Residential Property Review – December 2024

Property market trends in 2024 

As we approach the new year, Zoopla has highlighted trends in the UK property market in 2024.  

It is expected that, by the end of the year, there will have been 1.1 million sales completed – 10% more than last year. Meanwhile, January was the busiest month for visitors to the Zoopla site, followed by March and February. Interestingly, 80% of potential buyers were looking at the floorplans of a property before the photos, highlighting that pictures aren’t everything.  

As for sellers, May was the most popular month to put a home up for sale – just in time for the summer, which is typically the busiest period for house moves. August saw 104,740 completions – the busiest month of the year according to HMRC. It took the average homeowner 33 days to sell – a slight reduction on 34 days in 2023. The most popular property type this year was a three-bedroom semi-detached house. 

The top five fastest moving markets in the UK were all located in Scotland – Falkirk took the top spot with an average of 15 days to sell. In Scotland, properties are listed with a valuation and survey upfront, thus speeding up the sales process.  

Where has buyer demand increased? 

Comparison site GetAgent has revealed the levels of buyer demand in cities across Britain.    

The report highlighted the areas with the strongest growth in buyer activity this year. Out of 21 major cities, Sunderland came out on top; half of all homes on the market have currently found a buyer – 10% more than the start of the year. Leicester was second on the list with a 9% increase in buyer demand, followed by Liverpool (8%), Newcastle (7%) and Leeds (6%).  

Aberdeen saw the lowest increase, with only a +0.2% change in buyer demand this year. London was also near the bottom of the list, with a 3.3% increase in activity. Although some increases were marginal, it is promising that every major UK city did see some growth in buyer demand in 2024.  

What’s in store for residential property investment? 

2025 is expected to be a good year for residential property investment, despite recent policy changes. 

Labour’s target to build 1.5 million new homes during this Parliament is likely to encourage investment in the residential property market. Capital Gains Tax on residential property remained unchanged in the Chancellor’s Autumn Budget, which came as a relief for many. However, those buying a second home are now subject to a higher rate of Stamp Duty Land Tax.  

Following the Budget, the Bank of England warned that inflation could rise again, causing interest rates to fall at a slower pace. There was concern that this could make the UK less appealing to European investors, who could play an important role in achieving the government’s housing target. The impact remains to be seen; however, the Bank still hopes to reduce interest rates in 2025.

  

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

All details are correct at the time of writing (18 December 2024) 

Commercial Property Market Review – December 2024

Robust demand for Scottish hotels 

The Scottish hotels market continued to show resilience in Q3 according to Colliers. 

Hotel investment in Scotland hit £110m in quarter three – £40m more than Q2 and 150% higher than the five-year quarterly average of £44m. The year-to-date investment total is £200m – up 18% when compared with the same period in 2023. The report highlighted that investors are showing notable interest in leisure hotels in popular areas and larger hotels in built-up locations.  

Head of Colliers UK Hotels Agency, Julian Troup, commented, “These latest figures show that we’re continuing to see robust demand for hotel assets north of the border, with Scotland’s popular cities and stunning landscapes making it a desirable market for those looking to invest in UK regional hotels.” 

  

Office availability continues to tighten in Prime London 

Knight Frank data shows that Prime London office availability has dropped to near record lows.  

In the last year, office availability has fallen by 6.8% in the Prime London area, causing a vacancy rate of 9.1% and bringing total availability to 23.4 million sq ft. Supply of top-quality space is even more limited, as Grade A offices have a vacancy rate of just 1.8%.  

Availability is a particular challenge in the business districts. In the City & Southbank market, availability decreased by 5.8% due to increased letting activity. The vacancy rate is now 8.9%, which is 1.7 percentage points higher than the long-term quarterly average. True Grade A availability has fallen by 19.5% over the last 12 months, with a vacancy rate of only 0.5% in the City Core.  

In the West End, availability of new space is especially low – it fell to its lowest level in two years due to a 7.1% drop in Q3. As a result, the vacancy rate for new offices is only 1.3% in this area.  

An industrial revolution for the modern day 

The net-zero transition and artificial intelligence (AI) are expected to be the driving forces behind a new industrial revolution in the UK.  

The manufacturing sector will play a key role in meeting the nation’s target to reach net zero by 2050. With the transformation of the energy system already underway, demand has increased for green products such as wind turbines and electric vehicle batteries. JLL reported that ‘in the next 20 to 25 years the demand for new factories will become a more significant component of overall industrial property demand.’ These new factories could crop up in unexpected places – the growth of offshore wind means that towns and cities near ports will experience heightened demand.  

