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Writer's pictureMaverick P.

UK Property News Week 19

Updated: Jun 23

Welcome to NestInsights, where we investigate 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, our coverage spans from optimistic house price forecasts by Savills to evolving challenges within the estate agency sector. We explore market dynamics where a shift shows decreasing demand against a backdrop of increasing supply, analyse the allure of period properties, and examine recent fluctuations in mortgage rates. Furthermore, we highlight the resilience of the property market as evidenced by reduced house price reductions and a robust sales recovery.


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


  • 2024 House Price Forecast: Savills Upgrades Five-Year Growth Expectations

  • Key Challenges and Changes in the Estate Agency Sector

  • Market Trends: Demand Decreases as Supply Increases

  • Top Period Property Styles in the UK

  • Trends in Mortgage Rates: Recent Increases

  • House Price Reductions Reach 18-Month Low Amid Sales Recovery

UK Property News Week 19



Night view of a modern building with exposed structural beams and brightly lit interiors


2024 House Price Forecast: Savills Upgrades Five-Year Growth Expectations


According to a recent report from Savills, there has been a notable upward revision in the forecast for house price growth over the next five years.


Initially anticipated to face a downturn, the market is now expected to grow by 2.5% in 2024, a significant positive swing from the previous forecast of a 3.0% decline.

This adjustment is underpinned by a more optimistic economic outlook and a recalibration of interest rates which have provided a more stable foundation for real estate investments.


Savills projects that by the end of 2028, average UK house prices will have increased by a total of 21.6%, up from the earlier projection of 17.9%.

Such growth is anticipated to be more pronounced in regions further from London, where affordability constraints are less severe.


A key factor contributing to this optimistic forecast is the easing of mortgage costs, which have become slightly less volatile, thus encouraging buyer confidence. With the Bank of England's base rate holding steady, the mortgage market has responded with competitive pricing, helping to maintain a buoyant housing market.


Moreover, transaction volumes are forecasted to rise, with housing transactions expected to reach 1.05 million in 2024, a modest increase from the previous year's forecast.


Despite this positive outlook, the market remains sensitive to short-term fluctuations in the cost of debt and the looming political uncertainty. The potential impact of the general election later in the year could introduce some variability in market dynamics. However, most market participants seem to have already factored in the possible outcomes, minimizing the likely disruption.




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Key Challenges and Changes in the Estate Agency Sector


The estate agency sector has been facing a multitude of challenges and undergoing significant changes, particularly as market dynamics shift and new regulations come into play.


A survey conducted by GetAgent, which included responses from 957 estate agents across England, highlights the most pressing issues and the evolving landscape of the property market.


Impact of Economic Factors


One of the most significant challenges cited by estate agents has been the combination of rising inflation and increasing interest rates. These economic factors have led to spiraling mortgage rates, which in turn have dampened buyer demand.


The higher cost of borrowing has made affordability a critical issue, as potential buyers are finding it increasingly difficult to secure financing for home purchases.


Regulatory Changes and Their Impact


The estate agency sector is also grappling with recent legislative changes. The Building Safety Act of 2022, for instance, has introduced a more stringent regulatory framework within the construction industry.


This act has significantly impacted the sector, pushing agencies and developers to adhere to stricter safety standards, thereby increasing the cost and complexity of new developments.


Another notable regulatory change is the proposed Leasehold and Freehold Reform Bill, along with adjustments to the Minimum Energy Efficiency Standards and the Energy Act.


These changes aim to enhance the sustainability and energy efficiency of buildings, but they also require estate agents and property owners to make costly adjustments to their properties to comply with the new laws.


Brexit and Political Uncertainty


The ongoing political uncertainty, largely stemming from Brexit, continues to cast a shadow over the estate agency sector. Brexit has introduced trade barriers and regulatory uncertainties that have indirectly affected the property market. Estate agents report that the political environment has led to a cautious approach among buyers and investors, who are wary of potential economic shocks.


Technological Advancements and Market Adaptation


On a more positive note, the sector is witnessing rapid technological advancements that are transforming how estate agencies operate.


Online platforms, virtual tours, and digital transactions are becoming increasingly prevalent, catering to a growing demographic of tech-savvy clients. These technologies offer enhanced convenience and efficiency, enabling agents to reach a broader audience and streamline operations.


However, the adoption of technology also presents challenges, particularly for traditional brick-and-mortar estate agencies that must now invest in digital capabilities to remain competitive. The shift towards online services demands significant upfront investment in technology and training, posing a hurdle for smaller agencies.



