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UK house market sees ‘respite’ as mortgage rates ease

The UK’s beleaguered housing market enjoyed some “respite” as buyer activity picked up amid easing mortgage rates, according to an influential property professionals survey found.

Housing professionals said there had been a gradual improvement in market sentiment, influenced by the recent easing of mortgage interest rates, according to the December 2023 report from the Royal Institution of Chartered Surveyors (Rics).

Newly agreed sales figures also suggest a less negative market and short-term sales expectations have also risen with the year ahead and expectations are the most positive they have been since January 2022. The average time to complete a sale is also decreasing, now averaging 18 weeks, down from 20 weeks in September.

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Prices have continued to fall but the rate of decline slowed, Rics said. It forecast prices will continue to creep downwards, before stabilising by the end of the year. Professionals predicted a solid recovery in home sales volumes emerging in 2024.

New data from the Office for National Statistics published this week showed prices were down by 2.1 per cent on the year, which is the biggest drop since June 2011.

The latest feedback on house price expectations remains varied across the UK. House prices in Scotland are expected to rise in first three months of this year – the first-time that Scottish respondents’ three-month expectations for prices have moved into positive since May 2022.

This coincides with an overall improvement in sentiment within the Scottish residential market, according to respondents, which appears to be linked to the trend towards lowered mortgage rates.

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Together with Northern Ireland and north-west England, Scotland is one of the only areas of the UK where respondents expect prices to move higher over the course of 2024.

Tenants are likely to face rises of over 4 per cent over the next year as supply of rented accomodation continues to be constricted. The Rics professionals believe rental growth will average 5 per cent a year over the next five years.

Tarrant Parsons, Rics senior economist, said: “With 2023 proving to be a particularly challenging year for the UK housing market, it appears recent weeks have seen a little bit of respite emerge.

“Supported by an easing in mortgage interest rates of late, buyer demand has now stabilised, and this is expected to translate into a slight recovery in residential sales volumes over the coming months.

By David Connett

Source: i News

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UK house prices to rise by 3% in 2024

Knight Frank has revised its UK house price forecasts as inflation is falling faster than expected, with the company now suggesting that house prices will rise by 3% in 2024.

This compares to a decline of 4% which was predicted in October.

Knight Frank also expects cumulative growth of 20.5% in the five years to 2028.

This is partially a result of stronger demand, as the number of mortgage approvals was 10% higher in November than the previous year and the firms expects a double-digit percentage increase in sales volumes this year compared to 2023.

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The report forecasts slightly lower growth for the mainstream London market (+2%) this year as continued affordability constraints in the capital mean lower-value areas of the country are likely to outperform.

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In the prime country house market, Knight Frank expects a narrower decline this year (-2%) as the market comes down from the highs of the pandemic in recent years.

By Jodie Bradley

Source: Bridging & Commercial

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Have House Prices Fallen Or Risen In 2023?

9 2023 was a tough year for the property market. With an unstable mortgage market, where rates went on a rollercoaster ride, demand was subdued. Many commentators were predicting property prices to decline as a result. But have house prices fallen or have they risen in 2023?
House prices are often seen as a reliable indicator of the health of the property market. And while not infallible, they can offer an insight into how confident sellers and buyers are in the market.

The last year was not the best in terms of confidence in the market. Rising mortgage rates and high inflation has forced many people to put their plans to buy a new home on hold.

There was much speculation how the year will end regarding prices, with many predicting that they will fall. Now that we have data from several industry insiders, can we determine whether house prices have fallen or risen in 2023?

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Halifax Announces Slight Rise In House Prices in 2023
After Nationwide and Rightmove, Halifax has released its latest House Price Index for December 2023. The data shows that house prices have risen by 1.1% compared to November last year.

According to the lender’s figures, this is the third monthly price rise in a row, pushing up the average UK house price to £287,105.

Year-on-year, Halifax’s House Price Index suggests that house prices have risen by 1.7% in 2023, compared to 2022. This means house prices were £4,800 higher in December than in December the previous year.

However positive these figures appear, they contradict data from Nationwide and Rightmove.

