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Optimism in the Housing Market

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Anthony Codling of RBC Capital Markets provides an optimistic view of the current housing market for investors, highlighting the resilience of the market despite challenges.

Here’s a summary of his perspective:

  1. Overview of Housing Transactions:
    – Housing transactions fell by 19% in 2023 to just over 1.02 million, slightly ahead of the forecast made at the start of the year.
    – Despite the volatility caused by factors like stamp duty holidays and the 2022 mini-budget, housing transaction volumes in 2023 were only 7.3% below their 15-year average.
  2. Resilience and Outlook:
    – Codling acknowledges the unusual nature of the 2020s for the UK housing market but praises its resilience in the face of pressure.
    – Looking forward, he sees calmer seas and favourable winds for the market, suggesting a shift from survival to thriving in 2025.
  3. Recent Trends and Challenges:
    – Data from HMRC shows a significant decrease in residential transactions toward the end of 2023, attributed to higher interest rates and a general sense of caution in response to the cost-of-living crisis.
    – Higher rates have made buying homes less attainable for many, resulting in an 18% year-on-year decline in transactions by December 2023.
  4. Expectations and Predictions:
    – Tom Bill, head of UK residential research at Knight Frank, anticipates an improved outlook for the housing market, with leading indicators like prices, buyer registrations, and offers already picking up.
    – He expects transaction numbers to rise in the coming year as the impact of lower mortgage rates takes effect. Mortgage approvals are already increasing, and UK house prices are predicted to rise by 3% in 2024 as activity increases.
    – Bill suggests that a delayed general election would help momentum build in the housing market.

 

Source: Property Notify

Housing Market Gains Momentum at Start of 2024

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Average asking prices for British homes made the strongest start to the year since 2020, according to a Rightmove survey on Monday that added to signs that the slowdown in the sector could be easing as demand picked up in January.

House prices in Britain typically pick up at the start of January after a lull in the run-up to Christmas.

“For now the data at the start of 2024 points to building momentum, and reasons for growing market optimism,” Tim Bannister, director of property science at Rightmove, said.

Rightmove said the number of agreed sales was 20% higher in the first week of January compared to the same period last year, and buyer demand was up 5%. The number of homes coming to the market rose by 15%.

British house prices, like those in many other rich countries, surged during the COVID-19 pandemic, rising by more than 25% according to official data.

But transactions slowed sharply in late 2022 after then-Prime Minister Liz Truss’ budget plans caused turmoil in bond markets, which pushed up the cost of mortgages, while rising Bank of England rates acted as a brake through 2023.

Asking prices in Rightmove’s January period are still 0.7% lower than the year before.

Average mortgage rates have fallen, however, from a peak of 6.11% for a five-year fixed term in July 2023 to 4.86% now, Rightmove said.

Financial markets expect the Bank of England to start cutting rates from their current 15-year high of 5.25% in May.

Other indicators have also shows a rise in house prices. Britain’s biggest mortgage lender Halifax earlier this month reported a 1.1% monthly increase in prices in December and the first annual rise in eight months. That said, buyers were still likely to feel the squeeze from elevated mortgage rates and the cost-of-living crisis this year, Bannister said.

And while the housing market appears to be gaining momentum, Bannister said activity was likely to slow in the weeks leading up to the national election which Prime Minister Rishi Sunak has suggested will be held in the second half of this year.

Source: Reuters

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