Weekly Summary: 24th June 2022

DATA: Rightmove reported asking prices rose 9.7% in year to June 2022

This marked a fifth consecutive record high. They predict an annual price rise of 5% at the end of the year with buyer demand starting to ease and new listings rising (though still above/below their respective levels prior to the pandemic. They also report “More than 500,000 homes are currently sold subject to contract, which is 44% higher than 2019”.

DATA: ONS reported UK house prices rose 12.4% in year to April 2022

This was higher than the revised 9.7% rise reported last month though the next few months are likely to see more volatility in the annual growth rate as last year’s stamp duty driven peaks and troughs in prices affect the comparison period.

DATA: HMRC reported 109,000 residential transactions in May 2022

The provisional seasonally adjusted data showed a 1.3% increased compared to the previous month and was 10% higher than the pre-pandemic average.

DATA: ONS reported another record high in annual SDLT receipts

Total receipts (for residential and commercial property) were £16.5 billion in the year to May 2022. This was the highest annual total ever recorded.

DATA: DLUHC reported an increase in housebuilding activity in Q1 2022

Both starts and completions increased slightly compared to the previous quarter but were lower than the same period last year. For a comparison of how these figures compare to other sources at a local authority level, check out our Housing Supply reports.

DATA: ONS published house price statistics for small areas

DATA: ONS published private rental market summary statistics

The data, covering housing delivered through programmes managed by Homes England in England, shows starts increased 3.0% to 38,436 while completions rose 6.4% to 37,164. Related DLUHC affordable housing tables have been updated to reflect this data.

DATA: DLUHC published planning application statistics for Q1 2022

The release includes the latest data on the number of homes granted planning permission in England from Glenigan. It shows the annual total fell to 307,000 in Q1 2022 from its record high of 336,000 in Q2 last year.

DATA: UK Finance published interest-only mortgage statistics

See Chart of the Week for more detail.

POLICY: BoE FPC confirms withdrawal of mortgage affordability stress test

As expected, the Financial Policy Committee has confirmed it will withdraw the 3 percentage point stress test rate for mortgage borrowers. However, the soft cap on loans above 4.5 times income remains and borrowers are still subject to the FCA’s Mortgage Conduct of Business responsible lending rules.

POLICY: DLUHC launch Help to Build scheme

The Help to Build scheme provides £150 million funding to help self and custom builders access funding to build their own home with just a 5% deposit.

Chart of the Week

This week UK Finance published a summary on the number of first charge interest-only homeowner mortgages that are outstanding. It shows the number outstanding continues to fall, to just over one million in 2021, compared to over 3 million in 2012. The data shows most borrowers are managing to repay their mortgage when it reaches maturity. Though there are around 26,000 mortgages with an expired mortgage term, this figure has been relatively unchanged over the last ten years despite the large number of mortgages reaching their maturity date. Meanwhile, other data sources (e.g. MLAR) suggest the majority of interest-only mortgages are non-regulated – typically buy-to-let borrowers.

Weekly Summary: 17th June 2022

DATA: ONS monthly GDP estimates show GDP fell 0.3% in April

The reduction in Test and Trace activity contributed but this was still “the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021”.

DATA: ONS published UK labour market statistics for June 2022

The latest stats show a continued rise in payrolled employees, fall in unemployment, and record levels of job vacancies. However, the employment rate is still below pre-pandemic rates and regular wages (excluding bonuses) fell in real terms.

DATA: Bank of England increased Bank Rate to 1.25%

The MPC voted 6-3 to increase Bank Rate by 0.25 percentage points with three votes to increase it by by 0.5 percentage points (1.5%).

DATA: Bank of England published Agents summary of business conditions

They report “Contacts reported a modest increase in the availability of properties for sale across the UK, with instructions to sell picking up, and house price inflation starting to moderate in some areas”. Meanwhile, “demand for rental properties continued to exceed supply, with contacts reporting double-digit increases in rents in most parts of the UK”.

DATA: FCA/Bank of England published MLAR statistics for Q1 2022

See Chart of the Week for more detail.

