Improved UK Housing Affordability Offers Hope for Young Buyers

The UK housing market has witnessed an improvement in affordability for young buyers due to rising wages, partially leading to a decrease in property prices.

According to mortgage lender Halifax, the house price-to-income ratio decreased from 7.3 times average earnings in 2022 to 6.7 in the second quarter of 2023.

This stands as the most substantial year-on-year enhancement in affordability for the month of June since 2009.

The drop in property prices has been attributed to the Bank of England’s 14th consecutive interest rate hike, bringing rates to 5.25% – the highest level in 15 years.

These actions have had a cooling effect on the housing market after the surge in activity post-pandemic.

David Hannah, Chairman at Cornerstone Group International argues that for first-time buyers with the means to invest in property, now presents an opportune moment, given that the average UK property is currently valued at £260,828 – 0.2% lower than in June and 4.5% below the average price recorded in August 2022.

However, even though property prices are now more within reach for first-time buyers, certain affluent areas like London and the South East remain less affordable, with prices still notably surpassing average earnings.

Additionally, mortgage costs have experienced a significant surge, with typical monthly repayments increasing by over £200 in the past year and constituting 35% of income in Q2 2023.

Discussing the effect of rising rates on the property market, Hannah said:

“The predictable downward trend in house prices comes as no surprise, given the lingering effects of rate uncertainty and affordability challenges in the market.

Prospective buyers are still caught between adopting a cautious approach and displaying heightened assertiveness while making property offers.

Nevertheless, there is a glimmer of hope as certain lenders are reducing mortgage expenses in response to the approaching peak of the bank rate.

This suggests that although market sentiment may remain restrained, I hold the belief that the second half of this year will witness an improvement.”

Source: Property Notify

Why We Need A Reasoned Approach to Green Belt Release

Keir Starmer’s announcement about building on the Green Belt attracted some contentious headlines.

It immediately thrust housing and planning into the centre of the political battlefield.

Labour and the Conservatives have their battlelines firmly drawn up, with the NIMBYs on one side and the YIMBYs on the other.

A sensible discussion on the Green Belt is long overdue.

But can it remain sensible in this febrile environment?

We must move away from images of ‘concreting all over the Green Belt’. The idea that housing developments are primarily ‘grey’ may been true of post-war development when the Green Belt was introduced, but is not today.

As a result of changes in approaches to development today, new communities have the potential to be attractive, primarily ‘green’ spaces which significantly boost both the aesthetic and biodiverse qualities of the land.

Furthermore, we must look again at the definition of the Green Belt.

As Starmer quite accurately pointed out, much of it isn’t even green: contrary to a widely-held belief that the Green Belt is a bucolic ring of verdant countryside open to all, much of it is inaccessible and/or preserves and protects unattractive edge-of-settlement brownfield sites – those which have potential for sustainable development.

We have seen so many changes since the Green Belt was first introduced, including the New Towns programmes of the 1960s and 1970s – places like Milton Keynes, Basingstoke and Crawley were villages when the Green Belt was first introduced.

It is therefore imperative that the Green Belt is reviewed in order to deliver enough homes in the right places and protect land that deserves to be protected.

But because development is so sensitive, so complex and has so much scope for subjectivity, a review of the Green Belt can only be delivered though a national or at least a strategic regional plan, led by the Department for Levelling Up, Housing & Communities.

The Green Belt began as a national policy and must remain as such.

The controversy surrounding Starmer’s speech raises the question, is Green Belt release the only way in which we can increase housing supply?

My answer is that it is the only way in which housing numbers can be increased at scale: building 300,000 houses on the Isle of Wight could achieve this, and while popular with many, wouldn’t address the need for people to be located either close to economic centres or in close proximity to sustainable transport.

Adapting the Green Belt which surrounds Oxfordshire and Cambridgeshire, on the other hand, could achieve this.

It is important to note that a review of the Green Belt does not necessary mean a reduction in the Green Belt, which is how it is often presented.

It means that that areas worthy of protection are included and those – such as the car park that Keir Starmer referred to in his speech – are potentially repurposed, and quite possibly in such a way that increases their aesthetic value.

To gain political and public support, the Green Belt needs to be reframed on the basis of expansion.

Since 1955 when the Green Belt was introduced, the UK population has grown from 51,063,902 to 68,497,907. The housing crisis demonstrates a desperate need for sustainable new settlements and we have adequate measures, such as AONB and conservation area status, in place to ensure that this is done sensitively.

