Residential Property Review – January 2024

Falling mortgage rates bolster housing market  

Hope seems to be on the horizon for the housing market as the year gets off to a promising start. 

The decision from many mortgage lenders to reduce rates seems to have had the desired effect, as buyer interest has noticeably increased. Lenders are competing to offer the best deals.  

At the end of the first week of January, according to Zoopla, there were 10% more prospective buyers than in 2023. TwentyCI has reported that agreed property sales reached a nine-month-high in December, with many commentators now hopeful that this signifies a market that is slowly but surely getting back on track.  

Oxford Economics expects the first cut to Bank Rate will come in May, thus relieving some of the pressure that many borrowers are under. This could further increase the demand for housing which, at the end of December, Zoopla has said was 19% higher than the previous year. Higher levels of demand are likely to have a knock-on effect on house prices, which could continue to stop falling if sellers no longer need to discount their property to make a sale.  

Most sought after areas   

Prospective home buyers seem to be committed to returning to the capital, as London is the most-searched-for location for the second year in a row, according to Rightmove.  

During the pandemic in 2021, there were months where Cornwall overtook London as the most searched-for area. However, the southwestern county has been firmly in second place for the last two years, indicating the mass exodus from cities has subsided. In fact, from 2022 to 2023, there was an 18% fall in the number of people looking to buy properties in Cornwall.  

London is also the most popular location for renters according to Rightmove’s report, with Manchester and Bristol below it in the top three.  

Tim Bannister, Rightmove’s Property Expert, observed that, “Many traditionally popular areas maintained their allure amongst buyers, whilst cheaper areas were also high on the list for buyers last year with affordability stretched.” 

UK landlords owed late rent 

The cost-of-living crisis is taking its toll on the private rented sector as tenants struggle to pay their rent on time.  

According to research from mortgage lender Molo, landlords in the UK are owed an average of £725 in overdue rent. Those in Yorkshire and the North East are particularly affected, experiencing the highest number of late payments each year. Meanwhile, landlords in Greater London are owed the most amount of money.  

VP of Strategy at Molo, Mark Michaelides, commented, “Our recent research found that over half (54%) of landlords have implemented payment plans for tenants facing late rent. He added, “As a tenant, it’s important not to ignore the problem. I’d advise tenants to communicate promptly, explaining reasons for delays and requesting additional time. Open dialogue can lead to collaborative solutions.” 

All details are correct at the time of writing (17/01/24) 

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

Commercial Property Review – January 2024

 

Different challenges set to confront investors in 2024 

The newly-released UK Commercial Cross Sector Outlook for 2024 from Savills has provided insight for the year ahead. Expectations from Mat Oakley, Director of Commercial Research, suggest that the factors impacting property values and confidence are set to improve this year, but as high inflation and interest rates abate, different challenges are set to confront investors.  

Although reducing, borrowing costs are not expected to return to the levels experienced in the ten or so years prior to the pandemic. With a General Election due to be held this year, it’s impact is likely to be measured. The report outlines, ‘Our analyses suggest that transactional activity is generally lower than normal in the three months prior to the election date, and then recovers in the following six-month period.’  

Focusing on sectors, undersupply of green and prime office space is a continuing theme, driving rental growth. Investor demand is expected to intensify ‘to capitalise on this’ according to the Outlook. With retail, this year ‘cautious expansion of retail footprints’ is likely, which will contribute toward a continuation of a downward trend in vacancy rates, which commenced last year. The expectation is that parts of the retail sector will attract opportunistic investors seeking higher yields and capital growth potential from possible change of use of premises. Evidence suggests that life sciences and logistics top the list for commercial property investors in 2024, with ‘weighting towards these sectors’ on the rise. Income-focused investors continue to be enticed by a mix of robust rental growth prospects, limited supply and structural change-driven demand, in the logistics and life sciences domain. 

Investor optimism 

A recent survey of over 100 global real estate fund managers, conducted by professional services firm Alvarez & Marsal, has highlighted that 70% of global real estate investors are planning to increase their UK exposure this year. 

Looking ahead over the next year to 18 months, the research found that of the investors surveyed, most are interested in supporting leisure, travel, work and retail, with 87% keen to invest in the hotel and leisure sector, 71% in office buildings and 67% in retail. 