POLICY: DLUHC published “A fairer private rented sector” white paper

The long awaited white paper promises to abolish Section 21 “no fault” evictions, require private rented homes to meet the Decent Homes Standard, reform grounds for possession, only allow rent increase once per year, introduce a single Ombudsman that all landlords must join, introduce a new Property Portal (landlord register?), strengthen councils’ enforcement powers, make it illegal to ban children or those receiving benefits from renting, give tenants the right to request a pet in their property, and monitor work on deposit passports. These proposals should help improve the quality and security of the private rented sector though some still require more detail.

REPORTS: DLUHC published multiple reports

These included Local authority enforcement in the private rented sector, Property guardians, Mobile homes: The impact of a change in the maximum park home sale commission, and English Housing Survey: a segmentation analysis of private renters.

REPORT: Resolution Foundation reported on “the impact of demographic change in the 2020s

The report “investigates how demographic shifts could affect the shape of the labour market and the goods and services we consume”.

REPORT: Resolution Foundation also published analysis of the pandemic’s impact on local economies in the UK

It finds “House prices have risen more slowly in places where WFH [working from home] has risen, consistent with a story that WFH is reducing demand among previous commuter-belt areas”. I’m not convinced by this narrative as many of these high WFH markets have seen bigger increases in transactions since the market reopened in 2020.

REPORT: Lichfields published report on brownfield land

The report, for the Land Promoters and Developers Federation, examines brownfield land registers in England and estimates that they have a net capacity of 1.4 million homes – around five years of net housing supply. They also warn “There is less brownfield land available in the places with the highest demand for new homes”.

Chart of the Week

This week FCA and Bank of England published the latest Mortgage Lenders and Administrators Return statistics covering the period from Q1 2007 up to Q1 2022. Our latest Digging Deeper slide deck contains more detailed analysis.

We’ve also collated some of the statistics to highlight how, as the risk of a recession and housing market downturn increases, the mortgage market is in a far more robust situation than prior to the previous financial crisis. Borrowers are now very unlikely to have an impaired credit history, have no evidence of their income, or borrow at very high loan-to-value (LTV) ratios. Meanwhile, the proportion of new advances on variable rates or interest only payment terms have also fallen considerably. The mortgage market is much better placed to deal with a crisis though this has come with a cost – fewer people able to access home ownership. Also not shown is the proportion of borrowers on higher loan-to-income multiples – a group more likely to be hit by rising mortgage rates.

Two Week Summary: 10th June 2022

DATA: Nationwide reported UK house prices rose 11.2% in the year to May

The annual rate fell slightly (12.1% previously) but prices have now risen 5.9% in the year to date. Based on historic trends, this suggests a year-end price rise of 7.9% though much will depend on the state of the market and economy in the autumn.

DATA: Halifax reported UK house prices rose 10.5% in the year to May

This was slightly lower than last month’s annual rate of 10.8% but still set a new price record thanks to eleven consecutive monthly price rises.

DATA: Zoopla reported UK house prices rose 8.4% in the year to April

They reported “New supply coming to market is starting to rise, up 7% compared to the five-year average” and “Behind strong headline price growth there are signs of market softening, taking price growth to +3% by the end of the year”.

DATA: BoE reported mortgage approvals for house purchase fell in April

The seasonally adjusted figures fell 5.1% in April compared to the previous month though the total number of approvals for purchase was in line with the 2014-19 average.

DATA: BoE reported a rise in the effective mortgage rate on new lending

The data for April showed the average effective rate on new secured lending was 1.83% compared to 1.74% last month. While the average rate is rising, it was still below last year’s figure of 1.89% and the average rate on outstanding balances of 2.05%.

DATA: BoE reported sharp rises in quoted mortgage rates in May

The average quoted rate for two-year fixed-rate mortgages at lower loan-to-value ratios (60%/75%) rose to their highest rates since late 2012. There is minimal difference across loan-to-value ratios though it may take some months for these higher rates to feed through to effective rates as many current buyers will have locked in lower rates.

DATA: ONS published stats on dwelling stock by tenure for Great Britain

POLICY: Prime Minister announced plans for increasing home ownership

Though details following the speech are limited, it marks a clear shift in priority from housing supply back to home ownership with the prime minister failing to commit to the 300,000 net new homes in England annual target. The proposals fall into three key parts:

1.Right to Buy for housing association tenants: this is a revisit of a previous policy and appears to be heavily based on a Centre for Policy Studies paper (see below). The lack of dedicated funding and profile of housing associations tenants suggests that demand may be limited, especially given the current economic climate.

