By Daniel Hickey, Managing Director
In the past few years, there’s been more than enough to report on when it comes to economics and politics in the UK, and 2024 looks to be no different.
Economics
Whilst the year started with positive news on interest rates, largely due to the many lenders becoming competitive in their terms, the recent announcement that the UK is now in recession potentially signals a slow down to the early spring market. However, the reality is that the property industry is far from doom and gloom.
Property portal Rightmove started the year by announcing that house prices saw the biggest January rise since 2020, and that the number of new properties coming to the market for sale was 15% higher than the year before, a statistic mirrored by the increase in demand also. The average asking price rose nationally by 1.3%, and whilst prices are usually inflated in the new year, it’s suggested that even once levelled out, these should only be 1% lower by the end of the year, rallied by the underlying buyer demand.
In terms of properties coming to the market, Rightmove reported valuation requests were 23% higher than 2023, one factor being the more stable mortgage market, encouraging confidence in moving decisions. This has continued into February thanks to interest rates being held at 5.25%, the fourth consecutive month of the Bank of England holding the Base Rate following 14 consecutive rises. The Bank of England meets about every six weeks to determine whether interest rates should change, the next decision being announced on 21st March which currently analysts are proposing will stay the same, or potentially drop, however given the recent announcement of the recession, this could change.
The prevailing expectation is for interest rates to remain stable throughout 2024 before starting to decrease. During this period, it is anticipated that fixed-rate mortgage products will gradually incorporate these reductions.
However, pinpointing the exact timing of more substantial drops in mortgage rates proves challenging due to their dependence on various factors. These include the trajectory of inflation, the decline in swap rates, and the absence of unforeseen economic factors.
Politics
2024 was always going to be a turbulent year for politics with the general election taking place by 25th January 2025. Whilst there was initially speculation that Rishi Sunak would combine this with the local elections in May 2024, he’s since suggested that he would call the election in the later part of the year. With the US election in November, it’s unlikely to clash, suggesting October for a likely scenario. However, until this is confirmed, speculation is rife and continues to create uncertainty in the political sphere.
Both Labour and the Conservative party have vowed to overcome the challenges in the housing market should they be elected. Both parties have outlined their visions for new home development in their election manifestos.
Labour has promised 1.5million new homes over the course of the parliament, to include more social and affordable housing. If elected, Kier Starmer promises first-time buyers first choice on new homes in their areas, and a government-backed mortgage guarantee scheme, reform planning to boost the supply of new homes and a planning passport for urban brownfield development.
The Conservatives’ primary housing focus remains on achieving their target of 300,000 new homes annually. This commitment was outlined in their 2019 general election manifesto, where they allowed for some flexibility by specifying that the target of 300,000 homes per year would be met by the mid-2020s.
Since 2019, the government has yet to fulfil its 300,000 target. Instead, they have maintained an average of around 230,000, with approximately 233,000 new homes supplied in 2021/22.
Like Labour, the Conservatives are committed to safeguarding the green belt and endorsing the development of Brownfield sites.
Whilst these are ambitious targets, the continued pressure of the relaxation of planning regulations surrounding Brownfield development may create a surge of opportunity in that area of the new build market, resolving the need for sustainable urban planning and affordable housing.
Barratt and Redrow
The recent merger of Barratt and Redrow has prompted speculation about the underlying market challenges that may have motivated this strategic move. Market dynamics, coupled with the economic downturn, may have necessitated a consolidation of resources to weather the storm. Such mergers often seek to achieve economies of scale, streamline operations, and enhance resilience in the face of economic uncertainties.
For PLS Solicitors, and others in the industry, the Barratt and Redrow merger signals a shift in the competitive landscape. The combined entity’s enhanced capabilities may translate to improved efficiency and innovation, but it also prompts us to stay vigilant and adaptive to emerging market trends.
As we look ahead to what 2024 might have in store for the property industry, the current recession, the upcoming general election, and the Barratt and Redrow merger collectively underscore the ever-changing and unpredictable nature of the marketplace. As we navigate these challenges and opportunities, our focus remains on providing reliable, efficient, and adaptable conveyancing services to our clients, ensuring a smooth journey through the ever-evolving landscape of property transactions.
Sources:
https://www.rightmove.co.uk/news/articles/property-news/house-prices-rise-jan-hpi-2024/
https://www.rightmove.co.uk/news/articles/property-news/home-valuations-hit-new-record/