We need to move away from the idea that there’s something intrinsically unattractive about development: twenty well designed houses, in sympathetic landscaped surroundings can benefit the natural environment, rather than detract from it.

I believe that Keir Starmer is very much on the right track in accepting that the Green Belt must be reviewed to address the housing crisis.

I believe it is possible to expand the Green Belt overall, while also delivering more homes.

But a strategic approach is the only way in which this can be achieved.

Source: Property Notify

The Political Game Around Homeownership

Both Labour and the Conservatives are sparring over the state of the housing market.

As we hit summer next year, expect electoral promises around increasing housing supply and reintroducing schemes designed to kick start the housing market by enabling first time buyers access to the market, in return for your vote.

This political foreplay has already started with Labour promising to reinstate housing targets.

Emboldened by the current shambolic state of the property market, housing is an easy target to hit the Conservatives with. House price increases stoked by an unnecessary Stamp Duty holiday has left many struggling to now afford a home.

Even with recent price falls, without the low interest rate crutch buyers have become reliant on, many simply can’t afford the same property that they once could, if at all.

This is coupled with low supply levels of rental, social and affordable housing which aren’t due to be restocked anytime soon, due to the Government’s handbrake turn on targets, seemingly bending to the nimby’s middle class will, leaving many disillusioned with the Government and its policies that seem to neglect the many in favour of the privileged few.

Why aren’t the Government building more houses

What every political party knows is they can’t build 300,000 homes now. Build costs have increased whilst buyer affordability has gone down making it financial suicide to build more than is already in the works.

Unless developers are working on build to rent or eco-friendly, state of the art commercial property, they are stalling until inflation is stable and there is an election for a party to win using house building as the carrot.

Be it tightening green belt lines or developing brownfield sites, something will have to give, along with a few nitrates, but not until buyers can afford to buy.

Why homeownership is so important to politicians

Once on the ladder, studies have shown homeowners are more likely to vote and protect their asset’s worth, whilst also taking an interest in the area around it, than renters.

Historically, homeowners gravitated to voting conservative but after their dismal 13 year reign, the public has grown wise to their rhetoric.

Constant policy changes and broken promises have led even the nimby voters who have curtailed many a housing scheme, wondering how their offspring will ever get on the ladder, whilst also firmly remaining in denial about their own involvement.

Every party wants to be the party of homeownership for this reason but also because of the money they can claim via taxation from it.

The more house prices increase the better the “incoming” revenue.

Be it capital gains, inheritance tax or Stamp Duty.

In addition, homeowners generally spend more than renters, vital when boosting economic growth in times when inflation isn’t bloated.

What’s happened to house prices

Low interest rates had become instilled in a generation’s psyche. For the past 15 years interest rates have decreased in an attempt to stimulate growth.

Whilst failing with anything significant here it did bolster house prices with various initiates to bolster them higher (Help to Buy/Stamp Duty Holiday).

Post-Brexit, Covid and the current war, the BoE have voted consecutively, 14 times, to increase rates in an attempt to curb stubborn inflation.

The problem now being that many who own their property outright or have fixed at a lower rate are yet to feel this effect.

So the few are left with the cheque on behalf of the many who can already afford it.

This also results in a divided market where some need to sell, reducing house prices whilst others stubbornly hold out.

But don’t be fooled, all the parties have a vested interest in homeownership and opposition parties will be utilising the Government’s current pickle to their advantage.

Should the Government create schemes or encourage building before an election, the other party can say they were swayed by their political pressure.

The public are mere pawns in this political game for control. Both parties are saying the same things at different times with only one agenda – your vote.

Who gets it depends on who you believe will actually deliver.

Source: Property Notify

Halifax House Price Index: Housing Market Displays Resilience

Average UK house prices edged down slightly in July, with the monthly fall of -0.3% equivalent to a drop of around £1,000 in cash terms.

While this was the fourth consecutive monthly decrease, all have been smaller than -0.5%.

In reality, prices are little changed over the last six months, with the typical property now costing £285,044, compared to £285,660 in February.

The pace of annual decline also slowed to -2.4% in July, versus -2.6% in June.

These figures add to the sense of a housing market which continues to display a degree of resilience in the face of tough economic headwinds.

In particular, we’re seeing activity amongst first-time buyers hold up relatively well, with indications some are now searching for smaller homes, to offset higher borrowing costs, said Kim Kinnaird, Director, Halifax Mortgages.

