When it comes to the three nations, Scotland’s property market is faring far better than south of the border.
Homes aren’t only selling quicker in Scotland – twice as fast as London, in fact – but the country also has the highest year-on-year growth.
Scottish owners receive highest financial boost
The news, from Rightmove’s latest survey is in contrast with much of the rest of the UK. To the extent house prices fell by 0.4 per cent last month across Scotland, England and Wales together. Taken individually though, property owners in Scotland enjoyed a 2.6 per cent increase in the value of their homes compared to the same month in 2022. Property was selling in 32 days on average. This compared favourably to 63 days in London and 64 days in Wales.
Second fastest-selling market is the North East where property is taking 49 days to sell, followed by the South West with 54 days.
In terms of prices, property went up in only four other areas overall – by 2.6 per cent in the North East, 1.2 per cent in Yorkshire and the Humber, 1 per cent in the North West and 0.7 per cent in London. The biggest drop in prices was in Wales where property was worth 1.5 per cent less. Next was the East of England where sellers received 1.4 per cent less and the South West, with a fall of 1.3 per cent.
Mortgage interest rate rises together the increases in the cost of living, have slowed down the market as many would-be buyers began to re-assess their moving options.
Property transactions down by one fifth
Certainly, according to HMRC figures, the number of properties changing hands in July this year, fell by more than one fifth (22 per cent) compared to the same period in 2022.
And, with many more fixed rate deals coming to an end over the following months, together with no indication of mortgage rate drops, the status quo is expected to remain for some time yet. Especially when you consider that the average two-year fixed rate mortgage has gone from 2.3 per cent to 6.56 per cent over the past two years. This is due to the Bank of England increasing its base rate on 14 occasions since the end of 2021.
Fewer properties for first-time buyers
In terms of available housing, there are 10 per cent less properties than four years ago. And this figure doesn’t look like improving any time soon – certainly in terms of New Builds. That’s because planning approval for new housing in England is the lowest it’s been for 15 years. The Home Builders Federation revealed the number of new homes approved for building in England, in the second quarter this year is 54,200. The total for the past four quarters is 265,223. This is despite the government’s promise to build 300,000 new properties a year by the middle of the decade.
Developers are less inclined to build since the mortgage interest rises, as well as the withdrawal of the government’s scheme to help first-time buyers get on the property market.
Mortgage interest rates are slowly coming down in a bid to kickstart the property market. One area that desperately needs a helping hand is the construction supply sector where poor demand is already resulting in redundancies. Last month the government put skilled builders, plumbers and joiners on its ‘eligible workers’ visa list.
House prices
Average new seller asking prices dropped 1.9 per cent this month to £364,895, according to Rightmove figures. That may sound positive for first time house buyers but the majority are worse off, considering mortgage rates have increased at a higher rate.
According to Nationwide chief economist, Robert Gardner the cost of mortgage payments today would result in a first buyer paying around 43 per cent of their take-home pay on their mortgage today compared to 33 per cent last June. It’s no surprise then to find 10 per cent less properties being bought by first-time buyers, according to Rightmove.
Mortgages
Rising mortgage costs and increases in the cost of living resulted in a 14,000 drop in property purchases in June, compared to the same time the previous year. Then, 100,000 housing transactions went through, compared to 86,000 for the same month this year.
The good news is lenders are beginning to bring down their interest rates for house buyers – NatWest, Halifax and Virgin Money, Nationwide, Barclays, TSB and HSBC have all made concessions to the wider economic difficulties.
The reductions in mortgage borrowing couldn’t have come at a more suitable time. Earlier this month the Bank of England increased its base rate by 0.25, bringing it to five per cent. This was a further effort to bring down inflation. Mortgage lending criteria has also proved less restrictive in recent weeks.
Thousands of borrowers may now be worried that they acted a little hastily at the start of the summer in a bid to circumvent potentially higher mortgage rates. Bank of England figures showed an increase in mortgage approvals, from 51,100 in May to 54,700 in June. Remortgaging also increased by £5,000 to 39,100 from May to June.
Thomas Pugh, an economist at the audit, tax and consulting firm RSM UK, said: “With interest rates on mortgages continuing to rise, the average two-year fixed-rate mortgage deal broke above six per cent in June, we expect the peak in house prices to fall by around 10% with the risk of bigger falls if the base rate rises above six per cent.”
