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Interest Rates Held at 5.25%

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Andrew Bailey, the Governor of the Bank of England, has signalled that interest rates will likely need to be cut in the coming quarters to maintain inflation at the 2% target. Despite policymakers voting to keep interest rates steady at 5.25%, Bailey emphasized the need for rate cuts, possibly exceeding current market expectations.

Money markets had anticipated two rate cuts by the year’s end before Bailey’s remarks. He stated that a rate reduction in June was not definitively ruled out nor guaranteed.

Bailey expressed optimism regarding falling inflation in the upcoming months, attributing it to encouraging economic indicators. He emphasized the necessity of observing sustained low inflation before implementing rate cuts.

Sir Dave Ramsden, the Bank’s deputy governor, supported calls for reducing borrowing costs, citing signs of inflation’s descent.

The Bank’s recent economic assessment revealed a 0.4% growth in the UK economy during the first quarter, marking a recovery from recession. It projected inflation to have eased back to the 2% target in April from 3.2% in March, with food prices stabilizing around this level for the remainder of the year.

Investors have adjusted their expectations, bringing forward predictions for rate cuts from August to June, with rates potentially dropping to 4.75% by year-end.

Source : Property Notify

Housing Market Continues Spring Revival

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The average asking price of property coming to the market increased by 1.1%, or £4,207, this month to hit £372,324, just £570 short of the record in May 2023, according to new data from Rightmove.

A key factor behind this growth towards a near-record average price is the largest homes, top-of-the-ladder sector, which is seeing its strongest start to the year for price growth since 2014, with the annual rate of price growth is now stood at 1.7%, the highest level for 12 months.

However, the market remains price-sensitive, and operating at different speeds, with prices and activity rising more slowly in the more mortgage dependent first-time buyer and second-stepper sectors.

The number of new sellers coming to the market is up by 12% compared to this time a year ago, and the number of sales being agreed is up by 13% as both seller and buyer activity rebound from last year’s much more subdued Spring.

The biggest growth in activity is taking place in the largest homes, top-of-the-ladder sector, with the number of new sellers up by 18% compared with last year, and the number of sales being agreed up by 20%.

Rightmove says homeowners are springing into action, with Thursday 28 March seeing the highest number of new sellers coming to the market in one day so far in 2024, and the third largest since August 2020.

There appears to be a window of opportunity for those considering a move to act, with a busy summer of sporting events, followed by a likely general election, creating more home-mover distractions than usual, according to Rightmove’s Tim Bannister.

Source : Property Industry Eye

Will the Property Market be Impacted by the Spring Budget?

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The most significant help for the property market is likely to come from a drop in the rate of inflation, which Chancellor Jeremy Hunt stated is expected to fall to its target of 2%, if not lower, within a matter of months.

Spiralling inflation and a seemingly constant increase in the Bank of England base rate between December 2021 and August 2023 saw mortgage rates rise significantly for many. However, if inflation does drop as predicted, the base rate should also reduce, enabling lenders to bring their rates down again.

Several tax changes were announced including:

Multiple dwellings relief – where investors can claim Stamp Duty relief when they buy more than one dwelling in a transaction (or a number of linked transactions) – is going to be scrapped from 6th April 2025.0

Furnished holiday lets tax relief will also be scrapped from 6th April 2025. This relief enables landlords who rent out furnished holiday lets to take the full cost of any mortgage interest payments from rental income and, if they qualify for Business Asset Disposal Relief, they only pay 10% Capital Gains Tax (CGT) when selling.

Higher-rate CGT will drop from 28% to 24%. While lower-rate tax payers are charged CGT at 18% of the rise in the property’s value, higher-rate tax payers pay 28%. The reduction to 24% will be implemented from 6th April 2024.

As mentioned, the biggest help comes from the forecasted fall in inflation to 2% or below, which should ultimately reduce mortgage costs for borrowers.

And whilst the changes to holiday lets will impact the bottom line of some landlords, we believe that some may return to offering longer term tenancies instead – which is good news for families and communities.

Source: Property Notify

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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