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Writer's pictureMaverick P.

UK Property News Week 12

Updated: Jun 23

Welcome to NestInsights, where we delve into the currents shaping the UK property market. Our focus extends across a spectrum of issues and developments that are pivotal to understanding the dynamics at play within the property sector.


This week, we spotlight crucial updates and analyses, from the inauguration of a Property Agent Regulator to the intricacies of rental market trends. Our content traverses current movements and anticipatory forecasts, offering sections on market activity, monthly price insights, interest rate predictions, and housing cost fluctuations.


Our goal is to offer a comprehensive overview that informs and empowers our audience to make informed decisions in a dynamic market.


Table of Contents


  • Establishing the Property Agent Regulator

  • Market Activity Surge Alert

  • Monthly Property Price Insights

  • Interest Rate Expectations

  • Rental Market Overview: March 2024

  • Housing Price Dynamics

UK Property News Week 12


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Establishing the Property Agent Regulator


The call for establishing a Property Agent Regulator has been gaining momentum, underscoring a pivotal shift towards enhancing transparency and integrity within the property market.


The urgency of this development stems from the government's commitment, made four years ago, to introduce a regulatory body aimed at elevating standards within the property agent sector. However, this initiative has seen considerable delays, leaving tenants, leaseholders, and property buyers exposed to potential malpractices.


The House of Lords Industry and Regulators Committee has been vocal about the government's procrastination, emphasizing the detrimental impact it has on stakeholders across the board.


The absence of a dedicated regulator has left a void in the market, allowing for a continuation of questionable practices that could be mitigated with proper oversight.

The establishment of a new regulator is not just a matter of improving business standards; it's about protecting consumers and ensuring that property agents operate within a framework of ethics and accountability.


The proposal for a Property Agent Regulator is backed by a comprehensive analysis and recommendations from various stakeholders, including professional bodies representing property agents, the Property Ombudsman, and the Leasehold Advisory Service.


The envisioned regulator would drive up sector standards and proactively enforce against agents who engage in malpractice. Currently, enforcement and redress mechanisms are reactive and limited in scope, lacking the teeth needed to address issues comprehensively.

One of the compelling arguments for the regulator includes the mandatory qualification for property agents. This measure would ensure that agents are not just well-versed in the technical aspects of property management and sales but are also committed to ethical dealings with consumers.


Additionally, the establishment of industry codes of practice, operated by the new regulator, would focus on achieving good outcomes for consumers, further elevating the quality of service within the industry.


Moreover, the proposed Memorandum of Understanding between the new regulator, National Trading Standards, and the redress schemes aims to foster cooperation and avoid duplication, streamlining efforts to enhance market standards.


The government's role in legislating for statutory consumer representation in the sector is crucial, ensuring that consumer views are not just heard but are a central part of the regulatory framework.


The call for a single ombudsman for property agents, as opposed to the current setup of competing schemes, highlights the need for a unified approach to complaints and redress in the property market. This consolidation would simplify the process for consumers seeking redress, making it more efficient and less cumbersome.




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Market Activity Surge Alert


The aftermath of the Spring Budget has set the stage for a seismic shift in market activity within the UK housing sector.


Historically, budget announcements have played a pivotal role in influencing market dynamics, and the latest budget is no exception. Despite mixed reactions to the budget's implications on various sectors, one clear takeaway is the anticipated surge in market activity.

Recent research reveals a telling forecast for the UK housing market: an overwhelming majority of current buyers are gearing up to intensify their property search now that the budgetary dust has settled.


A staggering 82% of potential buyers surveyed have expressed their intent to escalate their pursuit of a new home.

This surge is not merely a statistical anomaly but a testament to the pent-up demand that has been building, awaiting clear signals from the government's fiscal policies and market directions.


The Spring Budget, while not delivering substantial incentives directly aimed at homebuyers, has nonetheless acted as a catalyst, clearing uncertainties and setting the stage for active engagement from buyers and sellers.


