uk-housing

UK Housing

London Development and BTR Report - Autumn 2024

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<p>The Central London Development and BTR Report tracks development activity across London, including new targets for residential development, new homes sales and the performance of the Build to Rent sector.</p>

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<p>The JLL Big Six Residential Development Report compares activity, prices, and rents across six UK cities outside London: Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester. This report incorporates data from the JLL UK Cities index, comparing
    changes in prices and rents across mainstream and prime developments in each city.</p><p>In the sales market, higher rates, both interest and mortgage, have continued to put pressure on both development viability and buyers&rsquo; budgets. We are beginning to see this reflected in annual price growth across the Big Six cities, with growth
    across the cities remaining flat or marginal over the past year.</p><p>The rental market across the Big Six cities has remained robust, albeit growth has cooled significantly from double digit highs in H1 2023. There is continued demand for city centre living, particularly from young professionals seeking the lifestyle benefits
    and vibrancy of being centrally located.</p><p>Prime markets across the Big Six have generally outperformed both the mainstream sales and rental markets, with new prime stock continuing to push quality and amenity provision.</p><p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1725291585/resi/gb/Articles/PDFs/Big_Six_Residential_Development_Report_-_H1_2024.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Click here to read more</button></a></p>

Big Six Residential Development Report - Summer 2024

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Big Six Residential Development Report

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<p><strong></strong>The rental market across the Big Six continues to experience stock scarcity. Although the disparity between supply and demand eased at the year end. This meant growth fell back from the double-digit highs recorded earlier 2023, with rents
    across new developments in the Big Six rising 8.8% in the year to December 2023. </p><p>Despite higher mortgage rates, demand for homes across the Big Six remained robust in the second half of 2023. But higher debt and living costs meant budgets were squeezed, resulting in annual growth in prices slowing to 2.8% in the year to December.
    Edinburgh and Glasgow recorded the highest annual growth of the Big Six, at more than double that of the other four English cities.</p><p>In most cities the prime new build market has outperformed, reflecting a flight to quality and continued appetite for highly amenitised, high spec new homes in central locations.</p><p>In the build-to-rent sector Birmingham and Manchester still dominate, with the highest number of operational units. But Scotland&rsquo;s major cities are expected to see the most significant proportional increase in stock. Edinburgh has the largest pipeline
    relative to operational stock at 4.9x, followed closely by Glasgow at 4.8x.</p><p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1709041507/resi/gb/Articles/PDFs/JLL_Residential_Big_Six_Report_Winter_23_24.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Click here to read more</button></a></p>

Big Six Residential Development Report – Winter 2023/2024

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The JLL Big Six Residential Development Report tracks the new homes sales, lettings and build-to-rent markets in Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester.

<p>The JLL Big Six Residential Development Report tracks the new homes sales, lettings and build-to-rent markets in Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester.</p>

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<p>Mortgage rates in the UK are constantly changing, it can be hard to know where to start and what to do. Rising interest rates and inflation is making it harder to borrow money, by following this guidance you can put yourself in the best position when buying a new home.</p><ol><li>Get pre-approved for a mortgage before you start looking for homes. By doing this, you can gain an idea of how much you can borrow and therefore what homes you are able to afford.&nbsp;</li><li>Be prepared to move quickly. In the current market, particularly for new build homes, the process moves very quickly so you should come prepared beforehand so as not to lose out on the opportunity.</li><li>Be aware of changing interest rates. These play a pivotal role in the mortgage market by influencing borrowing costs and affordability.&nbsp;</li><li>Determine what type of mortgage is right to you e.g. fixed rate mortgage, and compare their rates with different brokers.&nbsp;</li><li>Stay informed on home buying schemes through our First Time Buyer Website. The government and independent homebuilders and Housing Associations are launching new and innovative solutions to help First Time Buyers onto the property ladder.</li><li>JLL can also help connect you to our in-house expert mortgage adviser, offering fast and reliable help.</li></ol><p>&nbsp;</p><div><p><strong><em>Key Terminology:&nbsp;</em></strong></p><p></p></div><div><p><span style="text-decoration:underline;">What is a mortgage?</span></p><p>A loan used to purchase or maintain a property, secured against the property itself. It is an agreement between the purchaser and the lender, typically a bank.</p></div><div><span style="text-decoration:underline;"><br /></span></div><div><p><span style="text-decoration:underline;">What is an interest rate?</span></p><p>The amount you are charged for borrowing money, usually a percentage of the total amount of the loan. An interest rate that a lender charges on the mortgage amount you borrow is known as a mortgage rate.</p></div>

Beginners Guide to Navigating Mortgage and Interest Rates

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Mortgage rates in the UK are constantly changing, it can be hard to know where to start and what to do. Rising interest rates and inflation is making it harder to borrow money, by following this guidance you can put yourself in the best position when buying a new home.