Nationwide’s House Price Index for December 2023 showed that house prices have stagnated on a monthly basis in the final month of the year. Compared to December 2022, house prices have fallen by 1.8%.

Rightmoves’ final House Price Index of 2023 also says the year has ended with a decline in house prices by 1.1% compared to the year before. Their data put the monthly house price decline in December at 1.9%, compared to November.

So what’s going on? Have house prices fallen or risen? The difference is down to the use of different datasets.

Halifax and Nationwide are likely to base their figures on data from properties bought with their mortgages, Rightmove uses property prices from all properties listed on their portal.

As such, Rightmove’s data seems to be the most complete. However, not all properties are listed on the portal. This means that all these figures have to be taken with a pinch of salt.

The most complete data to establish if prices have risen or fallen comes from land registry data. So we will have to wait for the Office forNational Statistics’ House Price Index to know for sure, which will be released mid to end of January.

But the likelihood is that house prices will have fallen by around 1% at the end of December 2023 compared to the previous year.

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Predictions For Next Year
While the currently available data doesn’t help to definitively answer the question of have house prices fallen or risen, there is more consensus about what direction prices will go this year.

Most commentators, including Rightmove and Nationwide, agree that house prices are likely to decline in 2024. Even Halifax believes that house prices will drop by between 2% and 4%.

Despite mortgage rates having come down recently as lenders compete for borrowers, mortgage rates are still at an elevated level. Inflation is also slowing, but prices for many everyday items are still high, putting pressure on many household budgets.

The current economic uncertainty will likely continue into 2024, keeping many buyers and sellers cautious.

Source: Property Road

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Property industry delivers verdict on new UK house price data

Property prices in the UK rose for the third consecutive month in December 2023, according to the latest Halifax HPI data.

The cost of an average UK home rose to £287,105, up £3,066 (+1.1%) from November, reaching the highest level since March 2023.

According to Halifax, this means the housing market beat expectations in 2023 and grew by 1.7% on an annual basis.

The average property price is now £4,800 higher than it was in December 2022.

Kim Kinnaird, director for Halifax Mortgages, said: “Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September.

“The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months.”

Across all the UK regions, Northern Ireland recorded the strongest house price growth in 2023, with properties increasing by 4.1% to £192,153. Scotland saw property prices rise by 2.6% to £205,170.

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At the other end of the scale, the South East fell most sharply, with houses there now averaging £376,804, down by £17,755 (-4.5%).

Kinnaird said: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move.

“While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target.

“Our latest forecast suggests house prices could fall between 2% and 4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”

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More reaction

Anthony Codling, managing director, equity research, RBC Capital Markets, said: “The demise of the UK housing market is somewhat over reported. Most, including us, thought house prices would fall during 2023, and most think they will fall in 2024, but not us.

“With rising wages, falling inflation, falling mortgage rates, and increasing talk of election-related housing stimulus packages, we expect house prices to rise in 2024. Our pessimism was misplaced in 2023, and we don’t want to make the same mistake twice.”

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Source: Property Industry Eye

By Jerome Smail

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The Future of the UK Property Market: Analysing Interest Rates in 2024 

Introduction 

The UK property market has always been a significant focus for investors, homeowners, and renters alike. As we look ahead to the year 2024, one crucial factor that will shape the market is interest rates. In this blog post, we will delve into the potential impact of interest rates on the UK property market, exploring the key factors driving their movement and what this might mean for buyers, sellers, and investors. 

Understanding Interest Rates 

Before we discuss the future of interest rates, it’s important to grasp their significance in the property market. Interest rates are set by the Bank of England to control inflation and influence economic growth. When interest rates are low, borrowing becomes cheaper, leading to increased demand in the property market. Conversely, high interest rates can deter potential buyers due to increased mortgage costs. Therefore, fluctuations in interest rates can significantly impact the property market’s dynamics. 

Factors Influencing Interest Rates 

Several factors influence interest rates, and understanding these can help predict their movement in 2024. The Bank of England’s Monetary Policy Committee (MPC) considers various economic indicators, such as inflation, GDP growth, and employment rates. Additionally, external factors like global economic conditions and political events can also affect interest rates. As we approach 2024, the Committee will closely monitor these indicators and adjust rates accordingly. 