The revelation that 78% of surveyed buyers plan to proceed with their purchase plans, despite the budget's perceived shortcomings, underscores a resilient market sentiment. This readiness to engage, fueled by clearer economic signals, is preparing the ground for heightened transaction volumes in the coming months.


Further insights reveal that 14% of potential buyers remain cautious, opting to delay decisions, while a mere 8% have reconsidered their plans due to the absence of direct purchasing incentives. The challenges prospective buyers face are multifaceted, with 29% grappling with high mortgage rates and the task of finding buyers for their existing homes to finance new purchases. Additional hurdles include aligning mortgage funding with current income levels, accumulating the necessary deposit, and engaging in price negotiations, underscoring the complexities of today's market dynamics.


Amidst these challenges, a consensus among experts suggests that the current interest rate of 5.25% is likely at its peak, with anticipations of a decline. However, over half of the homebuyers express concerns over potential rate hikes within the year, highlighting the prevalent uncertainty affecting market sentiments.


Ruth Beeton, Co-Founder of Home Sale Pack, articulates the prevailing determination among buyers, emphasizing resilience despite the lack of governmental incentives and the looming interest rate adjustments.


Yet, opinions diverge on the market's trajectory in the upcoming months. A survey involving 833 property professionals by GetAgent unveils widespread disappointment with the recent Spring Budget, perceived as lacking in substantial housing market stimuli.


The absence of anticipated measures such as a significant announcement on 99% mortgages, which was notably retracted days before the budget, has sparked debate within the industry. A considerable segment had hoped for initiatives aimed at reducing stamp duty or introducing buyer incentives to energize the market, alongside enhancements in the homebuying and selling process.



Monthly Property Price Insights


This month's property price insights from Rightmove offer a fascinating glimpse into the current state of the UK housing market, revealing trends that could significantly impact both buyers and sellers in the months to come.


March has traditionally been a period of activity and optimism in the property market, and this year has been notably exceptional.


Rightmove's latest House Price Index reports a 1.5% increase in the average price of newly marketed properties, a rise that not only surpasses the typical seasonal uplift but also marks the most significant monthly increase observed in the past 10 months. This surge elevates the average property price to £368,118, signaling a robust recovery momentum after the more subdued market conditions of 2023.


Interestingly, this uptick in asking prices is accompanied by a parallel increase in sales agreements, with the number of sales being agreed now 13% higher than at the same time last year. This positive trend underscores a growing market confidence and a window of opportunity for buyers looking to secure properties before prices potentially escalate further.

For sellers, the current conditions present an advantageous moment to list, with buyer demand 8% above last year's figures, particularly driven by the less mortgage-rate-sensitive larger homes sector and a resurgent London market.


However, amidst this buoyant activity, the market remains delicately balanced.


Rightmove's insights hint at a cautious optimism, with the average asking prices still £4,776 below the peak of May 2023. This slight lag from last year's high points to a market that is still finding its equilibrium, navigating between sustained buyer interest and the overarching economic landscape. Buyers, therefore, are in a unique position to leverage this transitional phase, potentially securing properties at values that offer long-term appreciation prospects.


For sellers, the message is clear: the market is ripe, but pricing strategies need to be finely tuned. Over-optimistic pricing could deter the very buyer interest that the current market conditions favor. The insights suggest a strategy of realistic pricing to attract buyers who are keen but discerning, looking for value in an increasingly competitive market.


Moreover, the insights into the time it takes to find a buyer — now at an average of 71 days, the longest at this time of year since 2019 — offer a critical reflection point.


Properties priced attractively are being quickly snapped up, while those overpriced are lingering longer on the market. This dichotomy emphasizes the importance of aligning asking prices with market expectations to capitalize on the current demand.

 

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Interest Rate Expectations


The Bank of England's Governor has intimated that interest rate cuts are "in play" for forthcoming policy meetings, marking a significant shift from the prevailing narrative.


