Residential Property Review – August 2024

First cut in Bank Rate in over four years 

The Bank of England has reduced Bank Rate for the first time in more than four years.  

The rate is now 5%, having been held at 5.25% since August 2023, after 14 consecutive increases. The Monetary Policy Committee (MPC) marginally voted in favour of reducing Bank Rate, by 5 votes to 4. Many major mortgage lenders had already reduced their rates in anticipation of the cut and more are expected to follow suit. Despite this, the reduction is not expected to make a significant difference to mortgage affordability overall, however it is hoped to be the first of more cuts which should alleviate some of the financial pressures on homebuyers.  

Matt Smith, Rightmove’s mortgage expert, commented, “While those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue.” 

  

Renters’ Rights Bill – what’s in it 

The government has released notes on what to expect in the Renters’ Rights Bill, which is due to introduced in the autumn.   

As promised in Labour’s manifesto, the Bill will include the end of ‘no fault’ evictions but will have clear possession grounds for landlords needing to reclaim their properties. Renters will also have improved rights enabling them to challenge rent increases. Plus, the government plans to end ‘bidding wars’ on rental properties, although property experts Rightmove commented that this may be difficult as there are currently 15 prospective tenants for every rented property.  

Tenants will gain the right to request a pet, which the landlord must consider and cannot unreasonably refuse, however they can request appropriate insurance is purchased to cover any accidental damage.  A Decent Homes Standard is also expected to be applied to the Private Rented Sector to improve the quality of rental properties. 

  

The UK’s fastest selling homes 

Research by Zoopla has revealed the homes that sell the fastest in the UK.  

In England and Wales, almost half (49%) of homes find a buyer within 30 days of going on the market. This figure increases to 75% in Scotland where properties are valued and surveyed upfront, thus speeding up the homebuying process.  

In Q2 of this year, the fastest-selling property type on Zoopla was two-bed terraced houses, which took an average of 27 days to sell. It then usually takes another four months for the transaction to be completed. These properties appeal to a range of buyers, from first-time buyers to empty-nesters looking to downsize. Notably, there is also more competition for this kind of home due to limited supply, as they made up only 7% of new properties listed in the last three months.  

Interestingly, the slowest-selling properties are detached homes with at least four bedrooms, taking an average of 40 days before a sale is agreed. This is probably due to associated higher mortgage costs combined with a spike in supply of larger homes.   

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 (19 August 2024) 

Commercial Property Market Review – August 2024

Latest from RICS 

The commercial property market remained relatively flat in Q2 of this year, according to the latest Royal Institution of Chartered Surveyors (RICS) survey.  

Tenant and investor demand were both largely stable as headline occupier demand stayed at a net balance of +4% – the same reading as the previous quarter. Investment enquiries also remained the same (-4%) indicating that investment demand has become stagnant.  

Meanwhile, the London office market continues to outperform the rest of the UK, with 68% of survey respondents expecting prime office rents to increase within the next year. There was not the same confidence in other regions, with 29% expecting rents to rise in both the North and South, and 25% predicting increases in the Midlands.  

RICS reported that a third (34%) of respondents believe that the market is at the bottom of the current cycle and 41% think it is in the early stages of recovery – a slightly more optimistic view than the previous survey.  

A mixed picture in Scotland 

Occupier demand for commercial property in Scotland continues to recover, supported by the most resilient backdrop for retail in eight years, according to RICS. 

A net balance of +4% of Scottish surveyors reported a rise in occupier demand across all sectors through Q2. Demand for office and retail space was flat, while a net balance of 13% of surveyors in Scotland noted a rise in demand for industrial space. The net balance for retail demand moved out of negative territory for the first time since 2016. 

Looking ahead, rents in both the retail and office sectors are expected to fall, while rents for industrial space are expected to rise through the third quarter.  

RICS Senior Economist Tarrant Parsons commented, “Respondents now feel the market is moving towards the early stages of an upturn following a challenging couple of years.” 

Rise in office space leased in the capital 

Leasing activity surged in London in Q2 of this year, according to Savills. 

Take-up in the capital rose quarterly by 21% to 2.3 million sq. ft. The insurance and financial services sectors were key drivers of this, accounting for 32% of office space leased so far this year. This is partly due to Citadel’s pre-let at 2 Finsbury Avenue EC2, which is scheduled to finish construction early in 2027.  

Although take-up in the City of London was 1% higher than its long-term average in Q2, leasing in the West End was 37% lower as the lack of larger deals continue to impact this market.  