Interestingly, the vast majority (97%) of investors cite ESG as an important element of their investment strategy, with smart building technology, green building certifications and energy efficient upgrades, prime concerns for ESG-oriented investors. 

Managing Director at Alvarez & Marsal, Kersten Muller, commented on the findings, “The growing consensus that interest rates have peaked suggests that the worst of the uncertainty may be behind us. While this could pave the way for a rebound in the real estate sector in 2024, investors should continue to exercise caution when evaluating the types of properties and markets they deem worthy of their capital.” 

Falling investment volumes north of the border 

In 2023, a total of £1.49bn in commercial property investment volumes was transacted in Scotland, representing a 34% decline year-on-year, according to Savills. 

This reduction can be attributed to uncertainty in the economy, although the second half of 2023 saw an uptick in activity, increasing 39% versus H2 2022 volumes. 

Interestingly, contrary to the wider national trend, retail transactions reached £714m in Scotland, over 50% up on offices (£357m), followed by industrial, leisure and alternatives – £172m, £144m and £105m respectively. Strength in the retail sector is primarily due to the robust occupational market, with destinations like George Street in Edinburgh and Buchanan Street in Glasgow supporting the sector. 

For the second consecutive year, overseas investors were categorised as the most active buyer type, with nearly £46m of transactions (totalling £680m) attributable to this group, although representative of a large reduction in 2022 overseas investor volumes (£1.025bn). Other active investors in the market are property companies (£342m), private investors (£187m) and UK institutions (£127m). 

Director in the Scottish investment team at Savills, Aly Wright, commented on the findings, “All things considered, 2023 was a relatively positive year, and whilst we anticipate a slow first quarter of 2024, we are positive this will pick up post Easter as markets continue to stabilise.” 

All details are correct at the time of writing (17/01/24) 

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. 

News in Review

“The longer-term picture remains one of an economy that has shown little growth over the last year”

New data from the Office for National Statistics (ONS) has revealed that UK GDP is estimated to have grown by 0.3% in November 2023, this follows a fall of 0.3% in the previous month, and just exceeds a Reuters poll of economists who forecast growth of 0.2% in the month.

The figures show that the main contributors to growth came from the services sector, which increased by 0.4% in November, with production output contributing 0.3% in the month. Growth in the services sector was boosted by retail sales, as people stocked up on Christmas goods, with Black Friday helping to shore-up sales. Meanwhile, construction output provided a drag, reducing by 0.2% in November.

Chief Economist at ONS, Grant Fitzner said the economic growth in November was supported by “strong retail sales but also car leasing, computer games and fewer strikes than we’ve seen in previous months. We have had quite a number of companies telling us they saw strong Black Friday sales which had a positive impact not just on the retail sector but also warehousing, couriers and some manufacturing sectors.” Mr Fitzner went on to caution that “the longer-term picture remains one of an economy that has shown little growth over the last year.”

The quarterly data shows that GDP is estimated to have fallen by 0.2% to November 2023, 0.1% higher than the decline expected by the Reuters poll. The Q4 2023 GDP reading is due in February. If this is a negative reading, the UK would be in what’s termed a ‘technical recession,’ defined by two consecutive quarters of GDP contraction.

On assessing that data, Research Director at the Resolution Foundation, James Smith concluded that the stronger-than-expected growth in November provides the UK with “a fighting chance” of avoiding recession, adding, “the final verdict on 2023 will come next month, but it is essential that Britain builds some economic momentum in 2024.”

Last week, Andrew Bailey, Governor of the Bank of England (BoE) cited further “global shocks” as a prime threat to the UK economy, as fresh concerns emerged over the supply of oil following the disruption and conflict on critical Red Sea shipping routes though the Suez Canal. When speaking to MPs on the Treasury Select Committee, Mr Bailey confirmed that the BoE was monitoring the situation closely, which had arisen following an escalation in attacks by Iran-backed Houthi rebels on container ships.