2.Using benefits to buy rather than rent: details on this are more limited but this could actually end up being a successful though expensive policy supporting people in the relatively more affordable markets where the security and quality of employment is the major factor in the housing crisis (e.g. North East). Paying benefits to home owners rather than landlords in these markets could also help improve the quality of housing stock (another key issue in these areas). However, there are considerable risks given both the economic climate and the more precarious finances of those receiving benefits.

3.A review of the mortgage market: there is a balance between financial stability and higher rates of home ownership and that balance has been weighted towards financial stability since the financial crisis. It is surprising it has taken this long but a review is understandable as the balance shifts towards home ownership. However, given the current economic climate, it may not lead to the immediate political wins the current Prime Minister is looking for.

POLICY: DLUHC published their response to the Select Committee report on The Future of the Planning System in England

POLICY: DLUHC introduce Social Housing Regulation Bill

The bill proposes stronger powers for the Regulator of Social Housing including the power to issue unlimited fines. The NHF and CIH have launched an “independent panel on quality in housing association homes”.

POLICY: DLUHC launched consultation on CPO compensation

REPORT: Centre for Policy Studies proposed a “Right to Own” policy

The paper appears to be the source for the Government’s proposals for housing association tenants to buy their own home though at times it has hints of a personal vendetta waged by a former Number 10 advisor upset that their policies were “kicked into the longest of Whitehall grass” following their exit from Downing Street.

REPORT(PDF): RICS published May Residential Market Survey

They report “New buyer enquiries indicator turns slightly negative” for the first time in nine months and “New instructions and sales remain more or less flat at the headline level”. Meanwhile “House prices continue to rise across the country although twelve-month expectations point to an easing in momentum further ahead”.

REPORT: UK Finance published their summary of household finances in Q1

They warn that while household finances appear calm, there are “storm clouds gathering”.

REPORT(PDF): Barbour ABI published The Home Improvement Report, 2022

The report finds demand for home improvement has boomed but supply is a major issue.

REPORT: Crisis published report on “Experiences of the Homelessness Reduction Act, 2018-2021”

Their recommendations include “building on the intent of the HRA and widening legal protections to help everyone address their homelessness; increasing the supply of social rented housing; and improving service standards through introducing a statutory code of practice”.

REPORT(PDF): Safer Renting reported on establishing an annual indicator of harassment and unlawful eviction in the private rented sector

The research found that “of the 7,000 landlords who were brought to the attention of advice agencies and local authorities, only 23 landlords had legal action taken against them following complaints to local authorities and agencies in 2020/21”.

REPORT: Welsh Parliament published report on second homes

The report provides recommendations following the Local Government and Housing Committee’s inquiry into second homes in Wales.

Weekly Summary: 27th May 2022

DATA: Rightmove reported asking prices rose 10.2% in year to May 2022

Asking prices hit another record high with the number of buyers contacting agents 31% higher, available properties 55% lower, and sales agreed 12% higher than 2019 levels.

DATA: ONS reported £1.6billion in SDLT receipts in April 2022

This was the second highest monthly figure for stamp duty land tax receipts recorded (residential & commercial) and the highest ever annual total at nearly £15.9billion.

DATA: HMRC reported 106,780 residential transactions in April 2022

The seasonally adjusted figure fell 4% compared to the previous month and was 12% lower than last year but still 8% higher than the pre-pandemic average.

DATA: VOA published Council Tax: stock of properties data for 2022

The data indicates a 232,000 net increase in homes across England during the 2021/22 financial year. The release also includes useful local level data on property counts by council tax bands alongside property types and build periods.

DATA: NISRA published first 2021 Census estimates for Northern Ireland

This was the first release of 2021 census data and estimated that the population of Northern Ireland increased 5% between 2011 and 2021. The number of households rose faster at 9%, with the average household size falling from 2.54 in 2011 to 2.44 in 2021.