AI can accelerate the transition to net zero; it enhances the efficiency of wind and solar power generation, improves industrial efficiency and speeds up relevant research and development. However, it does use a significant amount of energy and will drive an increase in data centres to store the computer systems.  

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

All details are correct at the time of writing (18 December 2024) 

News in Review

“The economy contracted slightly in October, with services showing no growth overall and production and construction both falling” 

Key takeaways 

  • ONS figures showed that the UK economy contracted by 0.1% in October  
  • GfK’s Consumer Confidence Index edged up by one point in December to reach -17 
  • New buyer demand, new instructions and house prices were all up in November 

The UK economy contracted again in October, according to official figures released on Friday by the Office for National Statistics (ONS). The unexpected fall of 0.1% marked two consecutive months of negative growth for the first time since the onset of the pandemic in March and April 2020. 

Analysts pointed to the effects of the Budget weighing on confidence as a reason for poor growth. Prior to the release, economists had expected GDP to rise by 0.1% in October. Chancellor Rachel Reeves called the data “disappointing”. 

The poor showing resulted in part from weak performances from hospitality and manufacturing. According to ONS, hotels and food services slowed in October, along with arts and entertainment. Manufacturing was the biggest drag on overall production output, down 0.6%, while the construction industry fell by 0.4%. The services sector also dragged on the economy, providing no growth in October after returning similarly flat figures in September. Conversely, growth in transport, and science and technology rose in October. 

“It’s not possible to turn around more than a decade of poor economic growth and stagnant living standards in just a few months,” Ms Reeves said. “Growth is the number one mission of this government – economic growth that results in families feeling better off with more money in their pockets – and we’re driving that economic growth and we hope that those numbers will start to improve because of the policies that we’re pursuing in the months ahead” she added. 

Commenting on the release, Liz McKeown, ONS Director of Economic Statistics, said, “The economy contracted slightly in October, with services showing no growth overall, and production and construction both falling. Oil and gas extraction, pubs and restaurants and retail all had weak months, partially offset by growth in telecoms, logistics, and legal firms. However, the economy still grew a little over the last three months as a whole.” 

Consumer confidence edged up in December 

On the same day, separate data from GfK’s long-standing Consumer Confidence Index painted a rosier picture in the run-up to Christmas. Consumer confidence edged up by one point in December to reach a total of -17. Despite rising confidence, however, respondents remained cautious about making major purchases, with GfK’s major purchase index remaining at -16. 

Looking ahead, expectations for the general economic situation over the next year stayed at November’s level of -26. Meanwhile, the forecast for personal finances over the same period was up two points at +1, three points higher than this time last year. 
 
Neil Bellamy, Consumer Insights Director at NIQ GfK, commented, “Consumer confidence is still far from strong but there is some room for optimism with views on personal finances over the next 12 months up two points versus November and creeping back into positive territory. However, with the major purchase measure unchanged at -16 in December, consumers are still thinking twice about big-ticket purchases and whether they will bring Christmas cheer.” 

Buyer demand pushes UK house prices higher 

House price growth has gathered pace, according to the latest Residential Survey released last week by the Royal Institution of Chartered Surveyors (RICS). With new buyer demand, new instructions and house prices all on the up in November, sales and prices are also staying high as 2024 draws to a close. 

New buyer enquiries posted a headline net balance of +12% in November, a fifth consecutive positive reading, with a net balance of +1% for agreed sales. Commenting on the data, Tarrant Parsons, RICS    Senior Economist said, “Although the latest survey results continue to signal a steady improvement in buyer demand across the residential market, the broader macro environment is likely to pose additional headwinds moving forward.” 

Is Europe’s stuttering economy ready for Trump? 

Weeks away from the return of Donald Trump to the White House, the outlook for growth across Europe looks subdued, figures released by the European Central Bank (ECB) indicate. Last Thursday, the ECB cut interest rates for a third time in a row, citing falling inflation as justification. At the same time, however, the central bank dropped its forecast for Eurozone growth next year to 1.1%, down from the 1.3% it had expected in September. ECB President Christine Lagarde cautioned that Europe’s economic recovery depended on consumers spending more and businesses increasing their investments.  

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (18 December 2024) 

Buy-to-let market update: Trends and insights 

The UK buy-to-let (BTL) market has seen notable changes recently. 

