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Category: Market Pulse

Property Market Picking Up Nicely

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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Buyers Want Smaller Homes and Eco-Builds

House prices are teetering on the edge of a fall, while the cost of a mortgage in the UK is increasing. 

The most recent figures from the Halifax show property price increases are flatlining; April’s increase for the average property was a mere 0.1 per cent compared to the same time in 2022. And, with the rapid rise of inflation in comparison, it means prices are, in reality, much lower. 

Cost of New Builds up 3.5 per cent

Looking at individual sectors, the cost of a New Build has actually risen over the past 12 months, by 3.5 per cent. Another positive figure is for property in the West Midlands, which has seen a jump of 3.1 per cent. 

Yesterday’s rise in interest rates, by 0.25 per cent, bringing the figure to 4.5 per cent, is exacerbating the issue of falling property costs. That’s because higher interest rates make buying less palatable. At the same time re-mortgaging becomes far more expensive. 

This is evidenced by the recent RICS survey which showed estate agents have more properties on their books. The average estate agent had 36 homes in April, compared to 35 for the previous two months. The reason being less buyer demand.

Buyers looking for smaller homes 

A squeezing of household finances has also led to a trend in people looking for smaller homes (ie with one bedroom less than in the past). Energy efficient New Builds are also featuring highly on buyers’ ‘want lists.’ 

Simon Rubinsohn, RICS chief economist, said: “Buyer demand still appears to be subdued in the face of relatively high borrowing costs… and ongoing affordability challenges.”

Although Tom Bill, head of UK residential research at Knight Frank, said he expected prices to fall this year, it wouldn’t be by much. He quoted a figure of around three per cent, saying the market would be buoyed by plenty of employment, large amounts of housing equity and people still sitting on impressive savings they garnered during lockdown.

Stammer to hit foreign buyers 

Labour’s Keir Stammer meanwhile threw a spanner into the works of property buying strategies of overseas buyers, this week. He announced that were his party to gain control of government he would impose new restrictions on foreign investors. This includes raising foreign buyer Stamp Duty yet again (it’s currently at two per cent) and curbing the number of properties they can buy on a development. 

Stammer says he also wants to give priority to first-time buyers. He would achieve this, he said, by allowing them a ‘buyers window’ for up to six months (or a time agreed by individual local authorities). In other words, only first-time buyers would be allowed to purchase for a set time. 

Rishi Sunak has already been criticised by some of his party for dropping national house-building targets – especially in light of the poor Conservative election results last week.

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First-time Buyers Face Uphill Struggle

UK property prices are on the rise again – albeit on a monthly basis and by just 0.2 per cent.

The increase was from March to April, reports Rightmove. And, although positive for homeowners, is still 1.7 per cent lower than in the same period last year. The cost of the average property overall in the UK is now around £366,247.

It’s all about competitive pricing for spring, insists Rightmove’s Tim Bannister.

The property portal director said: “Many sellers have transitioned out of the frenzied multi-bid market mindset of recent years and understand the new need to tempt spring buyers with a competitive price.”

The pace of the property market, he says, is similar to that pre-pandemic. In fact, sales were 18 per cent lower than in spring 2022.

First-time buyers face price hikes

Meanwhile, one sector of the property market where prices aren’t particularly competitive, is the first-time buyer market. That’s because the price of one to two-bedroom properties has jumped two per cent compared to spring last year. It brings the asking price for the average first-time buyer home (ie those with one and two bedrooms) to £224,963.

Conversely, sales for ‘second stepper’ homes ie those with three to four bedrooms and a garden and four per cent less their pre-pandemic figure. 

City living is becoming appealing again

And talking of lockdown, now that more people are going back into the office, the yearning for city living is becoming ‘a thing’ once again. Property researchers TwentyCi say sales in cities, particularly inner London, are on the rise. In fact, it’s 5.8 per cent more than in 2019. The prices are rising due to investment from foreign buyers. 

Meanwhile, London lettings and estate agent Benham and Reeves has identified a gap of more than 34 per cent between seller expectations and what buyers are prepared to pay. The average approval price being around £271,098 compared to the seller’s asking price of £363,416. It’s the biggest gap since the market was in full flourish during the height of pandemic in autumn 2020.

North East sees most UK property sales

Most property sales over the last quarter have been in the North East of England (an increase of seven per cent). Scotland was the only other area to experience an increase in sales numbers. The biggest drop in sales was in the East Midlands, at 15.3 per cent. The previously popular South East saw sales drop six per cent.