DATA: DfT published vehicle licensing statistics for small areas

The data includes quarterly counts of vehicles at lower super output areas across the UK.

DATA: MOD published land holdings summary data for 2022

The release is very high level and contains what is perhaps my favourite least useful map.

POLICY: HMT launch further support for the cost of living crisis

The package is a welcome response, especially as it should help lower income households most. However, there are some groups, such as unpaid carers, that appear to have been left out and the longer term challenges remain.

POLICY: DLUHC announce government funding for “garden communities”

The additional £15million is split across 43 cities, towns and villages.

REPORT: DLUHC published English Private Landlord Survey, 2021

See Chart of the Week for more detail.

REPORT: Building Back Britain Commission reported on net zero

The report calls on the Government to “on the Government to commit to spending £2.3 billion a year for the next decade on raising the energy efficiency standards of 2.3 million homes across England”.

Chart of the Week

The DLUHC survey of private landlords provides a wealth of information on their circumstances, attitudes to the sector and tenants, and their approaches to legislation.

One of the things about the private rented sector that has consistently intrigued me is the importance of debt. For example, the outstanding value of BTL mortgages suggests a relatively low loan-to-value (LTV) ratio for the sector, suggesting that mortgage related risks in the sector are low. However, it is clear from the survey that debt (BTL mortgage or other) is still an important factor. The DLUHC survey shows that the median portfolio LTV for those landlords that have debt is 48.3% though a large proportion (38.3%) have no debt or borrowings against their portfolio. As the chart below shows, it is the landlords that own multiple properties that are more likely to have some form of borrowing secured against their portfolio. Worryingly, anecdotal evidence suggested that it was these larger landlords who were more likely to get into trouble during the financial crisis as rental arrears on a single property could quickly cascade and cause problems across the whole portfolio and even on the mortgage secured against landlord’s primary residence.

Weekly Summary: 20th May 2022

DATA: ONS reported UK house prices rose 9.8% in the year to March 2022

This was slightly lower than the previous month’s revised figure of 11.3% though this data is being regularly revised at the moment – it was reported as 10.9% last month.

DATA: ONS reported on the UK labour market

The number of payrolled employees is well above pre-pandemic levels and the unemployment rate (3.7%) is well below pre-pandemic rates. However, the employment rate is still below pre-pandemic rates and real basic earnings were negative – though this turns positive when bonuses are included.

DATA: ONS reported a 9.0% annual rise in the Consumer Price Index (CPI)

This was the highest rate recorded by this measure since it began in January 1989 (based on constructed historic data). RPI rose 11.1% over the same period.

DATA: Zoopla reported UK private rents rose 11% in the year to Q1 2022

They reported “Rental demand is particularly acute in city centres as students, office workers and international demand returns”. Rents in London rose 15.7% over the same period though this partly reflects the bounce back from falls during the pandemic.

DATA: UK Finance reported a fall in number of mortgage arrears in Q1 2022

The number of owner-occupier mortgages in arrears of over 2.5% of their balance fell 10% to 75,970 and arrear rates are still around record lows. The number of BTL arrears fell 5% over the same period.

DATA: MoJ reported rapid growth in mortgage and landlord possessions

However, this reflects the bounce back from very low levels during the pandemic and all measures are still well below pre-pandemic levels.

DATA: DLUHC published Building Safety Programme release

The release states that, at the end of April 2022, 88% of identified buildings no longer have unsafe ACM cladding. Meanwhile, a Home Office consultation response suggests it will ignore a recommendation of the Grenfell inquiry and not make personal emergency evacuation plans (PEEPs) for those with limited mobility a legal requirement.

REPORT: DLUHC on “Estimating the prevalence and costs of external wall system life-safety fire risk in mid-rise residential buildings in England”

See Chart of the Week for more detail.

REPORT: NHBC published new home statistics for Q1 2022

The report shows a big increase in new homes registered during the quarter (up 25% compared to Q1 2021) though completions were 4% lower over the same period. This data is no longer a meaningful indicator for housebuilding activity due to market share issues.

NEWS: MoneyFacts report the average two-year fixed rate “breaches 3% for first time in over seven years”

The data, an average for all loan-to-value ratios, shows an increase in the average rate to 3.03%, the highest since March 2015.