Construction
The construction sector is also feeling the pinch.Building supplier Marshalls announced this month that it would cut 250 jobs in a bid to stem losses caused by a drop in the demand for New Build homes.
The Yorkshire firm said sales were already 13 per cent down in June, year-on-year, with pre-tax profits down by twice that figure to £33m.
In July, Barratt Developments – the UK’s largest housebuilder, announced a double-digit drop in annual profits. It’s not only demand that’s fuelling the losses, supply chain difficulties are causing slowdowns while Brexit has led to a drop in skilled labour numbers.
Only this week, Crest Nicholson became the latest housebuilder to announce a profits warning. The company’s chief executive Peter Truscott, blamed a “significant reduction in sales.” This, he said, was due to “economic uncertainty deterring prospective home movers.”
Private rented sector
A recent report by property portal Zoopla shows the average PRS tenant in the UK now spends around 28 per cent of their salary on rent.
Edinburgh saw the biggest rise in rents last year, with an increase of 13.7 per cent. That was even higher than London at 13.5 per cent. The smallest increase was in Belfast, with 4.3 per cent.
According to Zoopla there are around 20 per cent to 40 per cent fewer homes to rent across the UK than before the pandemic. There’s also more tenants today than in the past five years. In the North East, for instance, there has been a 56 per cent demand for private rented accommodation since 2018, while, at the same time, supply has fallen by 42 per cent.
The highest increase in demand is in Scotland, with an 86 per cent increase, supply there has fallen by 18 per cent. The figures for the UK as a whole are a 57 per cent increase in demand and 28 per cent drop in supply.
Housing Secretary Michael Gove is to make it easier to convert retail outlets, betting shops and takeaway premises into residential dwellings.
The plan, he says, is to make better use of buildings by increasing the availability of residential property, especially in inner city areas. Current homeowners, meanwhile, will find it easier to build an extension or loft conversation after Gove lightens planning laws.
A spokesman for the Department for Levelling Up, Housing and Communities said they were confident that by relaxing the commercial to residential conversion rules, they would help rejuvenate high streets and encourage people to come and live in cities.
“We must build more [housing] in the places that make sense – in our inner cities so that we protect our countryside,” said Gove.
“And we must make better use of the buildings we already have – empty shops or offices cannot be gathering dust while we have an urgent need for more homes.”
Gove insists government in line to meet ‘advisory’ target
Gove’s speech on reforming national permitted development rights, came at a time when a parliamentary cross-party group warned the government was about to fall short of its annual target to build 300,000 new homes each year. The government’s response was to alter the target to an advisory one.
At their manifesto in 2019, the government promised to build “a million homes by the next vote.’ Gove still insists this is possible, despite a Department for Levelling Up, Housing and Communities saying the opposite.
In another bid to ‘get building’, Gove also intends to spend £24mn creating a “super-squad” of planners etc to make sure plans for major housing developments face no ‘local’ obstacles. This includes being able to ‘streamline and simplify’ planning consent matters. The first location he’ll be focusing on, he insists, is Cambridgeshire.
Major housing developers warn more reform needed
But major house developers weren’t impressed. In fact, Steve Turner, executive director of the Home Builders Federation, was clear that if Gove didn’t do more to free up red tape in the planning process then “housing supply could halve” in the coming years.
Neither were housing charities. A spokesman for Shelter said converting retail units into residential homes could result in ‘shoddy housing’ ie where the quality was poor and the buildings themselves “unsafe.”
Polly Neate, chief executive, said: “We need proper investment to build much-needed genuinely affordable homes, not more piecemeal reform.”
Meanwhile, if elected, Labour’s plan to deal with the housing crisis is to free up poorer areas of the greenbelt for developers to start building on. Housing developers and other interested parties have already written to Gove, urging him to use abandoned brownfield sites. They say this could lead to the space for a further 1.6m homes to be built in the UK and at least make inroads into the crisis.
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Bungalows are getting bigger – in popularity that is, according to new research.
To the extent that the price of a bungalow has soared by 17 per cent over the past two years (between May 2021 to May 2023). It compares to a jump of just five per cent for flats between the same period, and 13 per cent for houses.
Research by the estate agency Knight Frank shows the cost of a typical bungalow was £349,127 in May, compared to £362,915 for the average house and £281,526 for a flat.