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The Impact of Interest Rates on Buyers 

Interest rates play a crucial role in determining affordability for potential buyers. In a low-interest-rate environment, mortgage repayments are more manageable, allowing buyers to enter the market and potentially drive up property prices. However, if interest rates rise significantly in 2024, mortgage repayments may become less affordable, leading to reduced demand and potentially stabilizing or lowering property prices. 

The Impact of Interest Rates on Sellers 

Higher interest rates can also affect sellers in the property market. If mortgage costs increase, potential buyers may be deterred, leading to a decrease in demand for properties. This could result in longer selling times and potentially lower sale prices. On the other hand, if interest rates remain low or decrease, sellers may benefit from increased demand and potentially higher sale prices. 

The Impact of Interest Rates on Investors 

Interest rates can significantly impact property investors. Low interest rates make borrowing cheaper, allowing investors to finance their purchases more affordably. This can lead to increased investment activity in the property market. However, if interest rates rise, investors may face higher financing costs, potentially reducing their purchasing power and limiting investment opportunities. 

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Predictions for 2024 

While it is challenging to predict future interest rates with certainty, experts suggest that interest rates in 2024 will largely depend on economic conditions. If the UK economy experiences strong growth, it is likely that interest rates will gradually rise. Conversely, if economic recovery is slower, interest rates are likely to remain low or even decrease further. The Bank of England will continue to monitor economic indicators and adjust rates accordingly to maintain stability. 

Conclusion 

The future of the UK property market in 2024 will be heavily influenced by interest rates. As buyers, sellers, and investors navigate these market dynamics, it is crucial to stay informed about the factors driving interest rate movements. By understanding the impact of interest rates on affordability, demand, and investment opportunities, individuals can make informed decisions in the dynamic landscape of the UK property market in 2024. 

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Savills predicts over 8% annualised returns in eight UK property sectors for 2024

Savills forecasts that eight asset classes in the UK property market are set to achieve annualised returns exceeding 8% for 2024.

This includes buy-to-let in the North West, London industrial properties, and retail warehouses, which are expected to be the top performers, with annualised investment returns between 8.5% and 9.2% from 2024-2028.

The upcoming year is seen as an opportune time for commercial investors, as retail, industrial, and office spaces are projected to be more affordable. The private rented sector’s challenges are likely to prompt institutional landlords to focus more on Built to Rent and Purpose Built Student Accommodation.

Farmland is also identified as a key area, expected to contribute significantly to net zero initiatives. Demand for prime arable land, primarily for food production, is anticipated to remain high, influenced by global events and environmental concerns.

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Richard Merryweather, Savills joint head of UK investment, highlights the positive shift in the market: “The factors that drove falls in UK property values and transaction levels over the last two years are expected to improve in 2024. There will be significant opportunity – especially in the commercial and residential spaces – for investors to buy at the bottom of the market.”

In 2024, investment focus is expected to shift to asset-specific basics rather than sector-wide trends. Strategic logistics projects, prime and green office spaces, and certain retail market segments are identified as areas with potential for better than average rental growth. The residential market is also expected to recover, with prospects for growth in mainstream house prices by 2025.

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By Ryan Fowler

Source: The Intermediary

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Falling inflation could boost the housing market – but there’s a catch

A consequence of the Bank of England’s decision to raise interest rates in order to bring down inflation was always that they could cause the housing market to stall and potentially tip Britain’s economy into recession.

Today, the Bank’s Monetary Policy Committee (MPC) will feel vindicated in its strategy, with the rate of inflation unexpectedly falling by more than expected to 3.9 per cent. This is its lowest level since September 2021, but still double the Bank’s 2 per cent target.

The MPC will also be glad that while the UK’s economy did shrink in the final quarter of this year, the prospect of a recession (which is where the economy contracts two quarters in a row) remains hypothetical.

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However, the data also show that the MPC’s decision to repeatedly make the cost of borrowing more expensive did indeed stall the housing market.