Chart of the Week

This week DLUHC published details on their estimates for the number of mid-rise (11-18m high) buildings and the work required to fix external wall fire risks. Their analysis found that the majority of residential buildings (89-91%) do not have an external wall system that poses a life-safety fire risk. However, it estimated that around 6,220 to 8,880 buildings do require remediation with the majority having at least one external wall that requires full remediation. They conclude that “The costs to alleviate external wall system life-safety fire risks for leasehold dwellings in mid-rise residential buildings is estimated to be between £3.1 billion and £5.3 billion”. However, there is some debate about the exact number of buildings affected given the challenges with the underlying data. Perhaps this would be an ideal time to create an open-source database of residential buildings across the country, though restrictions around Ordnance Survey data and other sources is a barrier.

Weekly Summary: 13th May 2022

DATA: ONS reported GDP fell 0.1% in March after no growth in February

This left GDP just 0.8% higher than its January 2020 level. While these figures will inevitably be revised, the underwhelming recovery of the UK’s economy following the pandemic is a concern given the challenges it faces in coming months.

DATA: BoE reported a sharp rise in quoted mortgage rates

Rates rose quickest for lower loan-to-value (LTV) ratio mortgages, with those at 60% LTV rising to their highest rate since early 2013.

DATA: DLUHC published 2021 dwelling stock estimates for England

See Chart of the Week for more detail.

DATA: DLUHC published Q4 2021 Help to Buy equity loan statistics

While the number of completions increased 22% versus the previous quarter, delivery via the scheme is still well down on the levels regularly seen under the previous version of the scheme. With the lowest number of completions in Q4 since 2014, the regional price caps and restrictions to just first time buyers are clearly limiting the number of homes delivered.

DATA: HMT published Q4 2021 mortgage guarantee scheme statistics

The release again shows relatively few mortgages completed with the scheme since it stated in April – just 12,388 completions up to the end of December. This equates to just 5% of total mortgage completions, reflecting the importance of the scheme in simply existing rather than being actively used. The spatial breakdown provides some interesting patterns with large concentrations in and around Edinburgh and Glasgow – perhaps suggesting a single lender is responsible for a significant proportion of the scheme’s use.

DATA: HMT published Q4 2021 Help to Buy: ISA statistics

Both the number of bonuses paid out and property completions supported by the scheme were 15% lower in Q4 2021 than the same quarter in 2019.

DATA(PDF): RICS published April Residential Market Survey

They report “New buyer enquiries edge up slightly although the picture is flatter for agreed sales” while “New instructions generally steady over the month with available stock still scarce”. Price expectations for the next three and twelve months remain strongly positive.

POLICY: Queen’s Speech

Amidst debate about whether the 300,000 housebuilding target still applies, the speech included the Levelling Up and Regeneration Bill alongside the Social Housing Regulation Bill, Renters Reform Bill, and Housing Reform. The planning white paper proposals for all land to be categorised and linked to automatic “in principle” permission are unsurprisingly not being taken forward while we await more detail on street votes before drawing conclusions.

REPORT: JRF published a report on the experiences of low-income families during the second half of the pandemic

The report warns that, in the face of the cost of living crisis, there are several policy recommendations including the need to guarantee uprating benefits in line with inflation.

REPORT: Knight Frank reported on residential development land

They report greenfield land values rose 22.8% in the year to March 2022.

REPORT: Savills published survey of for-profit registered providers

They report “Growth in for-profit registered providers is constrained by the number of opportunities, not investor appetite”.

BLOG: BoE on the consumption effects of mortgage payment holidays

Their research shows that payment holidays were “effective in supporting consumption of more vulnerable households during a period of financial difficulty”. However, they also found that “households with stronger balance sheets have used the policy to boost savings instead of consumption”.

Chart of the Week

This week’s release of housing stock data for England in 2021 contains no great surprises in terms of the net change (that data was published last November). But it does contain estimates on the tenure of England’s housing stock in March 2021. Today’s Chart of the Week shows the net change in tenure over the last thirty years with three clear periods. The first period, during the 1990s and early 2000s, was largely an expansion of owner occupation. The period from the mid 2000s through to 2015 was dominated by the growth of the private rented sector and the number of owner occupied dwellings actually fell. During the mid-2010s, housing policy became increasingly focussed on homeownership, with the majority of net housing supply ending up in the tenure in the years leading up to the pandemic. However, the last two years have seen the private rented sector return to growth as the pandemic and affordability pressures limit access to home ownership.