The North East saw the biggest uplift in agreed sales at seven per cent, while Scotland saw a small increase at 1.4 per cent. 

Other regions recorded by TwentyCi reported a decline in sales agreed when compared to 2019, ranging from a drop of six per cent in the South East to a fall of 15.3 per cent in the East Midlands. The figures, a spokesman for TwentyCi said, pointed to a recalibration in the market, rather than an all-round freefall. 

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‘Over-inflated’ Property Prices Lead to Shrinking Market

An increasing number of sellers are withdrawing their properties from the market.

More than one third of sellers removed their property from marketing websites last month – the highest number since September 2020. The reason for the fall is down to buyers offering sums much lower than hoped for by the seller.

The research, by property researchers TwentyCi, shows buyers are hoping to cash in on the slowing down of the property market. This, however, is having a negative effect since it means fewer properties are available to buy and those that are listed, are more likely to retain their price. Overall though, the result, is increasing stagnation in the marketplace.

Analysts are confident that many of these withdrawn properties will come back onto the market in the spring, when the activity is traditionally strongest. The majority of withdrawn properties are in central London where prices are highest. Sellers there tend to be able to afford to ‘wait it out.’

Shrinking market caused by ‘over-inflated’ prices

One reason for sellers withdrawing their properties is that they were merely’ testing out’ the market anyway with an over-inflated price. In other words, they were in no hurry to move. Other genuine sellers are realising they’ve missed the price bonanza and removing property in order to rethink their strategy. Certainly, with mortgage rates expected to fall as the year goes on, there is hope the market with enjoy a revival of buyers.

Figures from the government’s Office for Budget Responsibility, revealed last week, show property prices are expected to fall by around 10 per cent from their peak last year. This is an increase of one per cent greater than was previously predicted.

Poor Ofsted ratings affecting house prices

Meanwhile house sellers who live in the vicinity of a state school with a failing Ofsted record, may be forced to take £20,000 of the price of their property.

The government’s school grading system is having a marked effect on house prices, says a survey by Hamptons estate agents. Their research shows that the price of properties with a catchment area for a school that had been downgraded by just one point (ie from ‘good’ to ‘needs improvement’) were two per cent lower than their nearby equivalents.

A two grade-drop was even more detrimental to sellers, with a five per cent drop in the value of their property. That’s an average of around £20,171.

Around 80 per cent of top rated schools downgraded

The schools Ofsted inspectors graded had all been marked as ‘outstanding’ in 2012. But, a decade later, up to 80 per cent of these education establishments had been downgraded. Four per cent had been re-graded as “inadequate.” In one area – Plymouth with Millbay Academy – house prices fell by 11 per cent last year.

Of course, the converse is true too. A one grade improvement can result in a property price boost of £4,731 (one per cent), while property sellers in an area where a school has received a two-grade boost can expect to sell for, on average, an additional £22,088 (or six per cent).

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Think Tank Wants Changes to Property Planning Policy

Around 442,000 homes would need to be built annually for the next 25 years in order to relieve the UK’s housing crisis. That’s according to a report by the leading economic think tank for cities and town centres. 

The Centre for Cities analysis shows the UK is short of 4.3 million homes. With the government’s promise to build 300,000 homes a year, it would take 50 years to fix. Worst hit is the Greater South East, while in England as a whole a typical house is more than 10 times the average salary.

UK’s housing crisis dates back to post-WW2

The report says Britain’s housing supply problem dates back to 1947 and the introduction of the Town and Country Planning Act. This is contrary to the belief by many that it was the Tory government’s Right to Buy legislation, introduced in the 1980s, that was the main culprit, particularly since council house building was also cut back at the time.

Comparing the UK’s housing history with that of it is continental neighbours, the report points to a drop in house building of more than one third after the introduction of the 1947 Act. It went from a housing growth of two per cent a year up to 1939 and to 1.2 per cent from 1947 to today.

Call for change to current planning system

Changing the discretionary planning system that local authorities currently use, to a new rules-based, flexible zoning system would greatly improve the rate of new house building, insists the organisation.

Andrew Carter, Chief Executive, Centre for Cities said: “UK planning policy has held back the economy for nearly three quarters of a century, stifling growth and exacerbating a housing crisis that has blighted the country for decades.

“Big problems require big solutions and if the Government is to clear its backlog of unbuilt homes, it must first deliver planning reform.”

