they would pay as much as another 50%. The issue also has had a clear impact on the desirability of older, ‘character’ homes, too, with 40% saying they would avoid them, as they were concerned about the cost of bringing them up to standard. So, what exactly are buyers and renters looking for? The top 10 green features are:
Loft insulation (54%)
Newly fitted double/triple glazed windows (47%)
A newly fitted boiler (45%)
Cavity wall insulation (45%)
Newly fitted double/triple glazed doors (43%)
Draught proofing (40%)
Energy-efficient light bulbs (39%)
Solar panels (35%)
A recently renewed EPC rating of C or above (33%)
Dual flush toilet (32%)
If you’ve got a home to rent or sell, especially an older one, and you want to maximise its potential value, it is well worth considering making some efficiency improvements before putting it on the market.
Preparing a home for sale or rent in winter in Notting Hill
Our customers at Homesite are at not just investors in buy-to-let, they are homeowners too. And, if of you are trying to sell or rent out a house at this time of year, it probably won’t be looking at its best: the trees are bare, their leaves scattered across the garden, both front and back. Any flowers have long since withered and died and you’ve almost certainly given up mowing the lawn. Inside it’s not much better, it’s dark and gloomy and the last time you cleaned the windows was in a mad rush of enthusiasm last spring. So how on earth can you make it look attractive to a potential buyer?
Starting with the exterior, the first and most obvious thing to do is to have a really good tidy up. The lawn is one of the most visible elements of your garden and you will be amazed how much of a difference it makes when it is neatly cut. The good news is that while you’re mowing it, you’ll be clearing away the leaves at the same time. And don’t forget - give the edges a trim while you are at it. Next, sweep the remaining leaves off any pathways and terraces and cut back any dead plants. If your garden is still looking a bit drab, there are one or two winter flowers you can buy, such as cyclamens or winter flowering pansies. Even the odd evergreen shrub can help, especially if it’s got some bright berries on it, so get yourself down to the garden centre and see what is on offer.
Unfortunately, in winter, everything seems so much more exposed, so the little details show up more than normal. It means you need to ensure that: windows, doors and gates are either washed or repainted: knockers, knobs and numbers are shining - hinges are oiled and the porch light actually has a working bulb in it! And, in the run up to Christmas a little holly wreath wouldn’t go amiss either.
That brings us on to the next steps. When you go inside a house at this time of year, if there is a welcoming glow coming from inside, it makes you feel good. If it is dark, it has the opposite effect. So, light it up. Not just the hallway, light up the whole house, especially those dark corners. A great tip is that, if you want to replicate natural light conditions, you need lots of low-level light sources. A single, high wattage bulb, on the other hand, can make a room look like an interrogation centre.
Temperature is just as important as the lighting levels and can have a big influence on how someone feels about your home. Normally, most people turn off the heating while they are out, but if there are going to be viewings, make sure it stays on and is at a comfortable temperature - that means neither a sauna, nor a fridge. According to most experts, that is around 19C. And, clearly, the most welcoming thing of all is a fire, roaring in the hearth. Mind you, you should always think twice before leaving a real fire unattended - after all you want to sell or rent the place, not burn it down.
If you still need to add some extra cheer, you can always put some cut flowers around the house. A Christmas tree and a few festive lights would be great too, but don’t clutter up the place too much as it can make the rooms feel smaller. Another mistake to avoid is that huge bit of plastic that covers the carpet by the front door. It is highly practical but not the kind of thing that makes visitors feel relaxed and welcomed. Things do get mucky at this time of year, it's true, but if you’ve got a spare bit of the carpet in the attic, cut it to size and use it as a rubbing mat. Or you could get some coir matting from your local DIY store.
There you go - plenty of quick and simple ways to make your house sparkle, whatever the weather.
Property Prices In Notting Hill
As you know, at Homesite, we like to keep you up to date with all the latest developments in the property market and the current political and economic upheavals mean there has been a great deal of speculation over what is going to happen to it over the next 12 months. Many are expecting the heat to come out of demand and prices to fall, especially with the base rate rising once again last month. However, it is not as straightforward as it may appear, as there are a number of factors at work which need to be taken into account before it is possible to get a true understanding of what is actually going on.
The latest data from Rightmove’s index shows, for example, that far from falling asking prices were up again in October, by 0.9% nationally and by an impressive 1.9% in London. At the same time, Rightmove notes that demand softened, but not by much and is still 20% ahead of pre-Covid levels (2019). The data also shows no evidence of a surge in the number of sales falling through - just 3.1% of agreed deals compared to a long-term average of 3.0%. Nor were vendors making significant reductions to their asking prices - 23% of listings had their prices reduced compared to a more typical 32%.
These are the kind of statistics that you would normally expect from a healthy market, however, when you dig a little deeper, it seems that some of that momentum is being driven by buyers who have had mortgages agreed before rates rose and are therefore rushing to push through deals in order not to lose them. When those buyers complete their deals (and there are 293,000 of them, according to Zoopla) there may be a more pronounced slowdown, but that is not likely to happen until the first quarter of 2023.
And that slowdown is unlikely to be anywhere near as serious as some of the more lurid recent headlines have suggested. That is because prices will continue to be supported both by the shortage of property and the current historically high levels of employment. Perhaps more significantly, prices will also be supported by the improving outlook for mortgage costs. Although the base rate went up by 0.75% last month, mortgage rates actually fell. That’s because prices are affected as much by the outlook for interest rates as the current base rate (see this month’s financial section). And the outlook for the UK’s inflation, and therefore the base rate, has been adjusted down in recent weeks, with many experts now predicting mortgages have already peaked at 6.5% and are likely to start falling back over the next 12 months, dropping to somewhere between 4% and 5% towards the end of 2023.