The number of new BTL mortgages granted has decreased sharply. This decline is largely due to higher interest rates and stricter taxation measures, which have served to cool investor enthusiasm. 

Additionally, the overall size of the BTL mortgage market has contracted. Investors are encountering more challenging lending conditions and increased costs, which have made new investments less appealing. 

Resilience remains 

However, despite these difficulties, the BTL sector demonstrates some resilience. Demand for rental properties remains strong, driven by a persistent affordable housing shortage and a reduced pool of available properties for rent. This ongoing demand suggests that while the market is shrinking, there are still opportunities for those who can effectively navigate the evolving conditions. 

James Tatch, Head of Analytics at UK Finance, commented, “Without more unexpected negative shocks, strong rental demand and strong lending standards could mean the buy-to-let sector emerges from last year’s downturn sooner than previously expected.” 

Contact us for expert buy-to-let advice  

If you’re considering a buy-to-let investment or need assistance with your current holdings, understanding these market trends is crucial. For personalised advice tailored to your needs, please get in touch. Expert guidance can help you make informed decisions and optimise your investment strategy in this shifting market. 

As a mortgage is secured against your home or property, it could be repossessed if you do not 

keep up mortgage repayments. 

Why should you care about correlation

If you want your investment portfolio to strike a good balance between risk and return, it’s worth knowing how correlation can impact your investments. 

If two different investments are perfectly correlated, their value will rise and fall by the same amount, at the same time. Investing in highly correlated assets can increase your losses, because when one investment falls in value (except for a reason peculiar to it), the others may well do likewise. 

Avoiding correlation is crucial for building a well-diversified portfolio. If all your investments move in the same direction, your portfolio is more vulnerable. Owning a variety of investments that move differently can help limit risk and protect your overall portfolio’s value. 

Is your portfolio more correlated than you think? 

You might be surprised at how closely correlated some of your investments are. This is because many large funds hold similar holdings, which can lead to increased correlation and reduced diversification benefits. Even if you own a globally diversified fund, you might not be as diversified as you think, as allocation to holdings can be closely aligned. 

This has become a concern recently, as the performance of the ‘Magnificent Seven’ technology stocks (Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Nvidia and Tesla, has seen them dominate global portfolios. Should these companies all start to underperform, it could have a substantial impact on overall investment returns. 

So, for a truly diversified portfolio, owning a range of investments with low or no correlation, where one investment isn’t virtually certain to move in the same direction as another, is ideal. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.  

News in Review

“Mark my words: with this Plan for Change, we will stick to it. Country first, party second” 

Key takeaways 

  • The Prime Minister delivered a speech on the government’s ‘Plan for Change’ 
  • The Scottish Budget included record NHS spending of £21bn for the next financial year 
  • Cash was used in shops for one in five transactions last year 

Prime Minister Sir Keir Starmer delivered a speech last Thursday at Pinewood Studios on the government’s ‘Plan for Change.’ In it, he set out “six milestones” to be completed before the next general election, with new targets on housebuilding, NHS waiting lists, policing and clean power. 

“Today, we publish new milestones, measurable milestones that will also give the British people the power to hold our feet to the fire,” Starmer said. The milestones are: putting more money in the pockets of working people; building 1.5 million homes and fast-tracking planning decisions on at least 150 major infrastructure projects; treating 92% of NHS patients within 18 weeks; recruiting 13,000 more police officers, special constables and PCSOs in neighbourhood roles; achieving 95% clean power by 2030 and making sure three-quarters of five-year-olds are school-ready. 

Three of these apply to England only, specifically the targets relating to housebuilding, NHS waiting lists and school-readiness. One encompasses England and Wales (policing), while clean power and raising household income are UK-wide efforts. 

The Prime Minister presented the six milestones as yardsticks against which to measure the five missions he previously set out in February 2023, which he framed at the time as the driving purpose for the government. The missions include building an NHS fit for the future and reforming the justice system. All these milestones and missions are to be built on three foundations, according to Starmer: economic stability, secure borders and national security. 

“Mark my words: with this Plan for Change, we will stick to it. Country first, party second,” he said, before adding that this is “a strategy that will give government and the nation, whether in calm or choppy waters, the stabilising certainty of the clear destination [and] guide us towards a decade of national renewal.” 

Scottish Budget includes record NHS spending 

A day earlier, Scotland’s Finance Secretary Shona Robison unveiled her Budget for 2025/26, featuring significant announcements on health, local authorities and culture. 

