Quarterly housing tracker Q1 2024
23 May 2024
As we edged into spring, green shoots appeared across the housing market, despite the backdrop of a technical recession.
Fuelled by improving mortgage rates, the good start to the year has seen approvals outperform expectations and put the recovery for the housing market in full motion.
House prices head north
Across the regions we have seen prices stabilise, on average the UK house price rose by less than 0.5% to £263,541. This leaves it around 5% down over the last 18 months, with the post pandemic peak in Q3 2022 reporting values in excess of £275k and 2023 averages of £285k.
2023 saw house prices across the UK decrease in the 12 months to December by 1.2%. The start of 2024 has seen house prices rise, with prices in March up by 1.6% compared to a year ago. The North of England has seen the largest growth, with the North, North West and Yorkshire & Humberside all witnessing price increases of between 1.4% and 2%
The RICS survey reported positive sentiment in new buyer enquiries and new instructions turned positive in January 2024, the first time both had been had seen an uptick for two years.
In the 12 months to February 2024 the ONS estimated the average UK private rent price had increased by 9%, the highest increase since the measure began. Landlords continue to face cost pressures with rising mortgages and costs to make improvements to properties. Some have exited the market as a consequence, resulting in a dilution of stock and pushing up rents further.
Some of the major cities may be nearing their rent ceiling, coupled with a stock shortage of affordable housing this continues to put strain on the system for housing. In Scotland, the Housing Bill was published, headlined with long term rent controls. As a result the private rental stock has fallen by 2%, with the legislation being cited as a contributing factor by landlords.
Recent primary research from RSM, surveying property experts ranked residential / PRS as the top asset class for investors, senior living is also attractive and the trend of more of that generation renting will continue.
Optimism dampened by viability constraints
New home completions were down 12% on 2023 compared to the prior year. Mortgage affordability, energy and build costs, contributed to a slower market. National housebuilders continue to grapple with when the right time to put the foot back on the gas will be. With affordable housing shortages in a dire position, investment funds have seen opportunity for investment to stimulate the market and secure longer term higher rates of return.
| Company | Completion Builds (Latest YE) | Previous Completion Builds (2022) |
Percentage change |
| Barratt Developments | 17,206 |
17,908 |
-3.9% |
| Vistry Group | 16,118 | 17,038 | -5.4% |
| Bellway | 10,945 | 11,198 | -2.3% |
| Taylor Wimpey | 10,848 |
14,154 | -26.4% |
| Persimmon | 9,922 | 14,868 | -33% |
| Redrow Group | 5,436 | 5,715 | -5% |
| Keepmoat Homes | 4,074 |
3,776 | +7.9% |
| Berkeley Group | 4,043 |
3,760 | +7.5% |
| Miller Homes | 3,585 |
3,970 | -10% |
| Cala Group | 2,917 | 3,027 | -3.6% |
| Crest Nicholson | 2,020 | 2,734 | -26.1% |
Source: Company Investors releases.
A broken planning system
The industry continues to fight a planning system that is not fit for purpose. Housing targets, land availability and local political environments continue to create unnecessary barriers for the housing market. With many of the National Housebuilders announcing an increase planned in volume of units, the systems needs investment to simplify and speed up the approval process.
Across the regions, there are over 80,000 housing units in the planning system, 27% of these are at approval stage however this is a fraction of what is need to meet housing shortages.
Biodiversity Net Gain (BNG) regulation came into effect this year. All new development projects will have to ensure they generate an increase of at least 10% in biodiveristy, further putting environmental concerns at the forefront of planning. It adds an extra layer of complexity and cost and will have a fundamental effect on the way new developments are approached. Other building requirements introduced through the Building Safety Act have challenged the design and financial model of some higher rise residential schemes.
Partnership model emerges at scale in affordable housing
There has been a shift in focus in the market emerging with an increase in partnership models focussing on the affordable housing. 30% of housing developments in planning in the UK are within the social housing sector. National housebuilder Vistry announced the business will solely focus on mixed-tenure affordable housing, partering on joint ventures with public sector businesses, housing associations and other private businesses. The supply demand imbalance and need for affordable housing across the UK being a key driver behind that decision. The model is attracting private capital, institutions and pensions funds are investing in affordable housing schemes, the demand assures return and it represents a socially responsible investment.
Pent up mortgage demand
We have seen fluctuation across lending rates within the quarter. The improving sentiment and prospect of base rate cuts was seen as financial markets cut rates in January. Some mortgage products tipped below 4% briefly with widespread cuts across the market, yet these products creeped back up by mid-March. Comparing the data to the previous quarter there was a 0.5-0.9% reduction across two and five year fixed products.
The rate cut seen at the start of the year together with the pent up demand saw mortgage approvals increase sharply. Bank of England (BoE) data highlighted that approvals in February hit their highest levels in 17 months. A 99% mortgage product was also launched. However affordability remains testing for first time buyers, cash buyers remain best placed.
Overall with positive signs and momentum building, attention is firmly turning to the first base rate cut, RSM’s economic experts expect the first cut to take place at the Monetary Policy Committee meeting in June, with a further two cuts, leaving leaving rates at 4.5%, though the risk is that the first rate cut doesn’t come until later in the summer.
RSM’s 2024 housing market predictions
- House prices will stabilise across the UK, with a small fall of 2% anticipated in 2024.
- With wage growth hitting a high of 7% at the close of 2023, we predict it will settle at around 4-5% by the end of 2024.
- We expect the BoE to reduce interest rates during the summer months with rates falling to stabilise at 4.5% by the end of 2024.
- Cash investors are poised and will enter the market as it bottoms out early to mid-2025.
- Significant investment in enhanced technology and the use of generative AI to create better project efficiency and margins.
