Property News

Green shoots

As you know, we at Homesite like to make sure we keep you up to date with everything that’s been happening in the property market. And January’s housing data is of particular interest because it provides the first clues to the direction of the housing market for the year ahead. This time around even more so, as the market had been waiting to see how buyers and sellers would react to the reductions in mortgage rates that were occurring at the back end of 2023. The market had already been showing signs of recovery, with Halifax’s monthly figures surprising many commentators by moving into positive territory from October.

January’s figures show that process is now accelerating as nearly two years of pent-up demand is released onto the housing market. Activity has risen across the board. According to Zoopla, buyer demand was up 12% in January when compared to the same period in 2022. Agreed sales were also up (+13%) but in some areas, such as Yorkshire and the Humber, they went even higher at +19%. The number of properties coming to the market has been on the rise, too, with a 22% increase in supplies in January.

Rightmove is also seeing increasing activity levels. Asking prices were up 1.3% in January and, even more significantly, the Mortgage in Principle section on their website has seen record traffic post-Christmas.

Tim Bannister Rightmove’s Director of Property Science says:

”The numbers suggest that many are taking action to make their move in 2024, perhaps including some who paused last year due to the more unsteady mortgage market.”

However, it’s not all good news. Mortgage rates may have come down, but at 4.86% for the average 5-year fixed rate, they are still high compared to the last decade or so and they are unlikely to come down much further this year. It means affordability remains stretched and buyers are seeking discounts.

Zoopla is reporting that a fifth of sellers are having to accept offers that are more than 10% below their asking prices and they advise that ‘sellers must continue to price realistically if they are serious about moving in 2024. Improved market conditions will boost the chances of a sale, but sellers shouldn't expect to list at a higher asking price.’

In better news, is London, where the market had been lagging behind the rest of the country for some time, there is some of the strongest growth in demand. Since Christmas, there have been above-average increases in all areas, from inner and suburban London to the commuter areas.

HOUSE PRICES AND STATISTICS

Monthly growth figures for January vary between +0.7% and +1.3%. Annual rises vary more widely, from -0.7% to +2.5%, but all the indices are showing signs of improvement.

Nationwide: Jan: Avge. price £257,656. Monthly change +0.7%. Annual change -0.2%
Halifax: Jan. Avge. price £291,029. Monthly change +1.3%. Annual change +2.5%
Land Registry: Dec: Avge. price £284,691. Monthly change +0.1%. Annual change -1.4%
Zoopla: Dec: Avge. price £264,400. Annual change -0.8%
Rightmove: Jan: Avge. price £359,748. Monthly change +1.3%. Annual change -0.7% (asking prices on Rightmove)

BUY-TO-LET

As has been the case for some time now, the rental market appears to be on the opposite path to sales. With affordability now stretched to its limit, rents came down yet again last month. Homelet’s data shows the average is now £1,260pcm, a fall of 0.6%, although, on an annual basis, rents remain in positive territory at 7.5%. It is no surprise to find that some of the biggest falls have occurred in London (-2.2%), where rents have soared the highest. Just two years ago, the average rent in the capital was well under £2,000 at £1,760pcm. It is now £2,081pcm, which means a typical London tenant is currently spending over 40% of their income on rent.

Falling mortgage costs have meant that the gap between the cost of renting and buying is closing but it is still considerable. For someone with a 10% deposit, they will pay around 25% more to buy than rent and that is without factoring in having to save for a deposit beforehand. It means, unless mortgage costs fall substantially, there is unlikely to be any reduction in demand for the rental sector.

There are, though, some developments on the legislation front. With an election looming and the Tories trailing Labour, especially with younger voters, Michael Gove is now turning up the pro-tenant rhetoric and is promising to speed up progress on the Renters Reform Bill and No-Fault Evictions. The concern is that he will push through the legislation without providing the required changes in the legal system that are needed to make it work for landlords.

by adam

Post-Christmas Bounce

For the last couple of years, there has been a serious shortage of stock in the sales market. In November 2020, the average agent had 66 properties on their books. By January of 2023, that number had sunk to just 42, a fall of nearly 40% (source: Rightmove). It may have helped support house prices during some challenging times, but for the market to function properly, buyers need choice. If they don’t, they, in turn, elect not to sell, further exacerbating the problem.