This pivot is largely attributed to the success in curbing the UK's headline rate of inflation over the past year, offering a glimmer of hope for a potential easing in borrowing costs. This strategic hint from the central bank could set the stage for a cut in interest rates within months, a development eagerly awaited by many in the property market.


As of the latest assessment, the central bank has maintained interest rates at 5.25%, opting for a stance of watchful waiting as it observes encouraging signs of falling inflation. This approach suggests a cautious optimism, with the monetary policy committee open to the possibility of interest rate reductions should economic conditions continue to improve.


Such a move would be warmly welcomed by the housing market, where the cost of borrowing directly influences buyer affordability and, consequently, market activity.


However, the road ahead is nuanced. While the prospect of lower interest rates bodes well for stimulating property purchases and investments, the broader economic context remains a critical factor.


Danni Hewson, the head of financial analysis at the stockbroker AJ Bell, pointed out that economic recovery is on a gradual upturn, yet forthcoming increases in various bills might not be fully offset by the recent wage growth, tax cuts, and decreasing inflation rates.


This suggests a looming challenge for households and sectors such as retail, which may experience volatility as individuals grapple with feeling financially stretched and exposed to economic fluctuations.


In the financial markets, there's a growing anticipation of an initial quarter-point reduction in interest rates by June, with projections of further cuts bringing rates down to approximately 4.5% by year-end.


This expectation is grounded in a notable decline in inflation rates in recent months, reinforcing the Bank of England Governor Andrew Bailey's stance that planned rate cuts across the year seem reasonable.


February's inflation rates dipped to 3.4%, a significant fall from over 10% the previous year, with projections indicating a further decrease, potentially falling below the Bank's 2% target.

This expected decline is partly attributed to an anticipated drop in energy bills starting April. Nonetheless, the Bank remains cautious, suggesting inflation could surge again due to persistent wage growth and increasing prices within the service sector. Consequently, the central bank is likely to delay any policy adjustments until it reviews additional inflation and job market data over the coming months.


Governor Bailey has expressed optimism about the current trajectory of inflation and the broader economic recovery from a minor recession experienced at the close of 2023. This cautious optimism reflects a divided perspective among economic observers, with some aligning with Bailey's positive outlook, while others await more conclusive evidence of economic stability.

Rental Market Overview: March 2024


Insights from Zoopla's comprehensive Rental Market Report shed light on current trends and future projections, offering valuable data for tenants, landlords, and investors alike. The findings indicate a period of adjustment, characterized by a shift in demand, changes in rental prices, and the implications of these trends on rental affordability.


As of January 2024, the average rent for new lets in the UK has reached £1,223, marking a 7.8% increase over the last year.

This growth rate, while still significant, represents the slowest pace of increase in two years, suggesting a cooling period after the feverish heights reached during the pandemic years. Despite this deceleration, the rental market remains dynamic, with several factors contributing to its current state and influencing its future trajectory.


Supply and Demand Dynamics


One of the key factors affecting the rental market is the balance between supply and demand.

Recent data indicates that demand for rented homes has decreased by a fifth over the last year, attributed to a combination of factors including changes in pandemic-related living arrangements and a cooling labor market.


Despite this decline in demand, the number of enquiries per available property remains high, with more than 15 enquiries for every home listed for rent. This persistent demand, despite being lower than the peak pandemic years, underscores the continued pressure on the rental market, particularly in popular areas and cities.


The supply of rental properties has seen a modest increase, with the average letting agent listing 12 homes for rent, a fifth higher than the previous year but still below pre-pandemic levels. This modest recovery in supply has not been sufficient to significantly impact rental inflation, which remains high by historical standards.


Regional Variations and Rental Affordability


The report highlights considerable regional variation in rental growth, with Scotland experiencing the fastest increase at 11.6%.