Weekly Summary: 6th May 2022

DATA: Halifax reported UK house prices rose 10.8% in year to April 2022

A tenth consecutive monthly rise, of 1.1%, left the annual rate of change just slightly lower than last month’s figure of 11.0%. Halifax warn that “with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year”.

DATA: Zoopla reported UK house prices rose 8.3% in year to March 2022

Their latest data shows buyer interest still well above normal levels (+58%) while the stock of homes for sale is still well below (-40%). Despite the lack of stock, sales agreed are 18% higher than normal. They also note that “Upwards pressure on pricing has pushed 4.3 million homes into higher stamp duty brackets over the last 2 years”.

DATA: BoE reported small fall in house purchase mortgage approvals

They fell 0.4% compared to last month and were 14.5% lower than the same month last year but a more accurate comparison shows they were still 7% higher than the pre-pandemic average. Approvals for remortgaging were 40% higher than last year.

DATA: BoE reported a rise in effective mortgage rates in March

The average effective mortgage rate on new advances was 1.74% in March, an increase from the 1.60% reported for February. However, this was still below the 1.96% figure for March 2021 and the 2.05% average for all outstanding balances.

DATA: HMRC published quarterly stamp duty land tax statistics

See Chart of the Week for more detail on the Q1 2022 statistics.

REPORT: BoE published Monetary Policy Report – May 2022

Alongside an increase in Bank Rate to 1.0%, the Bank of England warned that inflation is likely to rise to around 10% by the end of the year, squeezing household incomes. GDP is forecast to fall towards the end of the year and remain weak over the next few years.

REPORT: Resolution Foundation published Q2 2022 Housing Outlook

The latest report investigates how the UK’s housing stock will be affected by the increased frequency and severity of flooding. It estimates that “1-in-50 homes are in places at medium or high risk of flooding from rivers and sea in England” and warns that poorer households are not covered by contents insurance – “a key factor in limiting the financial fallout of a flood event”.

REPORT(PDF): L&G/BPF on “Delivering a Step Change in Affordable Housing Supply”

It finds that “Increasing the annual supply of affordable housing will require an increase in capital funding for the sector” and suggests “Only new equity investment, supported by Government subsidy provision, can overcome the sector’s financial limitations”.

REPORT: House of Commons Library on “Improving the home buying and selling process in England”

The briefing provides a useful summary of the home buying process in England and investigates the multiple attempts made to improve the process.

NEWS: Nationwide on first-time buyers and the rising cost of living

Their survey found 70% of prospective first-time buyers are delaying their purchase as the rising cost of living limits their ability to save a deposit.

Chart of the Week

The latest HMRC quarterly SDLT release once again highlights that it is the top-end of the housing market that has benefitted most from the current housing boom. Analysis of transactions shows that, while lower price bands may have many more sales, it is higher priced homes that have seen the biggest percentage increase over the last three years. The number of sales priced between £1m and £2m in Q1 2021 was 86% higher than the same quarter in 2021 while the number of sales under £500k was just 9% higher. While most of the growth in transactions has been by home movers, half of the growth in the highest price band (over £2m) were transactions liable for Higher Rates on Additional Dwellings (HRAD).

Weekly Summary: 29th April 2022

DATA: Nationwide reported UK house prices rose 12.1% in year to April

This was slightly lower than last month’s figure of 14.3% but house prices have seen their fastest start to the year since 2004. A survey they commissioned shows 30% of outright owners and 42% of mortgaged owners are either moving or considering a move.

DATA: Rightmove reported UK house prices rose 9.9% in year to April

They reported another record high for prices noting “53% of properties are selling at or over the full asking price, again the highest level ever seen” and the number of sales agreed are 21% higher than 2019 levels.

DATA: ONS reported £1.4 billion in SDLT receipts in March 2022

This was 10% higher than the total stamp duty take last March and took the annual total up to £15.4 billion – the highest annual total ever in nominal terms.