These are, though, challenging times and the economic outlook could still change rapidly, especially, for example, if inflation dropped faster than expected, which would be good news, or if there was a significant wave of redundancies, which would not be such good news. In the meantime, the housing market is, and is likely to continue to be, remarkably resilient.
Tim Bannister, Rightmove’s Director of Property Science says:
“What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget. There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues. New sellers coming to market in the month have been pricing strongly, and the number of homes that were already on the market seeing a reduction in price is still well below the long-term average. It will take a bit of time for the market to settle in to a new, more ‘normal’ level of activity following over two years of market frenzy, especially with new developments happening almost daily at the moment.”
And finally, the Autumn Statement was not as bad for the housing as many feared. Liz Truss’ Stamp Duty will be reversed, but not until April 2025, turning it into a Stamp Duty holiday rather than a long-term commitment. It means the threshold will go back to £125,000 from £250,000 and the first-time buyer exemption will be reduced to £300,000 from £425,000 and be limited to properties of up to £500,000. The restricted timescale might at least put some urgency into the sales market, just as it is starting to slow.
Changes in Capital Gains Tax are another area where there are implications for housing, especially landlords and second-home owners. The annual exemption they would receive when they sell a property will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 in April 2024. Inflationary pressure and the social care crisis have also meant the Chancellor will allow councils to raise council tax by as much as 5%, up from a limit of 2.0% previously. At the same time, Hunt capped social rent rises to a below inflation 7%.
HOUSE PRICES AND STATISTICS
Rightmove’s index was up last month, but Nationwide’s and Halifax’s were down, although their annual figures were up by 7.2% and 8.3%, respectively.
Nationwide: Oct: Avge. price £268,282. Monthly change -0.9%. Annual change +7.2%
Halifax: Oct. Avge. price £292,598. Monthly change -0.4%. Annual change +8.3%
Land Registry: Aug: Avge. price £295,903. Monthly change +0.9%. Annual change +13.6%
Zoopla: Sept: Avge. price £259,100. Annual change +8.1%
Rightmove: Oct: Avge. price £371,158. Monthly change +0.9%. Annual change +7.8% (asking prices on Rightmove)
What effect will stamp duty changes have on house sales?
One of the few remaining measures in Kwasi Kwarteng’s mini-budget was the slashing of stamp duty, especially for first-time buyers. So, what are the changes and how will they affect the housing market?
There are two main changes – for ordinary buyers, the Stamp Duty (SDLT) threshold has been raised from £125,000 to £250,000. From there on, as before, they will pay 5% between £250,001 and £925,000, 10% from £925,001 to £1.5m and 12% thereafter. For first-time buyers, the Stamp Duty threshold has been raised from £300,000 to £425,000 for properties of up to £625,000 (up from £500,000). The 3% surcharge for second properties and BTLs and the 2% surcharge for foreign buyers remain unchanged.
As a result, 33% of all homes for sale will no longer be subject to SDLT (7% previously). At the time of writing, the average property for sale on Rightmove is £367,760. A typical buyer would therefore pay £8,388 before the change and £5,888 afterwards – a saving of £2,500, which is their maximum achievable saving. For first-time buyers, the figures are higher - 66% of homes will now be SDLT-free, with savings of up to £11,250. And, if they were to buy the average property, their SDLT would be reduced from £3,388 to zero. There would be savings for second home buyers, too – their tax bill on the average property coming down from £19,421 to £16,921.
Although first-time buyers (FTBs) would therefore appear to be the biggest beneficiaries, it is not so straightforward. FTBs tend to buy cheaper properties - flats and small houses which are often below the average price. In fact, it is estimated that the majority of FTBs spend under £250,000 on their first homes, which means the reduction in Stamp Duty will have no effect whatsoever on them, as they were already below the tax threshold. It is only in the more expensive areas, such as London, where the changes will be felt most, and only for purchases under £625,000, bearing in mind the average London property on Rightmove is £682,499.
If, though, an FTB was to buy a typical flat, say, in the London borough of Merton (avge. flat price £431,131), they would previously have paid £6,557 in tax but will now pay just £307, a saving of £6,250. The maximum saving would be for a property costing £625,000, whose stamp duty would have been reduced from £21,500 to £10,000.
STANDARD HOME PURCHASE
BRACKETS RATE
£0 - £250,000 0%
£250,001 - £925,000 5%
£925,001 - £1,500,000 10%
£1,500,001+ 12%
FIRST-TIME BUYERS
BRACKETS RATE
£0 - £425,000 0%
(but only for purchases up to £625,000)
£425,001 - £925,000 5%
£925,001 - £1,500,000 10%
£1,500,001+ 12%
STAMP DUTY ON AVERAGE HOUSE
£367,760 (Rightmove)
STANDARD PURCHASE FTB
SDLT was £8,388 £3,388
Now £5,888 £0
Saving £2,500 £3,388
So, will the savings stimulate more activity in the housing market? The answer is a qualified yes. Unlike the Stamp Duty holidays, though, the changes are permanent, so there will be less urgency. In addition, the maximum savings of £2,500 for normal buyers, although not unwelcome, are not enough to offset the rises in mortgage rates. For first-time buyers, however, it is a different story. One of the biggest barriers to entry for them has been raising the deposit, which includes making a provision for Stamp Duty. In the more expensive area, that just got considerably easier.