Jeremy Leaf, north London estate agent and a former chairman of the Royal Institution of Chartered Surveyors, said the housing market is still “playing catch-up” as the increase in new enquiries emboldens sellers to not only make their properties available, but chance their arm at higher asking figures.
He added: “The prospect of more stable or even falling mortgage rates is certainly helping to improve confidence generally.
“However, the uplift in supply has meant more choice, so the market remains price sensitive and buyers are negotiating hard – particularly those who require little or no finance.”
Rates peaked in July 2023, reaching 6.86pc, but have since fallen. The average two-year fix sits at around 5.83pc, while the average five-year fix is more like 5.40pc according to data firm Moneyfacts.
But in more recent times, mortgages have begun to edge up again as higher-than-expected inflation figures cast doubt over the likelihood the Bank of England will cut interest rates before the summer.
Tom Bill, head of UK residential research at Knight Frank, said changing economic predictions mean buyers and sellers “have faced mixed messages” this year, which may mean asking prices aren’t achieved.
He said: “While rising asking prices show seller expectations have improved, there is broader downwards pressure on prices as mortgage rates edge higher, supply increases and a wave of people roll off sub-2pc fixed-rate mortgages agreed in early 2022.
“The result is more friction around prices, particularly when a rate cut seems to move further into the distance with every release of economic data. That said, higher supply means there should be a recognisable spring bounce in the housing market.”
Nick Mendes, of mortgage brokerage John Charcol, said he had noticed a “slow down” of activity in recent weeks as mortgage rates stagnate and some buyers wait eagerly for a Bank Rate reduction.
He added: “We did see a lot of people entering the market earlier on in the year to beat the summer rush. Some house prices were reflecting the highs we saw just a few years ago.
“Some people will have stretched themselves, now unable to renew their rate in the current market and trying to downsize without losing on their property value.
“Always take asking prices with a pinch of salt; look at Land Registry prices for what [properties] were actually sold for.”
This challenge has become more apparent in recent years after the Brexit vote and the pandemic, when investors withdrew their money over fears of a property crash.
By comparison, closed-ended funds such as real estate investment trusts (Reits) do not suffer from a liquidity mismatch, as they have a fixed pool of capital that is not affected by investors buying and selling.
In terms of funds to buy, Ms Admans recommended CT TR Property Trust which is mainly invested in listed property shares, with physical property accounting for a maximum of 15pc of the portfolio.
The geographic split is 25pc to 50pc UK, with the remainder in Europe. It is currently trading at a discount of 7pc to net asset value.
“The manager, Marcus Phayre-Mudge, has deep sector experience and has built up a strong track record of generating income using a differentiated approach to property investing,” Ms Admans added.
John Moore, of wealth manager RBC Brewin Dolphin, recommended PRS Reit which invests in new-build family homes for the private rental market.
“Even though it is one of the scale players in the sector, it only manages 5,000 units, which is a drop in the ocean of [the Government’s] 300,000 per year new homes target – so there is huge room for growth,” he said.
“Yet the share price has not reflected any of that – it trades at a substantial discount to net asset value and offers a yield of more than 4.5pc.”
In addition, Ms Admans tipped Finsbury Global Property and Schroder Global Cities Real Estate. Both are open-ended funds, however they invest in Reits and listed property companies, removing the liquidity risk.
Shares in property companies
There is a chronic shortage of housing in the UK, and it could be wise to invest in companies that are working to address this issue.
Vistry and Persimmon are among the housebuilders who stand to benefit from the pledge to build more housing. Mr Moore said: “There has been a lot of movement in Vistry’s share price since interest rates picked up – even by the sector’s standards.
“But it should be in line to benefit as greater efforts are made to reform the planning system and provide more affordable housing, while offering a yield of nearly 6pc in the meantime.”
Labour will make Britain's housing market more unaffordable than ever
In fairness, Sir Keir grasps that there is a problem with the UK’s hopelessly inadequate rates of house building, and he might even mean it when he talks about relaxing planning restrictions.
The catch is that everything else his party is committed to will keep on driving prices up. First, a Labour government has failed to convince that it will bring down net migration levels. These reached 745,000 in 2022, and places significant pressure on the housing market.
It is hard to see how “safe and legal” routes for asylum seekers can do anything other than make the UK a more attractive destination for anyone fleeing persecution, or, as is too often the case, simply looking for better opportunities in a richer country. Concerns have also been raised about a returns deal with the EU which would involve the acceptance of migrant quotas from the EU in return.
It has kept quiet on student visas, perhaps because academia forms part of its core vote, whilst universities are now too dependent on the foreign applicant gravy train.
There can be little doubt, too, that it will support importing more foreign workers as it throws yet more cash at the health service, and if employers say they need more people then its ministers will instinctively give in. After all, this was the party that started ramping up immigration levels in the early 2000s.
Add it all up, and there is little chance of Labour cutting the number of annual net arrivals, and it would hardly be a great surprise if the figure went above 1 million. In 2022, only 178,000 new houses were completed. Starmer has promised to build 300,000 – still far short of what is necessary.
Next, it might tweak the planning rules, and even ease the restrictions on the green belt, given that very few of its voters live in the leafy suburbs that will be most impacted. But its ideological commitment to net zero targets could mean that it makes little practical difference.
You can’t build new estates when there is no electricity, or when there are not enough reservoirs. Developers will be tied up in red tape – consider, for instance, how Labour failed to support the Government in its plans to scrap nutrient neutrality rules. Yet the Home Builders Federation has estimated this environmental red tape has stopped at least 150,000 homes from being built.
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