There is noticeable demand for sustainable buildings – Victoria Bajela, Director of Commercial Research at Savills, observed, “Over 55% of take-up has been in BREEAM-rated Outstanding or Excellent buildings which continues to drive rental growth overall.”  Launched in 1990, the Building Research Establishment’s Environmental Assessment Method (BREEAM) is the world’s longest-established green building certification system.  

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 (19 August 2024) 

News in Review

“The UK economy has now grown strongly for two quarters” 

The UK’s economy grew by 0.6% between April and June, according to the latest gross domestic product (GDP) figure released by the Office for National Statistics (ONS) on Thursday. 

After slipping into recession at the end of last year, analysts now say the UK economy has turned a corner and finds itself in a much stronger position for the final two quarters of 2024. The latest rise, which was in line with forecasts, comes after a 0.7% increase in the first three months of 2024. 

The services sector powered the UK economy to growth in the second quarter, according to the release, with legal services and scientific research leading the way. Other strong performers included IT, transport, architecture and engineering. 

In contrast, manufacturing and construction both saw output fall between April and June. Consumer-facing service output also dropped by 0.1% in Q2 2024, after cost-of-living pressures and poor weather contributed to soggy retail sales. 

Overall, however, the GDP figures present a positive picture. Significantly, the UK has now recorded the strongest growth in the G7 group of advanced economies over the past six months. Following the release, sterling edged higher too, with the pound climbing 0.2% against the US dollar.  

Commenting on the figures, Liz McKeown, Director of Economic Statistics at ONS, summarised, “The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year. Growth across the three months was led by the service sector, where scientific research, the IT industry and legal services all did well.” 

Inflation slightly up 

The UK’s inflation rate rose for the first time in 2024, according to another set of ONS data released last week. The Consumer Prices Index (CPI) increased by 2.2% in the year to July 2024, figures showed, with analysts labelling housing and household services as the major cause of upward pressure. Prices of gas and electricity fell by less than they did in 2023. 

The latest figures mean that prices are rising faster than in previous months and at a rate slightly above the Bank of England’s target of 2%. However, inflation remains well below 2022 and 2023 levels, they were quick to point out. 

Grant Fitzner, ONS Chief Economist commented, “Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago. This was partially offset by hotel costs, which fell in July after strong growth in June.” 

Retail optimism 

A third set of ONS figures, released on Friday, painted a hopeful picture for the UK’s retail sector, with sales up by 0.5% month on month. This means that, in the three months to July, retail sales were up 1.1% compared with the previous three months, a significant improvement that analysts say bodes well for the rest of 2024. 

Non-food stores led the way, after recording a monthly rise of 1.4% in July, thanks in part to substantially improved department store and sports equipment sales, following high-profile sporting events such as Euro 2024. At the other end of the spectrum, automotive fuel sales fell by 1.9%; excluding fuel, overall sales in July rose by 0.7%. Furthermore, sales at clothing and household goods shops dropped by 0.6%. 

Still, with inflation down from its highs in 2022 and 2023, and further Bank Rate cuts expected later this year, analysts are predicting stronger consumer sentiment and spending for the months ahead. Alex Kerr, Economist at consultancy Capital Economics, is one such commentator who expects the trend to continue. “Lower inflation continues to support real incomes and bolsters consumer confidence,” he noted, which should pave the way for more sales rises. 

Uptick in credit card spending 

New data from UK Finance has shone a light on the increase in credit card usage and spending. With 382.1 million transactions in May, a 1.3% year-on-year uptick, the total spend of £21.4bn was a 1.4% increase versus May 2023. In the twelve months to May, outstanding balances on credit card accounts elevated by 8.5%, with just under half (48.9%) of those balances incurring interest. 

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 (21 August 2024) 

Insights into behavioural investing

Have you ever made an irrational or impulsive purchase you’ve later regretted? We all make decisions based on our emotions or personal biases, but when it comes to investing, such mistakes can be very costly. 

What is behavioural investment? 

Behavioural investment is an approach that acknowledges how our emotions and our biases can sometimes make decisions for us. During periods of geopolitical uncertainty and heightened risk, behavioural investment biases can become even more pronounced, tempting you into making poor decisions. Here are some impulses that often lead to bad investment decisions: 

  • Loss aversion: Investors worry about their investments falling further in value, so they sell them prematurely, locking in losses and missing out on potential rebounds 
  • Herd mentality: When markets fall, people tend to panic, follow the crowd and sell their investments. This ‘herd mentality’ means markets keep falling, as more people panic and sell, creating a spiral 
  • Confirmation bias: Investors let their own opinions dictate their actions and often seek out information that confirms their existing fears, ignoring evidence that contradicts their own impulses 
  • Overconfidence: Some investors believe they can predict the market’s reaction to geopolitical events, leading them to make risky bets that could ultimately backfire. 