Global economy

According to the World Bank’s latest bi-annual ‘Global Economic Prospects’report released last week, the global economy is ‘set for the weakest half decade of GDP growth in 30 years.’ Following growth of 6% in 2021 as the global economy reopened following the depths of the pandemic, the Bank said the growth rate eased back to 3% in 2022 and to an estimated 2.6% in 2023. Estimated growth in 2023 was supported by US economic resilience, according to the Bank, with the risk of a global recession receding, ‘largely because of the strength of the US economy.’

Looking ahead, a growth rate of 2.4% is expected this year, the weakest level of growth since the 2008/9 financial crisis. Higher interest rates have been a key factor contributing to this slowing, and ‘mounting geopolitical tensions’ cloud the horizon of the global economy. In 2024, the World Bank estimate advanced economies will expand by 1.2%, with developing and emerging market economies growing by 3.9%.

Mortgage product choice on the rise

The recent UK Mortgage Trends Treasury report from Moneyfacts details that total mortgage products (all LTVs) have increased by over 200 products month-on-month (December 2023 to January 2024). Average rates on both two and five-year fixed mortgages have fallen for a fifth consecutive month, and now reside at their lowest level in over six months. In addition, the average shelf-life of a mortgage product has increased to 21 days, this is the highest figure since last June (22 days).

Jobs market

Released on Tuesday, UK labour market data from ONS has shown that between October and December, the estimated number of vacancies in the UK fell by 49,000, representing the longest consecutive run of quarterly falls ever recorded. However, vacancies remain above levels seen before the pandemic.

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 (17 January 2024)

Get the year off to the right start with a protection review

Why not kickstart 2024 by reassessing your finances, particularly if you’ve undergone recent life changes? This should include reviewing your protection insurance to ensure it aligns with your current needs. 

Get protected 

Protection tailored to your circumstances serves as a crucial safety net during unexpected downturns. As we enter 2024, its time to assess whether the type and level of your existing protection cover remains suitable for your individual needs. Any life events you’ve experienced may necessitate updates to your protection. 

Given the ongoing cost-of-living challenges, it’s crucial to ensure everything is in order. Inflation adds complexity and makes things difficult for many people. It only underscores the vital role protection plays in your financial plan. 

Consider all options 

Carefully weigh up your options; cancelling protection not only leaves you vulnerable but may result in higher future costs. 

Secure certainty by maintaining the right protection. Contact us today to explore how we can assist you. 

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

Planning to secure your financial future

Over the past 12 months, the cost-of-living crisis has put significant pressure on household budgets and knocked many people’s confidence in their future financial prospects. Research, however, shows that planning is a key driver of positivity about our financial futures; so, as a new year dawns, now seems the perfect time to take stock of your finances and formulate a plan to help you achieve your retirement goals. 

Plan, plan, plan 

Although decisions around retirement are arguably the most critical people have to make during their whole lives, research¹ suggests only half of over-50s with pension entitlements other than the State Pension have actually formulated a detailed plan. Perhaps unsurprisingly, it also found that those with a plan were much more confident about securing a comfortable retirement than those who do not have one. 

Gender gap 

The research also found clear evidence of a gender gap with men generally more confident about their prospects for a comfortable retirement than their female counterparts. It also found that the 

cost-of-living crisis has been a key driver of low confidence, with half of the sample stating that it has either slightly or significantly worsened their chances of a comfortable retirement. 

Triple default trap 

People without a plan are also more likely to get stuck with their default pension settings. Recent years are thought to have seen a sharp rise in the number of triple defaulters who ‘set and forget’ their pension choices, with millions of auto-enrolled 32-40 year olds failing to update their contributions, investment choices or target retirement age. Even relatively small tweaks to one or more of these default choices could potentially boost a pension pot by thousands of pounds. 

Here to support you 

The evidence clearly shows that formulating a plan is the key to boosting confidence in your financial future. So, let’s kick off 2024 on a positive footing ‒ get in touch and we’ll help you develop a plan capable of securing the rewarding retirement you deserve. 

1Nucleus Financial Platforms, 2023 

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

“The traditional retailers always tend to do well in the run up to Christmas and this year was no exception”

There was good news for supermarkets last week, as new data from market research firm Kantar showed they experienced their busiest Christmas in four years. During the four-week period to Christmas Eve, Britons made 488 million visits to supermarkets, 12 million more trips than the same period the previous year, and the highest number since before the pandemic.