Leading the billing was record spending on the Scottish NHS: a funding settlement of £21bn for the next financial year, an increase of £2bn. Robison told MSPs that the extra funding would mean nobody having to wait more than a year for a new outpatient appointment, inpatient treatment or day case treatment by March 2026. The money “will make it easier for people to access GP appointments, that will improve A&E and ensure more Scots get the care they need in good time,” Robison said. 

Other key measures included record funding for local councils, which will “take their total funding to over £15bn” and pay for wage increases agreed for teachers and social care workers, among others. Meanwhile, Income Tax rates were frozen until 2026 and the culture budget was boosted by an extra £34m. 

Cash continues comeback 

Cash was used in shops for one in five transactions last year, according to figures released last Thursday by the British Retail Consortium (BRC), a second consecutive annual increase for notes and coins following a decade of falling usage. 

A day earlier, a committee of MPs had heard from campaigners about the dangers a cashless society would pose to some groups. For example, women in abusive relationships, who often rely on cash to avoid having spending tracked by an abuser. Some older people and those with mental health issues are also more comfortable using cash, the committee heard. The BRC data also revealed that shoppers found cash helped them to budget better and that the amount spent per purchase dropped to £22.03 in 2023, down from £22.43 a year earlier. 

Uncertainty in France after Prime Minister ousted 

French President Emmanuel Macron addressed the nation last Thursday following a tumultuous week that saw a Prime Minister voted out by Parliament for the first time in more than 60 years. 

Under pressure from parties on the left and right, Macron vowed to stay in his post “until the end of the mandate” in 2027. The President, now tasked with appointing a new Prime Minister, held talks with leaders of the Socialist Party on Friday and suggested he would name a new Prime Minister “in the coming days”.  

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (11 December 2024) 

A third of Gen X think they will never retire

Recently released research1 suggests a significant proportion of working age people are no longer planning a traditional ‘hard stop’ retirement, with 45 to 54-year-olds most likely to feel they will continue working beyond pensionable age. 

Work work work 

According to the survey, more than a fifth of working age adults think it unlikely they will ever completely retire, with those across the 25 to 54-year-old age bracket most likely to hold this view. This was particularly true for Gen X respondents, with almost a third of 45 to 54-year-olds saying they expect to carry on working. There was also a notable gender disparity, with only a third of women thinking they would completely retire compared to almost half of their male counterparts. 

Retirement uncertainty 

Financial considerations are inevitably a factor for many, particularly those in their 40s and 50s. The so-called sandwich generation can find themselves caring for both elderly parents and children, as well as having to provide for their own needs. 

Additionally, this group falls between the generations that benefitted from final salary pensions and younger ones reaping the full rewards of auto-enrolment. For Gen Xs, retirement can therefore appear close enough to consider yet too distant to have any certainty over. 

Control your future 

These findings undoubtedly highlight a shift in attitudes, with the concept of a ‘hard stop’ retirement increasingly being consigned to history. This could also partly reflect the fact that today’s workers can exert a higher degree of control over their retirement plans, with savers enjoying greater freedom over when and how to use pension savings, including the ability to set funds aside to help loved ones. So, if you want to take control of your financial future, get in touch and we’ll help you consider the full picture and plan a retirement that’s just right for you. 

1Aviva, 2024 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Many young mortgage holders do not have life cover

Research has found that 28% of young UK homeowners do not have life insurance1. 

It is estimated that 1.7 million adults aged 18-40 do not have appropriate cover in place, despite having a mortgage. This oversight puts their dependants in a precarious financial position in the event of their death. 

Why risk it? 

Of those homeowners who do not have life insurance, nearly a quarter (23%) said they do not believe it is a priority expense. Meanwhile, 22% said they never considered it and the same amount could not afford cover due to the cost-of-living crisis. 

Uncovered debt in the UK 

In 2023, there was thought to be over £433bn in uninsured mortgage debt in the UK. This concerning figure suggests that many people would be left unsupported if a loved one died, potentially making it difficult for them to stay living in their home. 

Make cover a priority 

Living without the right protection could put unnecessary financial pressure on your loved ones at an already distressing time. Life cover should be a priority expense, even when you’re young. Speak to us now to get insured. 

1Beagle Street, 2024

Don’t just plan – protect your money

Are you confident you have all the relevant cover in place to protect your finances? Having a financial plan should go hand-in-hand with a conversation about insurance. 

