Homesellers are feeling bullish
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Spring is approaching and homesellers are starting to feel bullish. Asking prices of homes put up for sale in the four weeks to March 9th posted the strongest increase in ten months, Rightmove said this morning.
Some of this is warranted. Rightmove's measure of buyer demand was up 8% compared to the same period a year earlier. Sales were up 13%. However, buyers are still cautious. Sellers took on average 71 days to find a buyer, the longest for this time of year since 2019.
This is a dynamic that risks becoming entrenched. Indeed, Tom Bill tackles the price "expectation gap" this morning. Sentiment has improved markedly, but higher mortgage rates mean trimmed budgets and supply is rising more quickly than demand so buyers have choices (see chart). See Tom's piece for more.
Heat pumps
The residential sector probably presents the biggest obstacle to hitting the UK's target of reaching net zero emissions by 2050.
About a fifth of the UK's greenhouse gas emissions come from heating homes that are owned by millions of voters, each with their own set of priorities. A complex set of incentives must be arranged that are large enough to coax the public to invest in the transition, likely by purchasing heat pumps, without placing undue strain on the nation's finances. Any incentive system is never going to be large enough to get everyone to willingly participate - current government grants of £7,500 are among the most generous in Europe - so the government must gradually phase out domestic heating systems that run on fossil fuels. It has said it will do so, but last year's decision to delay some aspects knocked the confidence of industry.
Maintaining that confidence will be essential if the government is going to grow the supply chain for heat pumps to a minimum market capacity of 600,000 installations a year by 2028. Installations will need to increase by a massive 35% every year in order to switch seven million existing fossil fuel heating systems to heat pumps or heat networks by the initial deadline of 2035. That's up from 14% growth in 2022. Heat pump manufacturers need to believe ministers are ready to support the sector if they are to ramp up production to required levels. ´
Auditing
The National Audit Office provided a progress check this morning and it's easy to see why the industry is still wary. As of 2023, three in ten homeowners had no idea that changes will need to be made in the way homes are heated.
Meanwhile the government still hasn't quite shut the door on the possibility of using hydrogen that runs on the existing gas network. Back in October, the National Infrastructure Commission demanded the government really come out in favour of heat pumps, but still questions linger.
The NAO makes a range of recommendations, including introducing a long-term consumer engagement plan finally clarifying the role of hydrogen. You can read the report here.
In other news...
This sense of hesitancy isn't confined to the residential sector. Commercial property owners have armed themselves with an impressive array of measurement and reporting practices, but how many are really making the investments that will make net zero happen? See this piece from David Goatman, Global Head of Energy and Sustainability at Knight Frank.
Elsewhere - Saudi Arabia and Gucci owner circle Selfridges (Telegraph), London’s Groucho Club chooses Yorkshire manor for first outpost (FT), and finally, landlords face higher taxes on home sales despite Hunt's budget relief (Bloomberg).