The data shows that the average household spent a record high of £477 during the four weeks running up to the big day, with £13.7bn ringing through the tills. The prime shopping day during the run-up to Christmas was Friday 22 December, when over 25 million trips were made and £803m was spent in shops (excluding online purchases), this represents an 85% uplift in average spending compared with Fridays last year.

Strong performances were experienced by supermarkets’ own-label ranges, while sales of premium ranges also saw a healthy uptick, with sales of ranges such as Tesco Finest and Sainsbury’s Taste the Difference increasing by almost 12% from last year, to total £790m (5.7% of all grocery sales).

Fraser McKevitt, Head of Retail and Consumer Insight at Kantar commented on the findings, “The traditional retailers always tend to do well in the run-up to Christmas and this year was no exception… We’re creatures of habit when it comes to Christmas and our data shows that the classic festive plate remains much the same.”

From a specific retailer perspective, growth in market share was recorded by Tesco, Sainsbury’s, Lidl and Aldi.

Boxing Day property bounce

A record number of sellers took to the market on Boxing Day, new data has highlighted, with a 26% increase in new sellers, overtaking the previous record set the year before. In addition to sellers pondering their plans and taking action, buyers also leapt into action on Boxing Day, with enquiries to estate agents about homes for sale 17% higher than Boxing Day 2022. An increase in activity is usually expected during this period. Data from Rightmove shows that visits to its website increased year-on-year by 8% on 26 December. Reflecting on the figures, Tim Bannister, Rightmove’s Property Expert, said that the “scale of this year’s Boxing Day bounce is an early positive sign at the start of the year that buyers and sellers are out there and taking action, likely including some movers who had put their plans on hold last year.” 

Although acknowledging that it’s early days, Mr Bannister added that “it will be key to monitor activity as it ramps up through the end of winter and into spring, particularly to track whether sellers are pricing attractively enough to agree a sale with a buyer quickly, given buyers now have more choice to consider than last year and are still very price sensitive.”

Average 2-year mortgage rates lower

The new year rung in some changes to mortgage rates, with data from Moneyfacts showing that the average rate on a two-year fixed mortgage reduced to its lowest level for almost seven months in the first week of 2024. According to Moneyfacts, the average rate fell to 5.87% (from 5.92%), as lenders look to compete for customers. Although potentially providing some relief for homeowners, mortgage rates are still higher than many people have been accustomed to, and with around 1.6 million homeowners currently on a fixed-rate mortgage due to expire during the next year, the vast majority could still see their monthly repayments rise.

General Election H2 2024?

Last week Rishi Sunak suggested he is working on the assumption that he will hold the General Election “in the second half of this year,” adding that“I’ve got lots to get on with and I’m determined to keep delivering for the British people.”  The latest the election needs to legally be held is 28 January 2025.

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 (10 January 2024)

Winter storm preparation

Minnie and Olga, Regina and Stuart – are all storm names for 2024 pre-allocated by the Met Office. With the average claim for storm damage topping £3,0001, it’s important to protect your home against extreme weather. So, what measures can you take? 

Keeping safe in a storm 

  • Put away your garden furniture, and any other items that could blow away 
  • Firmly shut all doors and windows 
  • Park your car away from trees and fences, or inside a garage. 

Ensuring you insure 

The most important step to take is having suitable home insurance. Many policies cover some level of storm and wind damage; however, there are limitations. 

Most insurers have an official definition of a ‘storm,’ meaning the winds need to reach a certain speed before it will be considered a storm. Depending on the small print of your policy, you might not be protected against damage to hedges, gates or fences, for example. 

Most home insurance will cover you in the event of wind and water damage, sewer back-up, roof damage and loss of power. You should notify your provider as soon as you can and do not move anything until you have spoken to your insurer, unless it is a hazard. 

Get in touch to ensure you have adequate cover for your home and your unique circumstances. 

1Confused.com, 2023

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

Autumn Statement update

Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement on 22 November, with a host of announcements on personal taxation and measures for business. Housing was largely absent from the key fiscal event, but there are a couple of points to be aware of. 