In contrast, London has seen a notable slowdown, with annual rental inflation cooling to 5.1% from a much higher rate a year ago. This variation reflects differing local economic conditions, housing supply challenges, and the varying impact of the pandemic on work and lifestyle patterns.


Rental affordability continues to be a pressing issue, exacerbated by the rapid increase in rents during the pandemic.


The report notes that over half of rented homes in the UK are now in markets where average rents exceed £1,000 per month, a significant increase compared to five years ago. This trend raises concerns about the long-term sustainability of rental costs, particularly for younger renters and those on lower incomes.


Looking Ahead


The rental market's future will be shaped by several factors, including economic conditions, changes in housing policy, and evolving work and lifestyle patterns. While the current cooling of rental price growth offers some respite, the fundamental issues of supply and affordability remain unresolved. Addressing these challenges will require concerted efforts from policymakers, developers, and the rental sector to increase supply, improve affordability, and ensure a stable and sustainable rental market for the future.



Housing Price Dynamics


The Office for National Statistics (ONS) House Price Index has become a critical resource for understanding these nuances.


As of January, we've witnessed a notable shift in housing prices, with a 0.6% decrease compared to the previous year, marking a subtle yet significant reflection of the broader economic uncertainties impacting the housing market.


This period of adjustment is characterized by a landscape where buyers are navigating through a terrain of fluctuating mortgage rates, influenced by broader economic policies and market sentiments.


The recent data suggests that the annual house price deflation has moderated, with prices climbing 0.5% month-on-month.

This indicates a market that, while cooling, is still resilient, with certain areas and property types showing signs of rebounding prices.


Notably, the East of England experienced a year-on-year decrease of 2.2% in housing prices, settling at £336,502. However, this region saw a month-on-month increase of 1.2%, indicating emerging positive momentum.


This pattern of recovery wasn't uniform across the board, as the East Midlands, North East, North West, and Yorkshire and the Humber all observed declines when compared to the previous month. Wales also experienced a downturn both annually and monthly, highlighting the varied impact of economic factors across different regions.


The type of property on the market further illustrates the complexity of the current housing landscape.


Flats and maisonettes saw the most significant annual decrease in value, dropping by approximately £4,000 or 1.7%.

In contrast, detached homes witnessed a slight increase in value, adding almost £2,000 on average. This variation in price movements across different property types reflects a diverse range of buyer preferences and market pressures.


The volume of property transactions up to November 2023 also underscores the market's challenges, with significant decreases observed across the UK. However, the Royal Institution of Chartered Surveyors (RICS) provided a glimmer of hope with its most positive reading for new instructions since March 2021, suggesting an uptick in seller activity.


Additionally, the HM Revenue and Customs (HMRC) reported a 1.9% rise in transactions between December 2023 and January 2024, adjusted on a seasonal basis, hinting at a potential revival in buyer interest.


Charlotte Nixon, a mortgage expert at Quilter, commented on the market's current state, noting its notable quietness yet also acknowledging the potential for a resurgence in demand. The fluctuating mortgage market, characterized by rapidly changing rates, poses a significant challenge to buyer affordability and market stability.


However, Nixon remains hopeful that a period of more stable rates, coupled with an improving economic outlook, could reinvigorate both buyer and seller confidence, fostering a more dynamic and negotiable market environment

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Conclusion


The launch of a Property Agent Regulator marks a significant step toward market transparency and ethical practices, signaling policymakers' commitment to reform and greater agent accountability.


The post-Spring Budget surge in market activity reflects strong buyer and seller confidence, indicating a resilient property market poised for continued growth and recovery.


Insights into property prices and interest rate expectations reveal an optimistic market outlook, with potential growth spurred by anticipated interest rate cuts that could make borrowing more affordable.


These trends indicate a transformative phase for the UK property market, underscoring the critical need for stakeholders to remain informed and strategically adapt to the evolving landscape for effective navigation and opportunity capitalization.

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