Kinnaird continued, conversely the buy-to-let sector appears to be under some pressure, though elevated interest rates are just one factor impacting landlords’ business models, together with considerations of future rental market reforms.

It remains to be seen how many may choose to exit and what that could mean for the supply of properties available to buy.

Prospects for the UK housing market remain closely linked to the performance of the wider economy.

Several factors are providing support, notably strong wage growth, running at around +7% annually.

And, while the uptick in unemployment is likely to restrain that somewhat, it seems unlikely to reach levels that would trigger a sharp deterioration in conditions.

Expectations of further Base Rate increases from the Bank of England were tempered by a better-thanexpected inflation report for June. However, while there have been recent signs of borrowing costs stabilising or even falling, they will likely remain much higher than homeowners have become used to over the last decade.

The continued affordability squeeze will mean constrained market activity persists, and we expect house prices to continue to fall into next year. Based on our current economic assumptions, we anticipate that being a gradual rather than a precipitous decline.

And one that is unlikely to fully reverse the house price growth recorded over recent years, with average property prices still some £45,000 (+19%) above pre-Covid levels, Kinnaird concluded.

The UK Property Sector is Undergoing a Technological Revolution

The Geospatial Commission has identified opportunities where improved data and use of location services and applications can unlock innovation across the property ecosystem in a new report published today (1 August).

The UK property sector is undergoing a technological revolution, rapidly adopting new data-driven digital tools.

Location data, services and applications are central to this revolution and essential for a well-functioning property sector, from town planning and site identification to property management and retrofitting.

The UK property sector contributes an estimated £100 billion to the UK economy each year.

Applying a spatial lens is crucial to achieve the sector’s economic, social and environmental ambitions, boosting productivity and innovation, improving our residential areas and achieving net zero commitments.

Alexandra Notay, Independent Commissioner, Geospatial Commission, comments:

“The property ecosystem provides the infrastructure of where we live, work and play.

However, many of our interactions with the industry from planning to buying, renting and maintenance, remain stubbornly analogue.

We can all see the transformative potential and multitude of opportunities for the property industry to embrace emerging technologies and digital tools empowered by location data; yet a truly systematic approach to innovation and technology across our diverse and siloed asset classes and property types has yet to emerge.

This report can be a catalyst for enabling that change.”

The report highlights some key initiatives already underway across the property sector and identifies further opportunities where location data, services and applications can drive innovation across the property life cycle, including:

  • Further digitisation of the property buying and selling process and ensuring data interoperability underpins the end-to-end process
  • Growing deployment of green technologies, like solar panels, heat pumps, insulation and energy efficiency solutions, into our homes by supporting better understanding of where they could have the greatest impact
  • Improving productivity in the industry through greater re-use of location data collected and created during design and construction to reduce costs, and support better targeting and design of retrofitting interventions

The report sets out four cross-cutting themes to support the better use of location data, service and applications, including property as a complex interconnected system and the importance of a strategic approach to data access.

These themes arise from an understanding of the role of location data and services across different stages of the property lifecycle from land use and planning, design and construction, buying and selling, safety and operations to the broader themes of retrofit and regeneration.

Dan Hughes, Alpha Property Insight and Real Estate Data Foundation, comments:

“The property sector is at the heart of a thriving economy, our impact on the planet and a healthy society, and the effective use of data is becoming increasingly important in ensuring that it operates effectively.

The world is changing rapidly and so the depth and breadth of data used by property is growing equally fast and at the heart of this is high quality and trusted location data.

For many years, the UK has had one of the strongest property market data infrastructures which has been a key element in the UK being recognised as one of the leading global property markets.

As the world evolves, it is important that the approach to data does too and so this report, and the actions identified, are very welcome to enable the property sector to meet the needs of society, the planet and the UK economy.”

Lynne Nicholson, Head of Data, HM Land Registry, comments:

“HM Land Registry was pleased to work with the Geospatial Commission on this report which outlines the immense potential value of geospatial data for the UK economy.

As one of the governmental bodies which holds significant geospatial data, HM Land Registry is committed to unlocking its value and supporting its re-use by making it more FAIR, in alignment with the UK Geospatial Strategy 2030.

By sponsoring the award-winning Geovation Accelerator Programme, we are supporting the next generation of innovative Proptech start-ups using location data to revolutionise the property sector.”

The report is the first deliverable from the UK Geospatial Strategy 2030 that was published in June.

It supports two of the Strategy’s missions: embracing enabling technologies to accelerate geospatial innovation, and driving greater use of geospatial applications and insights across the economy.