Mortgage guarantee scheme extended 

This scheme, introduced in March 2021 with the aim of helping more buyers get on the property ladder, was due to end in December this year, but it will be extended by 18 months, until the end of June 2025. 

The scheme aims to help borrowers with smaller deposits to take out a mortgage with a 5% deposit on a home worth up to £600,000. The government gives a partial guarantee to the mortgage lender of up to 15% if the borrower defaults on their repayments, giving lenders the confidence to offer higher loan-to-value mortgages. 

The scheme is available to those buying a home they plan to live in using a repayment mortgage. It does not apply to buy-to-let investments, or to those purchasing a second home or holiday home. Only loans set at a maximum of 4.5 times income qualify for the scheme.  

New permitted development rights 

The Chancellor announced plans to scrap planning permission for property owners wanting to convert one house into two flats. It will only be allowed in cases where the appearance of the home on the outside does not change. This could be good news for property investors and helping to meet ongoing demand for rental accommodation. 

Housing and planning investment  

During the Statement, an additional £32m was pledged to unlock development of thousands of homes across the country, including funding to tackle planning backlogs in Local Planning Authorities (LPA). 

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

Get the right protection in 2024

A new year is an ideal time to reassess your finances, especially if you’ve recently experienced some life changes. Make sure that a review of your protection insurance is near the top of your to do list in 2024. 

Get protected 

The right protection for your unique needs can act as an indispensable safety net in the event of an unexpected downturn in your circumstances within the policy’s scope. 

As we head into 2024, ask yourself if the level and type of cover you have is still suitable for your needs. If your circumstances have changed, you might need to update your cover. 

With continuing cost-of-living difficulties for many, it is especially important to make sure everything’s in order. We know that inflation continues to make things difficult for many people right now. That’s why it is more important than ever to consider the role that protection plays in your financial plan. 

Think carefully 

Take time to consider your options. If you’re thinking of cancelling protection cover, remember that as well as leaving you and your loved ones without essential cover, a new policy is likely to cost more in future. 

Having the right protection in place provides a level of certainty. Contact us to see how we can help. 

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. 

Looking ahead – the housing and mortgage markets in 2024

Falling house prices and turbulent mortgage rates made 2023 an unpredictable year for homeowners and movers. As the bells ring out for the start of 2024, is a calmer year on the cards?

Three key questions dominate analysts’ minds it seems. First, do house prices have further to fall? Second, will mortgage rates go lower? And third, how will affordability change throughout the year?

House prices not bottomed out yet

After recording significant drops in 2023, even the more optimistic analysts expect house prices to keep falling in 2024. According to one such prediction1, prices will slip a further 2% across the year. Others2 expect a more radical drop of as much as 10% by Autumn 2024.

As the number of homes for sale has steadily risen, sellers are facing pressures to keep pricing competitively, further reinforcing the picture of a buyers’ market. Despite robust supply, property prices may bottom out in 2024, separate analysis3 suggests.

Mortgage rates to fall?

Mortgage rates look set to remain higher for longer into 2024, some analysts4 predict, with an expectation that they will not fall back to 4.5% until the second half of 2024. In this context of higher rates, it is expected that cash buyers will be the biggest group of buyers in 2024. There are positive signs, however, that mortgage rates are falling and will continue to do so.

Steady increase in housing affordability?

After a shaky year, mortgage affordability improved towards the end of 2023. Indeed, the average monthly repayment for those purchasing in September was £64 per month lower than in July5. Expected rising incomes in 2024 may have a positive effect on housing affordability. Richard Donnell of Zoopla commented, “The housing market is adjusting to higher borrowing costs through lower sales rather than a big decline in house prices.”

He continued, “Assuming mortgage rates remain in the 4 to 5% range, we see UK house price growth remaining in the low single digits for the next 1 to 2 years, below the projections for growth in household incomes.”

Here for you

Whether or not these expectations come to pass, we’ll be here to guide you through all your property decisions in 2024.

1Zoopla, 2023

2finder.com, 2023

3JLL, 2023

4Zoopla, 2023

5Octane Capital, 2023

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