That’s why Rightmove’s report of a record number of sellers listing post-Christmas is such good news. According to the data, on Boxing Day alone, more than 10,000 new properties came onto the market – the largest number in over a decade. Such a pronounced surge in property for sale could have pushed the balance between supply and demand too far. Fortunately, at the same time, traffic on Rightmove’s website also spiked. Visitor numbers were up 273% from the previous day and buying enquiries were up 17% compared to the previous year. The stats are so good that many commentators are now revisiting their predictions for house prices in 2024.

The drivers behind it all are plain to see - many buyers (and sellers) had been sitting tight, while mortgage costs soared. However, at the end of autumn, the base rate finally reached its peak and then, in the run-up to Christmas, lenders started slashing their mortgage rates. Some by as much as 1%. It has not only reduced buyers’ costs, it has also given a substantial boost to the market’s confidence.

Even more encouragingly, it is likely that mortgage rates will continue coming down. although only by small amounts until there is another reduction in the base rate, sometime towards the back end of this year. Those falling mortgage costs also mean that, with rents soaring, there is increasing motivation for tenants to get themselves onto the first rungs of the housing ladder.

Rightmove’s Tim Bannister says:

“The scale of this year’s Boxing Day bounce is an early positive sign at the start of the year that buyers and sellers are out there and taking action, likely including some movers who had put their plans on hold last year.”

if you are thinking of selling, though, you should be aware that the market remains highly price-sensitive. It is still in the early stages of recovery and more choice means more competition between sellers. And buyers are likely to want to negotiate - the average is currently around 5.5%. It means, that if you overprice your property when you first put it on the market, you risk it going stale and that will not only make it harder to sell, but it will also take longer.

Tim Bannister goes adds:

“Accurate and realistic pricing for the local area is the recipe for success for sellers in 2024, and it’s been proven that over-optimistic pricing makes a move much less likely.”

by adam

What’s in store for the housing market in 2024?

As a result of inflation and the chaos unleashed by Liz Truss’ mini-budget, many were expecting 2023 to be a challenging year for the housing market. With mortgage costs soaring, quite a few commentators were even forecasting double-digit falls in house prices. However, in the event, the housing market bucked all expectations and there were signs, as of early January, that the housing market would hold steady. Inflation, on the other hand, proved more stubborn than expected. The interest rates, instead of peaking at 4.5%, went on to hit 5.25% and were forecasted, at one point, to reach 6.5%.

Activity, unsurprisingly, was subdued and by the summer, the rising cost of living was generating a wave of strikes and there were fears the economy would suffer. In the housing market, prices fell, but not by much, as many buyers, especially second-steppers, decided to sit tight and wait for mortgage rates to come down. Fortunately, high levels of employment meant that few were forced sales, although ever-rising rents ensured that first-time buyers were the most active in the market.

In August, the base rate climbed to 5.25% but was finally looking like it might have reached its peak. It took buyers several more months to be convinced it wasn’t a temporary blip, but with mortgage costs falling, confidence grew. By November, prices were at last on the move, although sales volumes were low and the market remained highly price-sensitive.

House prices ended the year down but, according to most of the indices, only 1% to 2%. It was the more affordable areas and homes which fared best, with the most expensive areas - the Southeast (-4.5%) and London (-2.3%) - seeing the biggest falls. In contrast, the price of homes in the Northwest rose by 0.3% and in Yorkshire and Humber they were up by 0.1% (source: Halifax). Transaction levels, though, were down by nearly 21% (1m) compared to their long-term average of 1.26m (source: Halifax).

So, what is everyone expecting the housing market to do in 2024? Although the base rate is unlikely to go down until the latter half of 2024, lenders have been busy slashing their rates. The best five-year deals are now under 4% and are expected to fall further, providing a major boost for the housing market. Despite the improvements in borrowing costs, mortgages are still some way above the levels we have become used to. So, in many areas, affordability remains stretched. Most commentators are therefore expecting the market to remain somewhat challenging, with house prices either stagnant or falling slightly, and a return to growth in 2025. There is also an election to factor into this year. They don’t, however, tend to have a huge impact on the market. Historically, there’s nothing more than a slight slowdown just before and just after.

2023: the facts

Nationwide: Dec 22 to Dec 23: National £257,443 -1.8%. London £515,132 -3.8%
Halifax: Dec 22 to Dec 23: National £287,105 +1.7%.
Land registry: Oct 22 to Oct 23: National £287,782 -1.2%. London £516,285 -3.6%
Zoopla: Nov 22 to Nov 23: National £264,500 -1.1%. London £515,504-1.5%
Rightmove: Dec 22 to Dec 23: National £355,177 -1.1%. London £667,019 +0.1% (asking prices).

