Hiten Ganatra is Managing Director of Visionary Finance.
As we move towards the end of Q1, this represents an opportune time to evaluate housing market expectations coming into 2024 – and to establish the foundations on which to build on in a potentially seismic election year.
This is especially following a much-anticipated Budget which, in reality, proved something of a damp squib for the property industry and a case, especially on the supply side, of what could have been.
Our inability to build enough homes over successive governments is finally coming home to roost. The 300,000 target often quoted to keep up pace with demand falls short of the number of new homes we actually need – this figure should be 385,000 per annum.
Moreover, this so-called target has been in effect since 2004, and has been missed every year since it was set. With the cost of materials increasing, developers simply not building, and local authority planning rules being very onerous, the problem isn’t going to go away. We need also to plug the skills and labour shortage in the construction sector.
This in turn is affecting the attitudes of voters and their views of a party which once prided itself on being the party for homeowners, both existing and future. A YouGov polling for the Times recently showed that only 11 per cent of 24 to 49-year-olds say they will support the Conservatives at the next election, compared with 43 per cent over the over-65s; this is a worry statistic for the party, and a clear indication that we have are failing generations of would be first-time buyers.
Since 2010 we have had 15 housing ministers and, unsurprisingly severely lacked a clear, stable, and deliverable policy. We need bold and radical proposals to restore trust and confidence in the party in the next parliamentary term.
Despite my doom and gloom, looking back to the close of 2023, it’s fair to say that encouraging signs were emerging across the housing and mortgage markets, with inflation and mortgage rates slowly but steadily falling. The increasing sentiment and confidence generated over the later part of the year was highlighted in January data from Propertymark, which showed that a larger number of those who had delayed selling, buying, and renting in 2023 had returned to the market on mass.
To kick off the new year with a bang, in the residential sales sector, the data showcased a 120 per cent increase in the number of potential buyers registered. On the supply side, there was a reported 80 per cent increase in the number of properties coming to the market, and a 129 per cent increase was also recorded in the number of market appraisals undertaken over the course of the month.
However, it wasn’t all plain sailing with heightened swap rate activity seeing some lenders increase their rates – a move which acted as a sharp reminder that the downward mortgage rate trend experienced in more recent times was not a given.
On a positive note, these mortgage rate adjustments have, thus far, been relatively smalll and a sustained period of Bank of England base rate and general economic calm continues to translate into a steady rise in new buyer enquiries and activity levels across the industry.
From a pricing perspective, the latest Nationwide house price index showed that UK house prices rose by 0.7 per cent in February, resulting in an improvement in the annual rate of house price growth to 1.2 per cent, compared to -0.2 per cent the previous month. House prices are now said to be around three per cent below the all-time highs recorded in the summer of 2022, with annual growth marking a return to positive territory for the first time since January 2023.
As the weeks go by, it feels like a growing number of sellers are demonstrating more realistic expectations, and buyers have a stronger understanding of the new interest rate norm and the financial implications. This combination is helping transform pent-up demand into some tentative signs of increased market momentum.
This was reflected in latest Zoopla House Price Index for February which stated that with the number of homes for sale was a fifth (21 per cent) higher than a year ago, with buyer demand up 11 per cent and sales agreed up 15 per cent. It added that the sales market, supported by these new sellers, is on track for 1.1m sales over 2024 (although while sales are set to increase, house price growth is still not expected to accelerate further this year).
The housing market has time and time again proved itself to be one of the most resilient cornerstones of the British economy, and we are now starting to see the green shoots emerge again.
But let’s be honest: whilst Labour has very little substance to offer, on this question our party appears to have imploded, constantly moving the goal posts and missing even inadequate targets. It’s time we reclaim our position as the party of property and home ownership – before it’s too late.
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Author: Hiten Ganatra
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