Both the Bank’s mortgage data and HMRC’s data show that the number of mortgages agreed and the number of homes being sold are lower than they would usually be, indicating that the housing market was grinding to a halt this autumn.

Now, data from the Office for National Statistics (ONS) show that in the year between October 2022 and 2023, UK house prices fell at the fastest pace in more than a decade.

Average house prices declined by 1.2 per cent during that 12-month period. This is the largest drop since October 2011 when the fallout of the 2008 global financial crisis was taking hold.

The greatest falls have been recorded in London (3.6 per cent), which is to be expected because pandemic house price inflation pushed the cost of homes up rapidly in many parts of the capital.

Some estate agents are trying to put a positive spin on this news. National chain Jackson-Stops, for instance, has issued a statement saying that it is a “minimal drop” which shows the market’s “enduring strength”.

That’s not quite the case. Think of interest rate rises as being more like drip filter coffee than espresso – rather than being an economic shot in the arm, they take time to feed through and their effects can be long-lasting, particularly when it comes to the housing market.

This is because there is a time lag between the Bank’s rate decision, banks setting their mortgage rates, people taking on those rates to buy homes, and the homes that they buy being recorded in the official ONS statistics.

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So, just as the true impact of 2008 wasn’t felt until the early 2010s, it won’t be possible to say with any certainty how much house prices have fallen for a little while yet.

The ONS data is the most comprehensive measure of UK house prices because it includes cash purchases. It is also the most accurate but, because the ONS base their records on deals that have been finalised and recorded by the Land Registry, they are less timely than those belonging to lenders such as Halifax and Nationwide.

There is a time lag between what’s actually happening in the housing market and what the ONS records show.

The news that the rate of inflation has come down has already resulted in calls – from the likes of the right-wing think-tank the Institute for Economic Affairs – for the Bank to abandon rate increases.

However, as the MPC made clear in the memo they published after deciding to hold the base rate at 5.25 per cent last week, they won’t hesitate to increase it further if there is any indication that inflation is on the up again.

If interest rates come down, it could pump the housing market up once again. Indeed, financial markets are already speculating that the Bank will cut rates next year and this will be priced into the cost of mortgages.

But, if we’ve learned anything over the last four years, it’s that things can turn on a dime.

The rate of inflation may be falling but everything is still more expensive than it was before the pandemic – from food shops to household bills. More than a million people will see their mortgages get more expensive next year.

And, even with mortgage rates at 4 per cent, the cost of having a mortgage will be significantly higher than it was in the ultra-low-rate world we lived in before Covid.

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I News

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Housing Market Activity Could Snowball In December

Research conducted by estate agent comparison site GetAgent.co.uk indicates a potential surge in the UK property market at the end of the year. Analysis of the past decade’s data shows that the number of homes completing in December is typically 6% higher than the average monthly total, belying the common perception of Christmas as a quiet period in the property market.

GetAgent’s study, which examined property sales data over the last ten years, reveals that December does not generally experience a dip in transaction completions. On average, 83,616 property sales have been completed each month over the past decade. However, in December, this number increases to an average of 88,673, marking a notable rise.

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Interestingly, in seven of the past ten years, the number of transactions completing in December actually increased compared to November. Despite this trend, the likelihood of finalizing a property sale on Christmas Day remains exceptionally low. Last year, only six sales were completed between Christmas Eve and Boxing Day, representing a mere 0.001% of the 810,450 homes sold in England and Wales in 2022. Out of these, three completed on Christmas Eve, two on Christmas Day, and one on Boxing Day.

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Colby Short, co-founder and CEO of GetAgent.co.uk, comments on these findings: “Christmas is often considered a bit of a lull period for the property market and this is true in some respects. There’s almost certainly a reduction in the number of motivated buyers and sellers pushing ahead to agree a sale, as plans are put on hold until after the festive break. At the same time, many progressing sales will see a slight delay due to the reduced office hours and staff numbers of estate agents, solicitors, and other required parties. However, for those approaching the home selling and buying finish line, December is business as usual, and market activity has actually sat above the monthly average benchmark over the last decade during the month of December.”