Market Trends: Demand Decreases as Supply Increases


Recent data from the RICS (Royal Institution of Chartered Surveyors) UK Residential Survey indicates a shift in the UK real estate market, marked by decreasing demand alongside an increasing supply of properties. This change, observed in April 2024, is shaping new dynamics within the housing market, with significant implications for buyers, sellers, and investors.


Decline in Buyer Demand


The headline for new buyer inquiries shows a net balance drop from +6 to -1 in April, concluding a streak of three consecutive months of positive outcomes. This decline signals a shift towards a more stagnant market environment.


The reduction in buyer demand is particularly notable in regions such as London and the Southern parts of England, where a noticeable loss of momentum has been reported. This cooling of demand can be attributed to several factors, including slight increases in mortgage rates and a general uncertainty surrounding economic conditions, which have made potential buyers more cautious.


Increase in Property Listings


Conversely, there has been a notable increase in the number of properties coming onto the market. A net balance of +23 of respondents noted an uptick in new instructions during April, marking the most positive figure since September 2020.


This rise in supply is likely a response from sellers feeling more confident about listing their properties as market conditions continue to stabilize post-pandemic.


Impact on Market Dynamics


The divergence of falling demand and rising supply has various implications for the real estate market:


  • Price Adjustments: With an increased supply and reduced demand, property prices may face downward pressure, particularly in areas where the imbalance is most pronounced. This could lead to more negotiable selling prices, benefiting buyers but posing challenges for sellers aiming to achieve their asking prices.

  • Increased Market Time: Properties may take longer to sell, as evidenced by the regional feedback indicating a more protracted sales process. This could lead to a higher inventory of unsold homes, increasing the competition among sellers and potentially leading to further price reductions.

  • Rental Market Effects: The lettings market is also experiencing shifts, with tenant demand losing momentum while landlord instructions remain in short supply. This imbalance could lead to a slow but steady increase in rents, albeit at a pace that might not meet the expectations of landlords.


Luxury apartment living room with large windows overlooking Tower Bridge in London

Top Period Property Styles in the UK


The UK's housing market is renowned for its rich tapestry of architectural heritage, with period properties holding a special allure for homebuyers.


A recent study by Rightmove has shined a spotlight on the most sought-after period property styles in the UK, revealing the enduring appeal of historical homes. Here’s a brief overview of the top styles that captivate property seekers:


  • Victorian Homes: Topping the list, Victorian homes are cherished for their distinctive charm and robust construction. Characterized by ornate detailing and spacious interiors, these properties often sit in prime locations, offering easy access to modern amenities.

    • Key Features: High ceilings, bay windows, and intricate brickwork.

    • Popular for: Their solid craftsmanship and historical aesthetic.

 

  • Georgian Properties: Known for their symmetry and proportion, Georgian homes come second. These properties are marked by their balanced architectural lines and elegant facades.

    • Key Features: Sash windows, stucco fronts, and parquet flooring.

    • Ideal for: Buyers looking for a mix of classical elegance and functional design.

 

  • Edwardian Residences: These homes are appreciated for their lighter, more whimsical style compared to their Victorian predecessors, with larger windows and more decorative freedom.

    • Key Features: Subtler ornamentation and wider hallways.

    • Favored by: Those seeking airy spaces and a touch of early 20th-century charm.

 

  • Tudor Style: With its medieval cues, the Tudor style is renowned for its steeply pitched roofs and half-timbering façade.

    • Key Features: Exposed wooden beams and leaded glass.

    • Chosen for: Its dramatic visuals and link to Britain’s medieval past.

 

  • Regency Buildings: Last but not least, Regency homes are admired for their stately appearance and fine ironwork, often enhanced by beautiful communal gardens.

    • Key Features: Tall windows and decorative iron balconies.

    • Perfect for: Enthusiasts of grandeur and ornate details.


Trends in Mortgage Rates: Recent Increases


The trajectory of mortgage rates in 2024 will largely depend on how the economic environment evolves, particularly in response to fiscal policies and inflationary pressures. Even small increases can significantly affect the cost of financing a home.


Recent Shifts in Mortgage Rates


  • Increased Rates: According to recent data, there has been a rise in mortgage rates across various terms. For instance, the average two-year fixed rate has seen an increase from 5.80% to 5.91% over the last month. Similarly, the five-year fixed rate has climbed from 5.39% to 5.48%.

  • Long-term Rates: The ten-year fixed rate, a less common but increasingly considered option, has increased from 5.77% to 5.97% since the start of April 2024. This uptick is part of a broader trend of rising long-term rates that provide insight into market expectations about future financial conditions.