Sellers reducing property prices by around 4.5 per cent

Meanwhile, for those who do have a property and are looking to sell, be prepared to reduce the asking price by around £14,000. That’s according to property portal Zoopla’s latest report which shows sellers are cutting prices by an average of 4.5 per cent. In London and the South East of England the cut is slightly bigger – at 5.5 per cent.

The reason for this is isn’t just the cooling off of the market, but the fact there are more homes for sale. According to Zoopla most estate agents these days have around 24 properties for sale. That compares to just 15 for the same period last year. As a result, nearly half of sellers (40 per cent) have been forced to lower the price of their property in order to secure a sale.

But, considering the average property rose by just over 20 per cent during the pandemic (resulting in an average gain of more than £48,000), the current cut shouldn’t be particularly hard-going for long-term home owners.

Richard Donnell, executive director of Zoopla says he expects a ‘soft landing’ for the property market this year, with property price falls of no more than five per cent.

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Barratt Boost While Purple Bricks Up For Sale

As the latest government figures put the average property in England and Wales at £294,329, one of the UK biggest New Build companies reports a rise in reservations. 

The UK House Price Index showed an annual price rise of 9.8% in December last year (the latest figures). In England the average property is valued at £315,119. In Wales it is £222,402. In London, the figure sits at £543,099.

At the same time the one-time big online estate agency success story Purple Bricks is itself up for sale.

The biggest annual price rise is in the East Midlands, at 12. 3%. Next highest is the North West with 12.2%. Yorkshire & the Humber is third highest with an increase of 11.8%. The smallest increase was in London at just 6.7%. Both the South West and the East of England were at the bottom of the region table with increases of just 8.9% and 9.9% respectively. 

In terms of property type, semi-detached homes increased the most in value over the year, with a jump of 11.5%. Next was detached homes, jumping by 10.7%. Terraced homes were up by 10%, with the lowest annual increase for flats at 7.8 per cent.

The average price of a New Build home in England increased by just over 21% between October 2021 and 2022. That was 9% more than an existing resold property.

Barratt sees jump in New Build sales

Earlier this month UK Housebuilder Barratt optimistically announced an increase in New Build reservations. But they remained cautious for the rest of the year, they revealed, preferring to wait until the spring before making any predictions. If it remained similar to January though, it would result in up to 17,000 New Home completions this year.

The recent rise they put down to more competitive mortgage rates, a lower Bank of England base rate than expected and the news that energy costs are expected to reduce as time goes on.

The construction company reported half-year revenue of £2.8bn from June to December this year. That compared to £2.2bn for the same six-month period last year. 

‘Disrupter’ Purple Bricks up for sale

Meanwhile it was once a roaring success story, but now online estate agents Purple Bricks is seeking a buyer of it is own. The company is expected to have made a loss of up to £20m last year following restructuring in it is lettings side and a failed international expansion into Canada, the US and Australia. The difficulties were exacerbated by entrepreneur and chief executive Michael Bruce leaving last year.

No buyer has yet been found for the chain and so far, no-one has come forward to publicly express interest. The company’s shares were once worth £5, but at the moment are sitting at less than 10p.

Investor Lecram Holdings, currently owns 5% of the group. Executives there are said to be pushing for new management at the top of the ailing online sales and lettings agency. More than one quarter – 26% – of the group is owned by Axel Springer.

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Mortgage Rates Increase as Property Prices Fall – Again

Mortgage rates are set to rise further after the announcement by the Bank of England that interest rates would increase by a half a percentage point.

The rise, from 3.5 per cent to four per cent, makes the base rate the highest it’s been for 15 years – at the start of the 2008 recession. It means the average residential tracker mortgage will increase by around £50 month, or £588 a year. 

Around 715,000 households in the UK have tracker mortgages. Another 1.4 million face renewing their fixed-rate mortgage at a higher rate this year, according to the Office for National Statistics (ONS).

Inflation starting to fall as mortgages go up

Economists considered the jump in the bank’s base rate ‘inevitable’ as the Bank struggles to contain inflation here in the UK. The good news is that their strategy finally appears to be working, with October’s inflation figure of 11.1 per cent having fallen to 10.5 per cent today. The Bank’s governor says he now expected the figure to come down rapidly, not that ‘a corner had been turned.’

But inflation isn’t the only thing that’s coming down. Only yesterday, Nationwide’s figures showed that the value of the average property in the UK fell for the fifth time in a row. It dropped to £258,297 in January – 0.6 per cent lower than the previous month. 