Bungalows best sellers in certain communities
In certain areas, where there is a large community of retired people, bungalows can fetch more than houses. A spokesman for upmarket estate agency Hamptons said this wasn’t uncommon, referencing Bassetlaw, Nottinghamshire where bungalows are selling at more than 51 per cent more than three to four bedrooms home, coming in at 51 per cent (or around £135,680) more expensive than the average family home.
Other areas where bungalows are becoming the property of choice include South Staffordshire (49 per cent or £185,110 pricier and North Ayrshire (48 per cent or £100,740 more expensive). In already sought-after locations, such as Cornwall and Bournemouth, a bungalow can set potential house owners back by as much as £450,000 or even £1 million in a particularly desirous locale.
Only 10 per cent of listings are bungalows
A spokesman for Knight Frank explained the fact there weren’t that many bungalows listed on estate agents’ books, put the price up too.
“Bungalows made up less than 10 per cent of the total new listings of houses, flats and bungalows in the year to May 2023,” said Chris Druce, the company’s senior research analyst.
There are many reasons why bungalows have appeared on the radar of so many people in recent years, say economists. And it’s not just down to an aging population. There’s also the fact that the humble – and traditionally small bungalow with just one or two bedrooms – doesn’t cost much to heat. And with the shock of rising utility bills last year, that’s a big reduction for retired couples who until recently were living in underused three or four-bedroom homes.
Families favouring bungalows too
And it’s not just the elderly who are snapping up bungalows. Families struggling to cope with rising mortgage rates are also downsizing. The fact bungalows tend to have large gardens that children can play in doesn’t hurt the bungalow’s popularity with families either.
One local estate agent in Cornwall is so adamant bungalows are the ‘next big thing’ for his community that he’s urging developers to build more. But not just any bungalow. He knows too that many homeowners in their 50s, 60s and 70s are also interested in sustainability.
“I have even advised local developers to consider making bungalows a greater part of development plans. Due to the scarcity of new bungalows, along with an ageing population, there is a real opportunity and demand for future-proof properties that boast modern tech and contemporary design,” says Ben Standen, director of Truro’s Jackson-Stops estate agency.
By that he means ‘green energy’ initiatives such as ground source heat pumps, solar panels, and EV charging points.
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More properties are coming on the market for sale with agents reporting an increase in supply. At the same time the countryside and ‘quieter living’ is still proving popular for buyers. Meanwhile, more people are looking to rent.
The estate agents’ professional body PropertyMark showed in its recent Housing Insight Report that there were 70 per cent more homes for sale in April than the same period last year. It brought the average amount of stock available per branch to 34. That’s a big increase of 14 properties more than in April 2022.
At the same time, the property market is once again similar to pre-pandemic figures in terms of sales, with an average of eight properties sold per branch. The majority of homes – around 75 per cent – are selling at sums below the asking price.
‘Escape to the countryside’ still going strong
Meanwhile, lockdowns may be over but the rush to the countryside is far from nearing its end. Hybrid working has meant many house buyers are still looking for quieter spots in which to reside. And they want bigger homes too.
At least that’s the findings from the latest Halifax report which says detached homes are by far the most popular category for today’s buyers. To the extent we’re buying seven per cent more than we were a decade ago. That’s a rise from 25 per cent to 32 per cent.
Analysts believe many older people who have built up large amounts of equity in their homes are downsizing. The reason for this is to help children and grandchildren get on the property ladder themselves.
The loser in the property stakes is terraced homes, which have fallen from 26 per cent popularity to 21 per cent over the same period. More of these are now being snapped up by first-time buyers.
At present, the number of detached homes in England and Wales – 4.21 million – makes up 16 per cent of all available homes. That compares to 6.93 million terraced houses (26 per cent) and 1.10 million flats (23 per cent).
More renters than property available
The number of people looking to rent in April was 24 per cent higher than the same time last year, the same Propertymark report we mentioned earlier showed. That worked out at around 118 prospective tenants registered per agency branch. And yet, there are only around nine properties to rent per agency. Despite this, the average rent is 75 per cent less than in April 2022.
Propertymark CEO Nathan Emerson said: “We are still seeing the demand for property grow but no increase in homes. This means that pressure on rent prices is remaining, whilst new legislation will undoubtedly have a knock-on effect, we desperately need more homes for renters.”
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Keep up to date with property market news by subscribing to a free trial of Blue Bricks magazine here today. You can cancel after the trial and it costs nothing, or it’s just £9.99 if you like it and want to continue (which we’re sure you will).
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