Sellers raise asking prices: will buyers meet them?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
The recovery in residential market sentiment that began around the turn of the year continued well into April. Asking prices rose 1.7% during the four weeks to April 13th compared to the same period a year earlier, Rightmove said this morning. The same metric climbed 1.1% month-on-month.
Rising mortgage rates as a result of hotter inflation figures have unquestionably put a dent in the recovery, but the market still has momentum. The number of new sellers was 12% higher than a year earlier, Rightmove said. The number of sales was up by 13%. Demand was strongest in the high-end segment where asking prices so far this year are up by the most since 2014. It'll be interesting to see how asking prices hold up during the next eight weeks:
“While rising asking prices show seller expectations have improved, there is broader downwards pressure on prices as mortgage rates edge higher, supply increases and a wave of people roll off sub-2pc fixed-rate mortgages agreed in early 2022, Tom Bill tells the Telegraph this morning. “The result is more friction around prices, particularly when a rate cut seems to move further into the distance with every release of economic data. That said, higher supply means there should be a recognisable spring bounce in the housing market.”
We think that mortgage rates will remain relatively stable during the next few weeks, though if there is movement it is likely to be upwards given the inflation data published last week. Tom has a piece on what the new outlook means for the property market over on the Intelligence Lab this morning.
Stamp duty
The Conservatives are considering ¬cutting stamp duty in the autumn statement this year as part of an aspirational offer before the general election, The Times reported late on Friday evening.
The Treasury has drawn up plans to increase the threshold at which people start paying the duty from £250,000 to £300,000, according to the report. That would mean that nearly half of all people buying homes would pay no stamp duty.
Cutting stamp duty is a smart move for all sorts of reasons. The Institute for Fiscal Studies has called it "among our worst and most damaging taxes", due to the fact that it decreases mobility in the housing market, keeps people in homes that are too big for them and reduces labour force mobility. Nevertheless, cutting stamp duty is politically tricky: it fuels demand and by extension house price growth, and is generally viewed as a giveaway to those who need it least.
Of course, this may all be rendered moot if Sunak gives into his temptation to "go for broke" with a summer election, also reported by the Times this weekend.
The grey belt, continued
The Labour Party on Friday committed to implementing plans that would allow development on green belt land dubbed 'the grey belt'. The party says that grey belt land includes "poor quality land, car parks, and wasteland."
Cameron McDonald, head of geospatial at Knight Frank, has previously done the sums on this. He identified more than 11,000 previously developed sites that comprise less than 1% of the green belt. All of those sites combined could produce 100,000-200,000 new family homes, depending on the density of the developments. While that's not a silver bullet for the housing crisis, it would be an important step forward in boosting delivery.
You can read more on what the proposals really mean from Knight Frank planning expert Roland Brass over on Linkedin. A lot will depend on how councils are empowered to confidently grant permissions and allocate sites within their local plans, which can only be achieved through a robust update to the NPPF. Regardless of how it is achieved, the implications are significant, Roland says:
"The proposals suggest a potential rebalancing of power, where the brownfield first policy applies not just to urban areas but also to the Green Belt. Through the new 'grey belt' classification, the character and quality of land would have a greater impact on the principle of development. This would bring forward more opportunities on sites and, importantly, provide more certainty in the planning process."
Cautious optimism
Helical this morning published a short trading update that included new leases signed at The JJ Mack Building, by Farringdon Station, and The Bower, next to Old Street, at values above 31st March 2023 Estimated Rental Values.
Those deals, plus broader market data, "provides further encouragement that the prime London office letting market is trending positively," said Helical chief executive Gerald Kaye. "We are looking ahead to the rest of year with cautious optimism as we progress the delivery of best-in-class office space into what is becoming an increasingly undersupplied market."
Indeed, Knight Frank's London Offices Spotlight for the first quarter suggests the lettings market in terms of deals has taken a quick pause for breath, but active requirements have now risen to more than 12 million square feet.
In other news...
Stephen Springham on the latest UK retail sales - flatter than a pancake?
Elsewhere - households face £400 net zero hit from higher interest rates (Telegraph), delays in cutting interest rates ‘will keep UK economy subdued’ (Times), London bankers inch closer to New York-style bumper bonuses (Bloomberg), and finally, Norway’s $1.6 trillion fund turns developer on trophy UK properties (Bloomberg).