Avoiding behavioural biases 

Investors often need to worry less about geopolitical events and more about avoiding making poor decisions. Worry not, you’re in safe hands. We can create a plan and stick to it, so we focus on longer-term goals, rather than risk getting distracted by short-term noise. We will build a resilient portfolio, spreading your investments across different asset classes to manage risk. Rest assured, we will make well-considered, researched investment decisions to increase your chances of achieving your long-term financial goals. 

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. 

What to consider when you buy a new build

Are you thinking of buying a new  build? The good news is there are more  regulations than ever that protect  buyers of newly built homes. It can be  difficult to keep up with these changes,  so here’s what you need to know.   

Codes of conduct   

Most developers are signed up to a code which lays out best practice for the marketing, building and  selling of new builds. Check which code your builder follows, so you know who is holding them to account if any issues arise. Many developers were signed up to the Consumer Code for Home Builders until 2021, when the New Homes Quality Board (NHQB) was launched.   

The guidelines   

Transparency is at the forefront of both the Consumer Code for Home Builders and the New Homes Quality Code from the NHQB. Consumers have the right to withdraw from the purchase if the housebuilder makes any changes to the home. Deposits must be protected and high-pressure sales tactics are prohibited to protect vulnerable customers. The housebuilder must also provide an after-sales service for up to two years after legal completion.   

Check for snags   

Defects with the property – otherwise known as snags – are a common problem with new builds. Buyers can commission a professional snagging company to inspect the new build before they move  in. If the developer is registered with the NHQB, they are required to rectify any snags within 30 days, unless there is a suitable reason for delay.   

Complaints procedure   

Each code has a process and timeframe for the handling of complaints. The New Homes Ombudsman Service is free for anyone whose developer is registered with the NHQB. Meanwhile, issues with housebuilders signed up to the Consumer Code for Home Buyers can be taken to the Independent Dispute Resolution Scheme.  

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

News in Review

“The construction sector appears to be in the early stages of a strong recovery” 

The release last week of a closely watched construction survey offered optimism for the sector and further evidence of the UK’s economic recovery. 

The S&P Global UK Construction Purchase Manager’s Index, a seasonally adjusted measure of activity in construction, jumped to 55.3 in July. This put it above the 52.2 recorded in June and, significantly, signalled a fifth consecutive month of growth. 

Analysts noted that the construction sector’s ‘strong recovery’ led to growth at its highest level in more than two years. Some pointed to Labour’s shake-up of planning laws as a possible reason for the boost in activity; others focused on increased customer confidence bringing stalled projects back into action. 

Andrew Harker, Economics Director at S&P Global, commented on the “pace of expansion roaring ahead in July”. He added, “Firms saw the strongest increases in new orders and activity since 2022 as paused projects were released amid reports of improved customer confidence.” 

An influx of new orders buoyed the growth in activity, experts agreed, with the data revealing the solid foundations of this growth. Indeed, all three key parts of the construction sector – housing, commercial building and civil engineering – recorded improved activity. 

Civil engineering led the way, with its sharpest growth for two-and-a-half years. Meanwhile, after a recent slump amid high interest rates, new housing projects saw a welcome return to growth. For the third consecutive month, construction firms also increased staffing. 

Commenting on the data, Peter Arnold, EY UK’s Chief Economist said, “As with the manufacturing and services surveys, the 2024 General Election appears to have injected some month-to-month volatility into the construction survey results, with a soft June followed by a stronger July as uncertainty cleared. The detail of July’s survey was also positive, with new orders growing at the strongest pace in more than two years and hiring and purchasing activity also increasing. After a challenging couple of years, the construction sector appears to be in the early stages of a strong recovery.” 

Boost to past growth figures 

In other good news for the UK economy, growth in 2022 has been revised sharply upwards in new figures published by the Office for National Statistics (ONS) last Wednesday. 

As the UK moved out of the pandemic, the economy picked up by 4.8%, ONS said, as opposed to the 4.3% figure originally estimated. According to the new figures, the UK economy was 2.1% larger at the end of 2022 than it had been pre-pandemic. 