DATA: DLUHC reported 238,000 new build EPCS in year to Q1 2022

The number of energy performance certificates for new build properties tends to be a leading indicator for net housing supply and is at similar levels to those seen in the years prior to the pandemic.

DATA: DLUHC published statutory homelessness data for Q4 2021

The data for England showed a 3.5% annual fall in the number of households initially assessed as homeless and therefore owed a relief duty but a 7.3% increase in the number of households threatened with homelessness and therefore owed a prevention duty.

REPORT: Knight Frank on London’s Tall Building Pipeline

They report that, while the future supply pipeline of tall buildings contracted slightly (-1%), there are still “583 tall buildings which are proposed or approved with 109 currently under construction”. They note that “what is coming through the planning system and out of the ground, is increasingly across the outer London boroughs, in zones 3, 4 and 5”.

REPORT: Savills reported on residential development land values

They report development land values are rising rapidly with UK greenfield land rising 9.3% over the last year. However, they are still 3.1% below their pre-financial crisis peak.

Chart of the Week

This week the ONS published analysis on the rising cost of living and its impact on individuals. It highlights the scale of the issue with 87% of all adults reporting an increase in their cost of living over the last month. Energy bills, food, and fuel are the most common reasons for this. The analysis also highlights the distributional impact of the cost of living crisis. While all income groups are reporting an increase in their cost of living, it is those at the lower end of the distribution or those living in the more deprived parts of England (chart below) that are finding it more difficult. The analysis also highlights that “a greater percentage of renters (37%) found it very difficult or difficult to pay usual household bills compared with a year ago, compared with mortgagors (23%)”. This is perhaps unsurprising given renters tend to have lower incomes than owners and 34% of them reported an increase in their rent during the last six months compared to just 19% of mortgaged owners reporting an increase in their mortgage payments over the same period.

Weekly Summary: 22nd April 2022

DATA: ONS reported UK house prices rose 10.9% in year to February 2022

This was slightly higher than last month’s revised figure of 10.2% though London continues to record the lowest growth rate of just 8.1%. This data will be revised in the future.

DATA: ONS reported monthly GDP estimates grew by just 0.1% in February

This leaves GDP just 1.5% above its pre pandemic level two years ago amidst rising concerns about a recession later this year.

DATA: ONS reported higher consumer price inflation

The latest data shows CPI rose 7.0% in the year to March 2022 while RPI rose 9.0%.

DATA: ONS reported on the UK labour market

They reported the number of payrolled employees is now well above pre-pandemic levels and the unemployment rate is also now at pre-pandemic levels. However, the employment rate is still below levels prior to the pandemic and the annual change in regular earnings (excluding bonuses) is negative in real terms.

DATA: HMRC reported another rise in residential transactions

The provisional data shows UK residential transactions increased 2.6% in March compared to the previous month and were 16% higher than their pre-pandemic average. The annual change (-36%) should be ignored due to last year’s stamp duty holiday spikes.

DATA: Rightmove reported 11% annual rise in asking rents in Q1 2022

They report “Rents are now 15% higher than pre-pandemic” and this is the “most competitive market ever for tenants – tenant demand is up 6% and available properties are down by 50% compared to last year”.

DATA: Bank of England published Credit Conditions Survey – 2022 Q1

The survey found that Lenders expect the availability of secured credit to decrease over the next three months (to end of May) while demand for secured lending for house purchase is expected to increase.

DATA(PDF): RICS market survey reported a resilient housing market

The survey found “Buyer demand and sales continue to rise at a modest pace in March” while “New instructions indicator turns positive for the first time in twelve months”.

DATA: ONS investigated town characteristics and house prices

The analysis found “The three most important characteristics for predicting average property prices in towns were: the distance of the town from London, the types of jobs carried out by the town’s resident workers and the level of income deprivation in the town”.

POLICY: DLUHC revealed building safety agreement with developers

The agreement includes a commitment of £2 billion to fix developers own buildings with a further £3 billion raised through an expansion to the Building Safety Levy. The list of 36 developers is available here while the Secretary of State also sent a letter to the Construction Products Association.