The statistics 

We may not like to think about death, but the reality is it is inevitable; however, data has revealed that only 29% of UK adults have some form of life insurance1. Meanwhile, just 13% have critical illness cover2. Even fewer (6%) have income protection, despite one in 13 working people having a long-term sickness3. These figures highlight that a concerning number of Brits risk leaving themselves and their loved ones vulnerable during life’s toughest moments. 

Writing life insurance policies into trust 

Writing your life insurance policy into trust is a tax-efficient way of protecting and preserving your wealth for future generations. This arrangement makes your trustees the legal owners of your policy, so the proceeds will not be considered as part of your estate when you die. Not only does this mean that under current rules the payout will not be subject to Inheritance Tax, but your beneficiaries should receive the money swiftly as it will not have to go through probate. 

We can advise on the best cover for you and your circumstances. 

1FCA, 2023 

2Health Foundation, 2024 

3ONS, 2023 

News in Review

“Housing affordability has improved over the past year, thanks to stabilising property prices, strong wage growth, and easing interest rates” 

Buying a home is becoming more affordable relative to income, according to the latest Halifax           Affordability Review released last Thursday, as the house price to income ratio continues to fall. 

Strong wage growth combined with lower house price inflation has made housing more affordable than a year ago, the research revealed. Since 2023, house prices have risen by 3.8%, while at the same time annual earnings for full-time workers have climbed by 5%. As a result, the house price to income ratio has declined from 6.62 to 6.55. 

In summer 2022, with house prices soaring but incomes yet to rise significantly, the ratio reached a    record high of 7.24. The Bank of England (BoE) raised interest rates to a 15-year high of 5.25% in August 2023, checking house price growth. 

The release also highlighted major regional differences that persist in the house price to income ratio. Unsurprisingly, housing was least affordable in southeast England and in London, with new mortgages costing 39% and 36% of local salaries respectively. 

Commenting on the release, Amanda Bryden, Head of Halifax Mortgages, said, “Housing affordability has improved over the past year, thanks to stabilising property prices, strong wage growth, and easing interest rates. That’s great news for first-time buyers and existing homeowners looking to remortgage or move up the property ladder.” 

UK car production drops – with electric vehicles down by a third 

Car production fell sharply in the UK in October, according to figures released last Thursday by the Society of Motor Manufacturers and Traders (SMMT), with output of all cars down by more than 15% from a year earlier. 

To explain the drop, SMMT pointed to weak demand causing a fall in exports. Leading the decline was the production of electric and hybrid vehicles, which dropped by a third compared with last year. In contrast, sales of electric vehicles (EVs) in the UK have been increasing – in October, EVs made up one out of every five cars registered. 

Mike Hawes, SMMT’s Chief Executive, commented, “These are deeply concerning times for the automotive industry, with massive investments in plants and new zero emission products under intense pressure.” 

Retailer sentiment nosedives ahead of crucial holiday season 

Sentiment among retailers for the next three months declined at its fastest rate for two years, according to the latest quarterly Distributive Trades Survey from the Confederation of British Industry (CBI). 

Retailers judged sales to be ‘poor’ in the year to November, while also expressing concern that volumes will be below the seasonal average in December. The CBI indicated that weak consumer demand was a leading factor in the falling sentiment. Looking ahead, firms declared that they expected to scale back capital expenditure in the next year compared to the previous year. 

Confirming the trend, data from the British Retail Consortium (BRC) revealed that high street footfall had dropped by 3.7% in November. Similar results were observed for footfall in retail parks (down 1.1%) and shopping centres (down 6.1%). After a challenging few weeks, BRC noted the importance of the            upcoming festive season to return some optimism to UK retailers. 

Commenting on the data, Ben Jones, CBI Lead Economist, said, “Retailers continue to report                  disappointing sales, though trading conditions have shown some improvement since the middle of the year. Yet the last time retailers felt this gloomy was back in November 2022, at the peak of the inflation shock. This makes the sharp decline in sentiment this month all the more telling.” 

Wealth gap shrinking but still substantial 

The average wealth gap between thirty-somethings and sixty-somethings has fallen by £86,000 in five years, according to research by the Resolution Foundation. 

Following severe interest rate rises and house price growth slowdown in recent years, the typical household wealth of someone in their 60s in 2018-20 has fallen by 16% over the past five years. Meanwhile, the typical wealth of someone in their 30s in 2018-20 has risen by 17% in the same period.  

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (4 December 2024)