“Balanced” market sees slight increase in property values
April saw a 0.5% rise in house prices, according to Nationwide, following seven months of consecutive falls.
Property values fell over the year by -2.7%, with the average property price reaching £260,441, signalling an improvement from March, where annual house price growth was -3.1%.
Robert Gardner, Nationwide’s Chief Economist, described the market as showing “tentative signs of a recovery”, and stated that “people’s views of their own financial position over the next twelve months, and general economic conditions in the year ahead, have both improved markedly in recent months”, which could support a “modest recovery in housing market activity.”
But any upturn is likely to remain fairly pedestrian, as it will take time for household finances to recover, since average earnings have been failing to keep pace with inflation, and by a wide margin over the last few years.
Robert Gardner, Chief Economist, Nationwide
Mortgage interest rates are also likely to act as a headwind.
Meanwhile, Zoopla’s house price index for May 2023 described the UK housing market as “more balanced than it has been for years”, with buyer demand and sale numbers recovering amidst a slowdown in house price growth.
Claiming that “the worst of the month-on-month price falls are now behind us”, the property website revealed that annual house price growth had slowed from 4.1% last month to 3.0% this month.
Zoopla reported that buyer demand is 14% higher than 2019, but -42% down on last year.
Barratt also reported an improved sales rate during the period from 01 January to 23 April 2023, revealing in a trading statement that net private reservations per outlet per week reached 0.65, bouncing back from the low of 0.30 in Q4 2022.
The volume developer stated that it was on track for predicted full-year completions of between 16,500 and 17,000 homes this year; a slight fall on the 17,908 completions achieved in 2022.
It also expects full-year adjusted pre-tax profit to be around £876.8m, in line with expectations.
In February we reported early signs of recovery in our reservation rates following the exceptionally challenging trading conditions experienced at the end of 2022.
David Thomas, Chief Executive, Barratt Developments
Whilst the economic backdrop remains difficult, we are pleased that more positive sales rates have been maintained through this period and we are now fully forward sold for FY23.
Industry forecast downgraded as new home registrations fall
The Construction Products Association have sharply downgraded their forecast for construction output in 2023 to -6.4%, from a previously projected -4.7%.
Private housing new build is forecast to be one of the sectors most impacted by falling household incomes and increased interest rates, with a -17.0% fall in output forecast for 2023.
An “absence of stimulus for homebuying in the Budget” is also to blame, with recovery forecast to begin in 2024.
This was reflected in the latest S&P Global / CIPS UK Construction Purchasing Managers’ Index, which showed the fifth consecutive monthly decline in housebuilding activity, despite overall construction output rising.
Output in April declined at its sharpest rate since the pandemic, falling from 44.2 in March to 43. An output below 50 reflects market contraction.
Meanwhile, the National House Building Council (NHBC) have reported that new home registrations fell -40.0% in the first quarter of 2023 against the same period in 2022, with those for the private sector seeing the greatest decline at -49.0%.
The number of new homes registered to be built in the UK totalled 27,673 in Q1, with 17,953 of those for the private sector, with some schemes originally earmarked for private sale being block sold to housing associations and other providers.
The number of terraced homes and apartments accounted for a larger proportion of the market in the first quarter of 2023 than the same period last year, with the number of detached homes being built halving when compared to Q1 2022.
This marks a shift from the pandemic – where buyers sought space – back to affordable homes, as pressure on family budgets increases.
However, there were signs of market recovery, with new home registrations in March 2023 reaching 11,928 against 8,005 in January and 7,740 in February.
Labour pledge to bring back mandatory housing targets
Labour leader Sir Kier Starmer has said that his party will restore mandatory housing targets of 300,000 new homes a year, amidst rumours that Sunak will bring back Help to Buy later this year.
In a series of statements leading up to local elections this week, Starmer said that he wanted Labour to become “the party of home ownership”, handing more power to local authorities.
Meanwhile, Housing Secretary Michael Gove has published the draft regulations which will establish its Responsible Actors Scheme (RAS) through the Building Safety Act.
Eligible developers must join the RAS if they wish to continue major developments in England. Companies which have annual profits exceeding £10m must join, as well as being required to sign up to the Government’s building safety pledge.
Avant Homes became the latest housebuilder to sign the pledge this week, leaving just three developers – Abbey Developments, Dandara and Rydon Homes – yet to sign.
L&G to “reduce activity” at modular factory, as Cala buys timber frame firm
Legal and General is to stop new production at its modular housing factory in Yorkshire whilst it considers the future of the division.
The firm stated that planning delays and the impact of Covid were key factors in preventing it from securing the pipeline needed to “make the current model work”, and is now entering into consultation with all employees of Legal and General Modular Homes.
Meanwhile, Cala Group – owned by Legal and General – has announced the acquisition of timber frame firm Taylor Lane, in a move designed to boost production to 1,500 units annually over the next five years.
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