Analysts called the revision a ‘boost for Britain’, as the country had previously been thought to be the slowest G7 economy in its pandemic recovery. Likewise, workers were more productive in 2022 than earlier estimates had believed, with output per hour of work up by 0.4%. 

While stressing that such revisions are a regular part of producing GDP estimates, ONS acknowledged that the past few years have been challenging for national statistical institutes. The challenges of taking reliable measurements during the pandemic have led many countries to revise initial estimates, ONS explained. 

Unemployment falls slightly 

UK unemployment figures released by ONS on Tuesday show a slight drop, at 4.2% in the three months to the end of June, down from 4.4% previously. In the same period, the employment rate was estimated at 74.5% and the economic inactivity rate was estimated at 22.2%.  

Meanwhile, wage growth continued to slow, rising at annual rate of 5.4% – its weakest in almost two years. 

However, ONS said pay growth remained ‘relatively strong’ with earnings continuing to rise faster than prices. 

Team GB success 

Team GB athletes have returned to the UK after collecting 65 medals at the Paris 2024 Olympics. The tally for Team GB was 14 golds, 22 silvers and 29 bronzes, matching their total medal haul from London 2012. It is also the joint-third-highest tally for Great Britain at a single Games, behind Rio 2016 (67 medals) and London 1908 (146). 

There is more to look forward to with the Paris 2024 Paralympics taking place from 28 August until 8 September. 

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 (14 August 2024) 

Financial wellbeing is multifaceted

According to research1, 81% of the UK’s wealthiest individuals are ‘stressed’ about their finances, suggesting financial wellbeing is about more than just the totality of your wealth. So, virtually everyone has concerns about what their financial future will look like. 

Planning for the future 

The prime concerns for individuals centred around future planning and retirement, specifically maintaining a comparable lifestyle in later life (51%), the value of their investments (39%), providing for future generations (25%), the tax burden (24%) and falling victim to fraud (22%). 

Interestingly, almost three in five wealthy individuals (59%) in the UK are considering relocating overseas, to enjoy what they regard to be an improved standard of living (36%), lower property costs (28%) and a more favourable tax regime (21%). 

The importance of financial wellbeing  

Financial wellbeing is more than just having large sums of money. It’s a state of feeling secure and in control of your finances, both now and in the future. According to the Global Financial Wellbeing Report 20242, across all the countries surveyed, people’s top goal is to ‘feel secure’ (94%), noting that people who feel financially confident are ‘two times more likely to have goals, ambitions and dreams for their life.’ 

Finding your purpose 

While money can’t buy you happiness, as the saying goes, it can give you security and freedom. But to get there, you need to have a plan. A good starting point is to work out what’s most important to you and what you want to achieve. Wealth has the capacity to create a powerful purpose within our lives, provided we are able to unlock its true value by understanding your ‘why.’ Once you’ve established this, you can create a plan unique to you that you can work towards with purpose. 

Unlocking the real value of your wealth  

We can help you to develop a clear understanding of what you want to achieve with your wealth, as well as provide you with the support and expert advice to help you develop a financial strategy that brings you closer to achieving those goals. There’s no point in worrying about your financial future when you could be taking valuable steps now to take control and face the future with confidence. 

1Arbuthnot Latham, 2024, 2nudge, 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. 

Home Finance – In the news

Location, location, location 

Homeowners are willing to pay more for convenience, as a short walk to a town centre or high street could boost a home’s value by more than £80,0001.  In England, homes that are close to a town are worth 27.6% more than the average property.  Interestingly, proximity costs an extra 14.2% in the West Midlands, but East Midlands homes only have a 0.9% premium. So, buyers looking to get more for their money may wish to look a little further afield – provided they don’t mind going the extra mile for a high street!   

Surge in smaller homes        

The pandemic prompted many homeowners to move out of cities in favour of bigger homes, but this trend, coined the ‘race for space,’ is now possibly being reversed as data shows demand for smaller homes is increasing. Last year, 53% of homes sold with a mortgage were smaller properties – the highest proportion in nearly 30 years2. This highlights that, amidst the cost-of-living crisis and  ongoing mortgage affordability challenges, buyers are managing their expectations and settling for less space. It may not be surprising that many of these small homeowners are first-time buyers, 57% of whom purchased flats or terraced houses in 2023.   

1Yopa, 2024, 2Halifax, 2024   

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

Thinking about making a pension contribution with your bonus?