The predictions

Please note – where possible, comparative figures for 2023 are from the company’s own indices.

Nationwide

Last year, Nationwide said there was likely to be a modest decline of around -5% against a final figure of -1.8%. In 2024, they are expecting the market to remain broadly flat at between 0% and -2%.

Halifax
Halifax’s 2023 prediction of an 8% fall was a long way off their final figure of a rise of 1.7%. This year, they expect prices to fall between 1% and 2%.

Zoopla
In 2023, Zoopla predicted prices would dip by 5%. In the event, their own figures show a fall of just 1.1%. This year they are forecasting prices to come down by a more modest 2%.

Rightmove
At just 2%, Rightmove were expecting one of the smallest falls in 2023, but even that was a little on the pessimistic side - their index ending the year at -1.1%. This year, they have reduced their expected fall to just 1%.

Some other predictions
CBRE forecasted house prices would fall 4.5% by the end of 2023. This year, with the outlook improving, they are expecting a far smaller fall of 0.9%.
Capital Economics were one of the gloomiest last year in their prediction of a 12% fall in house prices. They are considerably more optimistic about 2024, expecting prices to dip by just 1.5%.

by adam

Base rate rises again, but mortgages are going in the opposite direction

The base rate may have gone up by another 0.5% to 3.5% this December, but mortgage rates continue to come down. That’s because swap rates (the rate at which banks borrow money) are falling on the back of the money market’s increasing confidence that inflation and interest rates will peak far lower and sooner than had originally been anticipated. Andrew Bailey, Governor of the Bank of England, has even suggested inflation may have already done so.

The latest assumption is that the base rate will now reach a high point of around 4% to 4.5% in the early part of next year rather than 6.25% towards the end of 2023. It has meant that 5-year swap rates have fallen from 5.189% in October to 3.411% in December. To give you an idea of what that all means for mortgages - in December 2021, the average fixed-rate mortgage was as low as 2.34%. Just after the disastrous mini-budget, it shot up to 6.65%. Now the average is down to 5.78% and, at 60% LTV, there are quite a few deals sub 5% (see below). And the gap of nearly 2.4% between the current 5.78% fixed rate mortgages and five-year swap rates suggests there is plenty of room for further reductions.

And commentators are expecting those reductions in fixed-rate mortgages to continue throughout the course of next year, until they settle down to between 4% and 5%, with even lower rates for those with larger deposits. In the short-term, many borrowers are opting for tracker mortgages, especially ones with low or no early redemption fees, allowing them to secure the finance they need whilst hedging against future mortgage falls. When they bottom out, they can then move on to a fixed-rate product.

Below is a selection of this month’s best buys from Moneyfacts.co.uk:

Two-year fixed rates: 4.99% from Generation Home. Product fee £999. 80% LTV.
5.15% from Generation Home. Product fee £999. 85% LTV.

Three-year fixed rates: 4.93% from Coventry BS. Product fee £999. 65% LTV.
5.03% from Coventry BS. Product fee £999. 75% LTV.

Five-year fixed rates: 4.99% from first direct. Product fee £490. 60% LTV.
4.99% from Nationwide. Product fee £999. 60% LTV.

Discounted variable: 3.29% Until 31/01/2025. From Newcastle BS. Product fee £999. 80% LTV.
3.29% For 2 years. From Scottish BS. Product fee £995. 60% LTV.

BUY-TO-LET (BTL)

Best two-year fixed rate: 4.29% from The Mortgage Works. Arrangement 3.00% Advance. 65% LTV.

Five-year fixed rate: 4.69% from The Mortgage Works. Arrangement 3.00% Advance. 65% LTV

Best Discounted variable: 3.74% for 3 years. From Family Building Society. Completion £999 (up to £500k). 60% LTV.

The information we provide is our personal opinion and should not be relied upon for financial advice. Should you need financial advice or guidance please contact an appropriate professional.

by adam

How much value does a south-facing garden add?

‘’…And a lovely, south-facing garden’ – we’ve all seen the phrase in many a property listing, but how much does a south-facing garden really add to the price of a house?

South-facing gardens are considered more desirable because they get the most sunlight during the course of the day. And, in urban areas, where gardens are smaller, narrower and more shaded, it’s even more important. It is such a big issue that agents now regularly report people using the compasses on their phones during viewings to check the house’s orientation.