Not surprisingly, the number of properties being sold has also dropped. Recessionary pressures and higher mortgage interest rates are the main culprits here. The fall of 9,000 approvals between November and December (46,000 and 35,000 respectively) is the lowest number of approvals recorded since 2009. The approvals figure is in line with a fall in the number of mortgage applications since the mini-budget introduced by the Liz Truss when she was PM.

Landlords to increase rents with another base rate hike

Meanwhile, a survey shows that landlords are intent on increasing rents if the Bank’s base rate gets to 4.5 per cent later this year. 

Bournemouth-based lenders Finbri canvassed 1001 landlords for their research. More than half of those interviewed – 52.7 of landlords – said they would put their rent up to match increasing mortgage costs. A further 44 per cent of landlords said an increased base rate would prompt them to consider putting their properties back on the market. They would instead, look for other sectors to invest in, such as stocks & shares, hedge funds or even cryptocurrency. 

The base rate could indeed rise to 4.5 per cent by summer this year as many analysts predict. At this moment in time though, it remains speculative.

But it’s not only higher interest rates that landlords are wrestling with – inflation is putting up prices overall, meaning maintenance costs are higher than ever before. Then there is the possibility of rent arrears and ultimately void properties as tenants fall behind with rents.

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Cash Buyers Make the Most of Property Price Cuts

It was cash buyers who made the most of the fall in property prices last month. 

The cost of the average property (which is now sitting at around £281,272, according to figures from the Halifax), was 1.5 per cent lower than in the previous month. The fall brought the rate of growth of the average property down to two per cent – a decrease for the fourth month in a row. The figure has plummeted from 12.5 per cent in June this year.

Properties selling quicker than last year

Property website On the Market showed that properties were also selling faster this month. Around 60 per cent of properties which came on the market sold within the month (30 days), they reported. That compared to just 42 per cent of properties in the previous month and 53 per cent in December 2021.

Of those properties 36 per cent were purchased without a mortgage. That’s up three per cent from the previous month. The majority of cash buyers bought property in Scotland where houses and apartments tends to be cheaper than south of the border.

Buyer interest up in January after fall in mortgage rates

Figures revealed by property portal Rightmove show a similar rise, with a 55 per cent increase in buyer interest for January. It’s also four per cent higher than January 2019 – but still around 33 per cent lower than in January 2021.

Analysts attribute the increased number of buyers to the fall in mortgage rates in December. They spiked to more than six per cent after the mini-budget but have been falling since former Sunak became prime minister and are now sitting at around 5.63 per cent.

Tim Bannister, Rightmove’s Tim Bannister said he expected to see growth and a stronger property market after the spring.

“The full effect of affordability constraints and last year’s mortgage rate rises will hold back some segments of the market in the first half of the year,” he added. “But our leading market indicators may start to identify some green shoots of growth that will go on to strengthen in the second half of 2023.”

Rightmove – which base their data on sellers’ asking prices – put the average property at £362,438 – a jump of £3,301 on the previous month. 

Annual property rise equivalent to year’s salary

Meanwhile, figures from Stripe Property Group, based on the latest Land Registry figures show that the rise in the cost of the average property over the past year was just £313 less than the average UK wage of £33,402. In other words, at a rise of £33,089, a property was almost equivalent to an average year’s wages.

Splitting the analysis down geographically is even more startling. To the extent that in the South West of England houses rose by £44,012 over the course of the year, while the average wage was just £30,653 in comparison. 

James Forrester, managing director of Stripe Property Group, said the analysis showed him that “the hurdle to homeownership is only growing larger by the day.” To help combat this, Forrester, like most analysts is calling for the government to encourage construction companies and developers to bring more homes to the market to balance the supply and demand equation. 

To stay updated with the latest news in the property world, subscribe to a free trial of Blue Bricks Magazine by clicking here. 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).

Property Prices to Fall – but Analysts Argue Over Just How Much

House prices are now just over nine times the average salary, according to the latest ONS figures. 

That’s worse than back in 1997 when the typical mortgage was 3.5 times average take home pay. Pre-pandemic the ratio was 7.9 times earnings. That was a sum that many property analysts already believed was becoming unsustainable. 

And its why house prices are predicted to fall next year – especially considering the rise in mortgage interest rates and the general cost of living means householders having to dig deeper into their pockets. 

Predicted falls range from five to 20 per cent

The question is though – just how much will property prices fall by? Predictions vary from five to 20 per cent. Estate Agents Savills expect a 10 per cent drop in house prices, while the government’s Office for Budget Responsibility predicts prices will go down by nine per cent. That’s just one per cent more than the Halifax, who predict an eight per cent fall. The lender’s House Price Index puts the average property at £285,579.