Receiving a bonus at work as a reward for a job well done is highly satisfying, but with bonuses subject to Income Tax and National Insurance Contributions, you face losing a significant portion of your hard-earned money. A bonus may even push you into a higher tax band, meaning that you receive an even smaller sum than expected. 

With 44%1 of workers who received a bonus last year choosing to pay some or all of it into their pension, depending on your financial priorities, circumstances and timescale, this may be worth considering. Pension contributions benefit from tax relief at the highest rate of Income Tax you pay – currently 20% for basic rate taxpayers and 40% or 45% for higher or additional rate taxpayers. 

Consumer Finance Specialist at Royal London, Sarah Pennells, commented, “There definitely isn’t a right or wrong way to treat your bonus if you receive one, but, while investment returns are never guaranteed, your bonus could be worth more in the longer run if you choose to invest it in your pension rather than spend it, and sacrificing your bonus into your pension is a savvy way to save on tax.” 

We, your financial advisers, can help you understand the tax implications of your bonus, advise you on how best to invest it to stand you in good stead to meet your financial goals, and review and adjust your existing financial plan to reflect your new circumstances. 

1Royal London, 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. 

News in Review

“Inflationary pressures have eased enough that we’ve been able to cut interest rates”  

Last week, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) voted by a narrow majority of 5 – 4 to reduce Bank Rate by 0.25%, to 5%. Four committee members expressed a preference to maintain it at 5.25%.  

This is the first drop since March 2020. The rate had been held at 5.25% since August 2023 in an attempt to tackle rising prices across the UK. 

Commenting on the decision to lower rates, BoE Governor, Andrew Bailey said, “Inflationary pressures have eased enough that we’ve been able to cut interest rates today” but he went on to caution that policymakers need “to make sure inflation stays low and be careful not to cut interest rates too quickly or by too much”. 

The MPC minutes stated, ‘inflation is expected to increase to around 2.75% in the second half of this year, as declines in energy prices last year fell out of the annual comparison, revealing more clearly the prevailing persistence of domestic inflationary pressures.’ The Committee also confirmed that monetary policy will need to remain restrictive for long enough to dissipate any risks preventing inflation from returning sustainably to the 2% target. 

Looking ahead, the next MPC meeting will conclude on 19 September. 

Business confidence boost 

Overall business confidence in the UK rose significantly last month, according to the latest Business Barometer, released last Wednesday by Lloyds. With a nine-point increase in July, business confidence equalled its highest level in eight years. After reversing the drop recorded in June, confidence levels returned to 50%, the same as the figure in May. 

Analysts suggest that July’s strong showing resulted from a combination of improved economic optimism and better trading prospects. On the first point, more than six in 10 respondents felt more positively about the economy in July, up from 55% in June. In contrast, just 17% felt more negatively. Likewise, 62% of businesses reported stronger activity in July. This represented a significant jump from the level in June (53%). Only 6% predicted weaker trading prospects (9% in June). 

The optimistic outlook will likely be good news for employment figures too. Staffing expectations also rose healthily in July – more than half of businesses surveyed now plan to expand their workforce, compared to just 14% who expect to reduce staffing. The resulting net balance is the joint highest since March 2017. 

House price news 

Nationwide’s latest house price index, released last week, showed strength in the UK housing market, with mortgage activity seen to be continuing at a ‘respectable pace’. House prices rose by 0.3% month on month in July, the figures revealed. Meanwhile, the annual growth rate picked up to 2.1%, from 1.5% in June, making it the fastest pace of growth since December 2022. 

Commenting on the release, Robert Gardner, Chief Economist at Nationwide said, “UK house prices increased by 0.3% month on month in July, after taking account of seasonal effects. However, prices are still around 2.8% below the all-time highs recorded in the summer of 2022.” He added, “Housing market activity has been holding relatively steady in recent months with the number of mortgages approved for house purchase at around 60,000 per month. While this is still around 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment.” 

Summer’s arrival boosts clothing and beauty 

Latest data from the British Retail Consortium (BRC) has highlighted UK retail sales in the UK rose by 0.5% in July 2024 from a year ago. The growth was supported largely by consumers’ purchases of clothing and beauty products in preparation for the holidays. In the three months to July, food sales were up 2.6% year-on-year, while sales of non-food items declined by 1.7%. Helen Dickinson, Chief Executive at the BRC, said, “The late arrival of British sunshine led to a better month for summer clothing and health and beauty products as shoppers prepared for days out with friends and holidays away.”  

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 (7 August 2024)