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Landlord Knowledge

By LK

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UK house prices rise again as easing of mortgage rates tempts more buyers

UK house prices rose for the second month in a row in November, according to a leading index, as a slight easing in mortgage rates helped coax more buyers into the market.

The average price of a UK property rose by £1,394 – or 0.5% – last month to £283,615, according to the mortgage lender Halifax.

It signals an uptick in activity across the housing market, where price growth has stalled over the past year because of an increase in interest rates and subsequent affordability pressures that have driven away otherwise eager buyers.

UK house prices have also been underpinned by a shortage of available properties over the past year, as many sellers wait for the market to normalise and prices to recover.

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On an annual basis, prices are down 1%, although Halifax said this was a “relatively modest” drop given the economic headwinds that have weighed on consumers over the past 12 months. Average house prices are still £40,000 above pre-pandemic levels, having been skewed during the Covid crisis, when people scrambled to buy larger homes.

“Recent figures for mortgage approvals suggest a slight uptick in activity levels, which is likely as a result of an improving picture on affordability for homebuyers,” Kim Kinnaird, the director of Halifax Mortgages, said. “With mortgage rates starting to ease slightly, this may be leading to increased buyer confidence, seeing people more inclined to push ahead with their home purchases.”

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However, Kinnaird said house prices were unlikely to continue their upward climb into the new year. “The economic conditions remain uncertain, making it hard to assess the extent to which market activity will be maintained. Other pressures – like inflation, the broader cost of living, overall employment rates and affordability – mean we expect to see downward pressure on house prices into next year.”

Northern Ireland has experienced the strongest rise in house prices over the past 12 months, with the average home costing £4,294 more compared with last year, at £184,684.

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The Guardian

By Kalyeena Makortoff

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UK house prices rise for third straight month as mortgage rates fall

Nationwide says average property price was £258,557 in November, £5,231 down on same month last year

UK house prices rose for a third consecutive month in November as the market responded to hopes that mortgage rate costs had peaked.

Nationwide, the UK’s biggest building society, said prices rose 0.2% month on month in November, after a 0.9% rise in October and a 0.1% rise in September. Economists polled by Reuters had forecast a 0.4% fall in prices in November.

It is the first time that homeowners have seen the value of their property rise at least three months in a row since the summer of last year.

On an annual basis, prices were down 2% in November, the best in nine months and after a 3.3% year-on-year fall in October.

The average price of a home was £258,557 in November, £5,231 down on the value of a typical property in the same month last year.

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Nationwide said the improvement in the market has followed the view that the Bank of England’s move to hold the base interest rate at 5.25%, after a run of 14 consecutive increases, means soaring mortgage costs will start to drop, fuelling more activity in the housing market.

“There has been a significant change in market expectations for the future path of the bank rate in recent months which, if sustained, could provide much-needed support for housing market activity,” said Robert Gardner, the chief economist at Nationwide. “By the end of November this had shifted to a view the rates have now peaked and that they will be lowered to about 3.5% in the years ahead.”

In November, the Bank of England kept the rate at 5.25% for a second time, albeit still at a 15-year high, which has helped to push some two- and five-year fixed mortgage rates back down to below 5% – down from peak levels of more than 6%.

Last month, the sharp drop in inflation from 6.7% to 4.6% fuelled hopes that the Bank of England might start cutting rates next year.

However, earlier this week Andrew Bailey, the governor of the Bank of England, said there was no immediate prospect of an interest rate cut as the Bank faces a tough battle to bring inflation back to its 2% target.

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Mark Harris, the chief executive of the mortgage broker SPF, said: “The direction of travel for new mortgage rates is downwards, with a number of lenders making reductions this past week and bringing some early Christmas cheer to borrowers.

“However, while interest rates appear to have peaked, those hoping base rate will move swiftly downwards again to the rock-bottom levels of the recent past are likely to be disappointed. Pricing is higher than borrowers have grown used to over the years, meaning those buyers relying on mortgages are more price-sensitive on the back of ongoing affordability concerns.”

By Mark Sweney

Source: The Guardian