While the halcyon days of near-zero interest rates are long gone, the IMF expects Bank Rate to fall in the coming years. This could make mortgages more affordable, while an end to the cost of living crisis and a significant pickup in economic activity may further boost demand for new homes.
In terms of supply, the UK continues to struggle to build enough new homes to accommodate a growing population. England’s is forecast to rise by roughly 220,000 people per year over the next decade.
While not every individual will require a home, only 150,000 new homes were built per year, on average, over the past decade. This suggests the issue of undersupply is unlikely to be solved – even with changes to planning laws that have been mooted for years.
Indeed, the industry’s concentrated structure and the vast land banks of major housebuilders, alongside substantial barriers to entry, mean incumbents enjoy a strong position.
While Barratt’s shares could fall further in the short run after declining by 40pc since first being tipped by Questor in January 2020, they have significant long-term potential. Investors who can cope with short‑term uncertainty are likely to be highly rewarded in the next boom.
Questor says: buy
Share price at close: 436.8p
Update: Polarean While Barratt has the financial strength to overcome temporary market difficulties, medical device company Polarean last week warned investors about its financial position.
Its half-year results stated that “it is anticipated that additional capital will need to be raised by the end of the second quarter of 2024… to fund the group’s activities at their planned levels beyond this date”.
Given a lack of certainty in its future existence, Questor recommends that readers sell the stock. Its 88pc share price decline since first being tipped by this column in June 2021 is hugely disappointing. However, its risk-to-reward ratio is highly unfavourable.
Read the latest Questor column on telegraph.co.uk every Tuesday, Wednesday, Thursday and Friday from 6am
Read Questor’s rules of investment before you follow our tips
Builders have to submit far more supporting evidence because increased public scrutiny of planning applications has driven a surge in the use of case law in planning decisions.
Mr Brocklehurst said: “There was an unwritten social contract that used to occur between the generations, that we know we have to build housing for future generations.
“Up until the early 80s there was an acceptance of new house building. But that social contract seems to have slowly unwound and now people seem to be less willing to accept development near them.”
House price growth, which has far outstripped wage growth, has been key, Mr Brocklehurst added.
“Everybody is starting to view their house as a financial asset, as well as a place to bring up their family, and when people see it as a store of wealth, they get very concerned about anything that they imagine might reduce that,” Mr Brocklehurst said. “It has been a slow creep over 30 years, with an increased regulatory burden and changing social views.”
Edward Clarke, of Lichfields, said: “Every possible development that could affect anybody starts to get questioned much more when you’re in an atmosphere that is heavily politicised, not just between political parties but in local areas.
“Local authorities say everything has to be absolutely bulletproof before we take anything forward, just in case somebody brings up some vaguely relevant case law.”
Aneisha Beveridge, head of research at Hamptons, said price falls in 2023 are expected to be followed by a slow recovery as households adjust to higher rates.
She said: “This will be more akin to the ‘U-shaped’ downturn of the early 1990s than the ‘V-shaped’ crash and subsequent speedy recovery in 2008.
“On paper, the house price falls we forecast are minor in nominal terms. But high inflation for other goods and services means that in real terms, the average price of a home will have fallen around 11 per cent between 2022 and 2024.
“This essentially reflects the correction caused by higher rates. It’s also why we expect prices to rise again in both real and nominal terms from 2025 as rates fall to their new normal and a new housing cycle begins.”
Strong in recent years
In the North East of England, Hamptons is expecting relatively strong house price growth of 8.5 per cent by the end of 2026, while in Wales, house price growth is predicted to stall overall, at 0.0 per cent.
Researchers explained that house price growth in Wales has already been relatively strong in recent years, while in the North East it has been slower compared with some other regions. Housing affordability there is also less stretched than in some areas, allowing capacity for further house price rises.
Hamptons used Office for National Statistics and Bank of England data for its forecasts.
Investors are currently betting that rate-setters will increase the base rate again at their next meeting on September 21, from the current 5.25pc to 5.5pc.
They are split, however, on whether further hikes will come after that, with some predicting they could peak at 5.75pc by the end of 2023 and others predicting they could reach as much as 6.5pc.
Rising rates have pushed up mortgage rates for borrowers, forcing them to shoulder much higher monthly repayments when negotiating new deals with banks.
Aneisha Beveridge, head of research at Hamptons, said: “There’s a strong argument that the Bank of England’s quest to quell inflation has hit the rental sector harder than any other part of the housing market.
“A build-up of long-term supply issues combined with soaring landlord costs is putting upward pressure on rents.
“And it’s hard to see any of these pressures receding any time soon, which is why we expect rents to continue rising over the next few years.”
However, the research said the impact of rising rates so far seemed to be much more pronounced on rents than on house prices.
The estate agent is predicting a 2.5pc fall in house prices this year, followed by no change in 2024, 3pc growth in 2025 and 5pc growth in 2026.
‘On an individual basis, people may have overspent’
Yet those who work within the knotweed removal industry are adamant it is not one where chancers looking for a quick buck would have much luck.
This is predominantly because of the long-term liability removal companies have to take on, which can last up to 10 years.
Steve Livens, of the Property Care Association, got involved with the market 12 years ago. He describes it as “mature” and “highly competitive” with a large number of firms which bid for work on a daily basis.
Mr Livens said: “We’re not talking about playing around in a pick up truck and spraying some glyphosate around. These companies aren’t going bust. The market is not a profiteering Wild West.
“No other country I’m aware of in the world has taken a pernicious plant like this and got it under control without primary legislation. It’s a triumph that taxpayers have not had to pay for this weed which has run riot. We don’t have an exponential growth curve of this weed like we did 10 years ago.”
The PCA oversees some 110 firms responsible for removing knotweed. The trade body got involved in an effort to assure mortgage lenders that the firms removing the weed were credible, and to start lending again on homes affected by the weed.
In response to Ms Cadoret’s near six-figure quote, Mr Livens said he “recoils a little bit at these numbers” and “can’t believe that was just excavation and removal of contamination of soil”.
He added: “On an individual basis, people may have overspent.”
But he also pointed out that whether it was necessary or not, removal is an option and that clients are almost always presented with multiple options.
“Herbicide treatment takes a long time. It’s not quick. Removal, on the other hand, is.”
Mr Livens blames articles written about the plant in recent decades for why so many homeowners confronted with the plant feel as though their only option is removal.
He said: “Go back 10 years, and journalists were claiming it made your house fall down. This was far more responsible for what we see now than the industry.
“Knotweed is a dormant plant. While in many areas it should not be downplayed, in many other areas it should.”