Putting a value on it, however, is not that straightforward. Rightmove, fortunately, has done all the hard work, trawling through their extensive data in their search for answers. So what did they find?

Of the 400,000 homes they analysed, the average increase in value was £25,350, or 7%. In London, you’d expect those figures to be even higher, and they were, in financial terms - £60,593 - but in percentage terms they only ranked third, which suggests there is a ceiling to what people are prepared to pay. The keenest gardeners are to be found in Yorkshire and The Humber, which saw the biggest percentage boost of 14%.

During their research Rightmove discovered that south-facing gardens didn’t just affect the price of a house, it also meant the house sold faster. As you might expect, the biggest impact was found to be in places such as Yorkshire and The Humber, where buyers were most keen on south-facing gardens. Those properties sold 8 days faster than the average. Across the country, the figure was 3 days faster.

Rightmove’s Miles Shipside says,

“For as long as I can remember, south-facing gardens have been viewed as the crème de la crème of outdoor spaces among home-hunters.

“It doesn’t mean your house will automatically be worth £25,350 more if it has a south-facing garden as this is an average and it will also depend on the condition and location of your home, but it’s certainly something to shout about in a listing as it could mean your home makes it on to a buyer’s shortlist over another property down the road, or even on the other side of the street.”

Even if your garden is not south-facing, a decent one will still add to the attraction of your home. Whichever way it faces, though, it’s important to make sure you make the most of your outside spaces when you are trying to sell a property, making them look as attractive as possible. That means mowing the lawn, clearing the weeds and repairing and painting fences and sheds. And, at this time of year, that also includes cutting back any dead plants and sweeping away the dead leaves. Any shots you might have of the garden in summer would be very useful, too, as they will help potential buyers see what it looks like in full bloom.

by adam

House price news

After fourteen consecutive rises, the base rate was finally put on hold last month. There is still an outside possibility of one last rise of 0.25%, but all eyes are now on how the housing market will react.

It is too early to see its impact on the various housing indices, as the Bank of England’s announcement didn’t come until the middle of last month. However, as inflation had already shown signs of slowing, confidence in the sector was increasing and there was a slight uptick in asking prices (+0.4%) from the previous month. That is, though, a little below the average for this time of year with prices typically rising by 0.6% as activity ramps up after the summer hiatus. Annually, prices fell from -1.9% to - 0.4%.

It will be some time before all the changes in the base rate fully feed through the system. Many of those with five-year fixed-rate mortgages haven’t experienced any changes whatsoever in their mortgage costs, whereas first-time buyers and anyone coming to the end of their deals have been at the brunt end of it.

In the interim, there has been a bit of a stand-off, with sellers remaining reluctant to offer discounts and buyers waiting for mortgage rates to fall. It means sales volumes were down by 18% this July (latest available figures) when compared to pre-pandemic 2019. Sellers are now finally showing signs of adapting to the situation, with 36.3% of properties currently for sale having had a price reduction, at an average of £22,700 or 6.2%. And, according to another property listings portal, Zoopla, the average discount on the advertised sale price is currently 4.8%.

The price of smaller, more affordable homes is holding up better than it is for larger properties and, as a result, Tim Bannister Rightmove’s Director of Property Science advises:

“Sellers in the middle and upper sectors need to be extra careful not to set their price expectations too high. Plenty of sales are being agreed for properties that are priced at the right level, and those that are selling are still taking five days less than at this time in 2019. We’re also seeing the number of fall-throughs decline as market conditions and mortgage rates stabilise.”

With the economic outlook improving, inflation easing and employment levels high, the pressure to reduce prices much further is limited, so activity may remain a little subdued until the base rate rather than prices start to come down. Most experts believe that may not happen for another 12 months, at which point, we will be in the midst of an election.

HOUSE PRICES AND STATISTICS

Almost all the indices show price falls were moderating in September but, on an annual basis, they continue to slip.

Nationwide: Sept: Avge. price £257,808. Monthly change 0.0%. Annual change -5.3%
Halifax: Aug. Avge. price £278,601. Monthly change -0.4%. Annual change -4.7%
Land Registry: July: Avge. price £289,824. Monthly change +0.5%. Annual change +0.6%
Zoopla: Aug: Avge. price £265,100. Annual change -0.5%
Rightmove: Sept: Avge. price £366,281. Monthly change +0.4%. Annual change -0.4% (asking prices on Rightmove)

by adam