Factors Influencing the Rate Hikes


  • Economic Indicators: These recent increases in mortgage rates are largely attributed to changes in broader economic indicators, including inflation rates and policies set by the Bank of England. Although the base rate has remained unchanged since August 2023, the mortgage market reacts dynamically to even the slightest hint of economic shifts.

  • Market Speculations: Speculation around future economic policies, particularly those related to interest rates, continues to play a significant role. The financial markets' expectations regarding the trajectory of the Bank of England’s monetary policy affect how mortgage rates are set by lenders.


Implications for Buyers and the Housing Market


  • Affordability Concerns: The rise in mortgage rates has immediate implications for affordability. Higher rates mean higher monthly repayments for new borrowers, which can limit how much they can afford to borrow. This could cool demand in overheated market segments.

  • Refinancing Challenges: For existing homeowners, refinancing options may become less attractive as rates climb, potentially locking people into higher rates if they do not act swiftly.

  • Investor Calculations: Investors in the property market will need to adjust their calculations. The cost of financing investment properties is rising, which might thin margins and shift focus towards other investment avenues unless rental yields rise proportionately.



House Price Reductions Reach 18-Month Low Amid Sales Recovery


The UK property market is exhibiting signs of a robust recovery, highlighted by a significant drop in house price reductions, reaching an 18-month low. This trend provides a fresh perspective on the state of the real estate sector as it gains momentum post-pandemic.


Current Trends in House Price Reductions


  • Historical Context: Recent data from Hamptons indicates that only 44% of homes in England and Wales were sold following a price reduction last month. This figure represents the lowest percentage since October 2022, signalling a return to more stable market conditions.

  • Regional Performance: The decrease in price reductions has been particularly notable in regions such as the South of England, including London, the East, South East, and South West. These areas have seen a considerable uptick in sales activity, with many properties selling at or above their asking price.

  • Overall Market Dynamics: The proportion of homes selling above their final asking price has stabilized at 27% across England and Wales, mirroring last year's figures. However, regional disparities are notable, particularly in how quickly homes are selling and at what price.

 

Regional Sales Times


In the South of England, including London, the East of England, South East, and South West, the average time it takes to sell a property has decreased.


The gap between the time to sell in the South compared to the North has halved from 16 days last year to just 8 days.

The South West experienced the most substantial reduction in selling time, with properties going under offer six days faster than the previous year. The South East and London followed closely with improvements of five and four days, respectively.


Quick Offers


Approximately 5% of homes across Great Britain received an offer in the first week on the market last month, showcasing an increased readiness among buyers.


The North East saw a notable increase in quick offers, with 13% of homes receiving an offer within the first week, up from 7% last year.

This trend was also positive in the East of England, South East, and South West.


Asking Price Achievements


In London and the broader South, 25% of homes sold for more than their asking price, an increase of 2% from April 2023. This contrasts with the Midlands and the North, where fewer homes sold above the asking price compared to last year.


Sellers in the South of England achieved 98.9% of their final asking price on average, a slight improvement over the previous year.

In contrast, sellers in the North saw a marginal decline in the percentage of the asking price achieved.


Factors Contributing to the Reduction in Price Cuts


  • Increased Buyer Confidence: As mortgage rates begin to stabilize and economic forecasts improve, buyer confidence has rebounded. The introduction of slightly more favourable financing conditions has encouraged potential buyers to re-enter the market.

  • Supply Dynamics: There has also been a shift in the supply landscape. While the number of properties coming onto the market has increased, the quality and appeal of these listings have encouraged quicker sales at closer to the asking prices, reducing the necessity for price reductions.


Implications for Sellers and Buyers


  • Seller's Market Conditions: Sellers are currently enjoying a phase where the demand for homes is aligning more closely with supply, allowing them to hold firmer on their asking prices. This shift reduces the need to negotiate down from listed prices, often resulting in faster closing times.

  • Strategic Buying Opportunities: For buyers, the market's current state means that well-priced homes are likely to sell quickly. It’s essential for buyers to be ready to act swiftly with financing in place to take advantage of the available opportunities before prices potentially rise further.


Cozy, modern attic living room with exposed wooden beams and a fireplace


Conclusion


The optimistic revisions in house price forecasts suggest potential growth opportunities for investors and homeowners.


However, estate agencies are navigating a complex environment fraught with regulatory changes and the swift pace of technological advancements.


Market trends are showing a more balanced interplay between demand and supply, which could help stabilize prices and influence transaction dynamics.


Additionally, the enduring appeal of period properties and the recent fluctuations in mortgage rates add layers of complexity to the market, underscoring the importance of strategic decision-making based on well-informed insights.

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