Analysts at Nationwide are slightly more optimistic, believing that, at just five per cent, the fall in house prices won’t be anywhere near as drastic. But they warn that once prices start levelling out, the market won’t pick up again for some time. The reason for this being the shrinking economy and an expected higher unemployment figure as we go further into 2023. Currently unemployment is sitting at 3.7 per cent but the lender predicts it will rise five per cent in 2023.

Estate Agents Knight Frank agree with Nationwide, by also predicting a five per cent drop in property prices. They blame higher mortgage interest rates discouraging buyers from going ahead.

Homeowners already cutting costs by four per cent

Towards the end of this year property portal Zoopla said it was common for sellers to reduce house prices by four per cent in order to secure a sale. This is reflected in a slowing of demand, with property sales on the portal down 28 per cent compared to the same time last year. 

For next year rival portal Rightmove says it expects asking prices to fall by just two per cent. And, unlike the previous fall in house prices at the start of the 2007/8 recession it doesn’t expect many repossessions. It does, however, expect property to take longer to sell – up to 60 days, instead of just over two weeks, as in the buoyant property market of 2021.

Recently moved home owners may find it galling to see the price of their new property fall by as much as 10 per cent. But the good news is that property prices remain up to 20 per cent higher than pre-lockdown back in 2020. That means people will have enough equity in their property to withstand the plummeting values. 

Private rental costs escalating

Private rental costs meanwhile, are on a completely different trajectory. These are rising at quite an alarming rate for tenants in the sector. In November the average rent went up by four per cent, for instance – that’s a record figure and one that is causing economists to warn renting is becoming unsustainable for many individuals and families.

What 2023 will bring in terms of the property market we can only wait and see. 

To stay updated with the latest news in the property world, subscribe to a free trial of Blue Bricks Magazine by clicking here. 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).

A Property ‘Shake Out’ Rather than a ‘Crash’

Kwasi Kwarteng’s ‘mini budget’ didn’t just affect the value of the pound – it also hit the property market hard, as the most recent housing statistics of that time are unveiled.

Zoopla’s House Price Index showed annual house price growth fell in October to 7.8 per cent. Quarterly growth was 0.7 per cent – its lowest since February 2020. That was just before the start of the first major pandemic lockdown. Sellers have also been accepting bids of around three per cent below their asking price.

Housing demand dropped 44 per cent in October

A drop in demand by 44 per cent compared to October 2021 also coincided with Liz Truss’s short-lived role as UK Prime Minister. Actual sales were down 28 per cent. At the time she was also confronted with escalating utility prices and a cost of living crisis. Banks and other high streets lenders responded by withdrawing hundreds of lower-rate fixed priced mortgage products. Mortgage rates also soared to more than six per cent in November. 

Zoopla’s executive director, Richard Donnell, said he believed believes rates would drop to between four to five per cent at the start of next year. In their report, the property portal referred to the fall in prices as a market ‘shake out’ rather than ‘the start of a crash.’

His predictions are backed up by HMRCs house sales figures for October. These show that, despite the cost of living crisis, homeowners are still keen to move. There were, in fact, 110,850 property transactions last month – 29 per cent more than in October the previous year. The October figure is just two per cent down on September’s numbers.

First-time buyer desperation as rents increase

Although Donnell did expect growth to stop next year and perhaps even enter a negative phase. He also expected rents to increase, leading to a boost to the number of first-time buyers looking to secure themselves a step on the property ladder.

There is 40 per cent more housing stock on the market today than this time last year. However, that number is 20 per cent less than before the start of 2020.

The good news for first-time buyers is, of course, the cuts to Stamp Duty, under the ‘mini-budget’ and which current chancellor Jeremy Hunt confirmed would remain under Sunak’s government. These are no tax on the first £250,000 of a property’s value and pay 5 per cent from £250,001. First-time buyers pay stamp duty on property valued at over £425,000. They can claim first-time buyers’ relief on properties valued at up to £625,000.

Strong rental market tempting investors

The UK rental market is particularly strong at the moment, tempting more property investors back into the buy to let sector, according to a survey by bridging finance broker Finbri. Void periods for landlords are down while yields are increasing.

At the moment the typical yield in the UK a landlord can expect is around 4.7 per cent. Some locations though are expected to fare better than others. These include busy cities, such as Aberdeen, Liverpool, Reading and Bolton.

To stay updated with the latest news in the property world, subscribe to a free trial of Blue Bricks Magazine by clicking here. 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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