POLICY: DLUHC announced ban on ground rents from 30th June 2022

They suggest “Ground rent charges will be banned on most new residential leases” and also applies to retirement homes.

REPORT: Tony Blair Institute on home ownership and the mortgage market

The report “suggests that boosting home ownership will require some mechanism to extend more risky lending to first-time buyers” and investigates mortgage markets in other countries to see how they balance the risk between financial stability and riskier lending.

REPORT(PDF): House of Commons PAC on regulation of private renting

The report highlights that the private rented sector is “failing far too often to provide safe and secure homes for renters”. They note that “Regulation by local authorities is under capacity and not providing appropriate and consistent protection for tenants” and there is the need for better data to understand the issues within the sector.

REPORT: Knight Frank updated their UK house price forecasts

They “forecast that UK prices will grow by 5% this year, with several factors acting as a drag on the rampant growth that has taken place in recent months”. These factors including rising mortgage rates, an increase in supply available for sale, and the race for space will “calm down”. Prices are forecast to rise 1% in 2023 as the cost of living squeeze bites.

REPORTS: Savills published a flurry of reports on UK student accommodation, UK build to rent, and development land values

The student accommodation report identifies a market surge while the build to rent report focuses on Scotland, and they ask “How far can development land value continue to grow”.

REPORT: TwentyCi reported on the property market in Q1 2022

They report there were 342,000 sales agreed in Q1, 16.9% higher than Q1 2019. They also found that “Aside from Inner London, the whole of England and Wales at a regional level has just under two months’ worth of property stock left to sell and overall, the available months of stock are down by almost half on historical norms”.

Weekly Summary: 8th April 2022

DATA: Halifax reported UK house prices rose 11% in year to March 2022

Another record high thanks to the biggest monthly increase in six months though they warn the “Cost of living pressure likely to slow the rate of house price growth this year”.

DATA: Bank of England published quoted mortgage rates for March

Rates for two year fixed rate mortgages rose across all loan-to-value (LTV) ratios in March. Average rates at 60% and 75% LTVs have risen to levels last seen in late 2014. See Chart of the Week for more.

DATA: HMRC published Annual Tax on Enveloped Dwellings statistics

The release shows “ATED receipts in the 2020 to 2021 financial year were £111 million, which is 13% (£17 million) lower compared to the previous year, with decreases in all price bands except the £500,000 to £1 million range which remained the same as the previous year”.

POLICY: British energy security strategy released

The report says government will help consumers by “zero-rating VAT for the next 5 years on the installation of energy saving materials, including insulation and low carbon heating” and “Reviewing the practical planning barriers that households can face when installing energy efficiency measures such as improved glazing, including in conservation areas and listed buildings”. However there was criticism that the strategy does not go far enough in improving the energy efficiency of the existing housing stock.

REPORT: DLUHC published evaluation of supported housing pilots

Five local authorities were provided with funding to test ways of improving quality and value for money in supported housing.

REPORT: University of Warwick reported on the UK’s ‘non-doms’

The report found “Most non-doms reside in and around London, with non-doms making up more than one in ten adults living in Kensington and the Cities of London and Westminster”. The map in Figures 9a and 9b showing concentrations of non-doms locations closely matches the areas that estate agents call prime central London.

Chart of the Week

While saving a deposit is the biggest barrier to homeownership, the mortgage lending environment over the last decade has also played a part in deterring prospective first time buyers. The availability of higher loan-to-value (LTV) mortgages has been a major barrier and is closely linked to the challenges in saving a large enough deposit. However, the much higher mortgage rates on higher LTV mortgages has also been a factor in recent years.

Someone only able to save a deposit worth 10% of the home they were buying might find themselves with a mortgage rate that was 1-2% percentage points higher than if they had a 25% deposit. The situation has improved in recent years, ignoring the credit crunch during 2020/21, and the margin between very high LTV mortgages (90% plus) is at its lowest level since 2009. However, the latest Bank of England data on quoted mortgage rates shows a rapid increase in average rates on lower loan-to-value mortgages and so it remains to be seen if the narrowing of the mortgage rate margin is a temporary effect of the current mortgage market or a return to the pre-financial crisis normal of a minimal rate margin.

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