Mortgage rates in the UK are constantly changing, it can be hard to know where to start and what to do. 

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<p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1692190699/resi/gb/Articles/PDFs/Big_6_Report.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p><p><strong></strong>This report incorporates data from the JLL UK Cities index, comparing changes in prices and rents across mainstream and prime developments in each city.</p><p>There have been some obvious challenges facing the housing market over the past year. Higher rates, tightening household budgets and weaker overall market sentiment are all impacting prices and activity. Although we have seen the rate of growth in prices
    slow, city centre markets are proving resilient, supported by strong demand from students and young professionals. </p><p>In the rental market, severe lack of available rental supply is driving rents. The Big Six cities recorded average annual rental growth of 14.3% in the year to June 2023.</p><p>The increases in rents across the Big Six clearly demonstrates not only the demand for city centre living but also the need for more homes. This is not exclusive to the rental market, with a requirement for more homes of all tenures needed to address
    demand.</p><p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1692190699/resi/gb/Articles/PDFs/Big_6_Report.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p>

Big Six Residential Development Report, Summer 2023

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The JLL Big Six Residential Report compares activity, prices, and rents across Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester

The JLL Big Six Residential Report compares activity, prices, and rents across six UK cities outside London: Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.

<strong>The JLL Big Six Residential Report compares activity, prices, and rents across six UK cities outside London: Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.</strong>

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<div class="row">
    <h2><strong style="background-color:initial;font-size:inherit;text-align:inherit;text-transform:inherit;word-spacing:normal;caret-color:auto;white-space:inherit;">Q2 2023 Sales Index</strong><br /></h2>
</div>
<p><strong></strong>The JLL Prime Central London Index saw prices fall for the third consecutive quarter.&nbsp; The Q2 2023 index recorded a quarterly fall of 2.1%, with prices 5.9% down compared with the same period in 2022. Prices are now 6.8% lower than
    they were when prices peaked in the third quarter last year.&nbsp; </p>
<p>The upper echelons of London&rsquo;s prime market are proving more resilient. With prices down 0.8% in the 12 months to June 2023 compared with a 6.7% fall in homes priced at under &pound;2 million (likely to be most impacted by changes in interest rates).
</p>
<p>Despite sentiment impacting prices we saw deals agreed (exchanges) increase in an admittedly slow Q1 this quarter, with a 28% increase in sales in Q2 2023.&nbsp; With volumes on par with Q2 2022 (down -1.2%). </p>
<p>Stock levels rose in Q2, with 8.3% more properties on the market than in Q2 2022 and 9.7% more than at the end of the first quarter this year. Stock on the market is now at the highest level since the end of Q2 2020. </p>
<h2><strong>Q2 2023 Lettings Index</strong></h2>
<p><strong></strong>The uncertainty which is hampering activity in the sales market often has the opposite effect on lettings. With households more likely to stay in rented for longer or choosing to rent when delaying their decision to buy. Just over half
    (51%) of JLL deals agreed in Q2 2023 were renewals, up from 45% a year ago and 24% in Q2 2021. This was the highest rate of renewal since Q2 2020. </p>
<p>The number of new lets rose this quarter compared with last, up 13%.&nbsp; But the second quarter is usually more active than the first. Comparing new lets agreed (excluding renewals) in the second quarter this year with Q2 last year showing there were
    18% fewer deals agreed, with the number agreed down 35% compared with the Q2 five-year average.</p>
<p>This quarter the JLL Prime Central London Index saw rents rise by 1.9%, with rents 5.4% higher than they were at the same point a year ago. Small flats (1 and 2 beds) saw this highest annual increase in rents at 6.7% whereas more expensive properties
    (&pound;3,000 per week or more) saw a more modest 2.9% annual increase. </p>
<p>Rents are now 26% higher for one-bedroom flats (which have seen the highest growth) than they were three years ago at the end of Q2 2020. With the JLL Prime Central London Rental Index 19.2% higher overall over the last three years.</p>
<p>For prospective tenants having to contend with low stock levels there appears to be some respite as we move into the summer. Stock levels are starting to increase, albeit off a low base. With the number of rental properties listed to let at the end of
    Q2 2023 up 13.8% on the same point in 2022. But volumes remain 55% down on levels we were seeing pre-pandemic in Q2 2019. </p>
<h2>All Source: JLL/ LonRes</h2>
<p><strong>Our JLL Prime Central London Index is based on a &lsquo;basket&rsquo; of properties, valued by JLL at the end of each quarter. </strong></p>
<p><strong>Director of UK Residential Research at JLL, Marcus Dixon, explains: </strong></p>
<p><em>&ldquo;The implications of stubborn inflation on the UK mortgage market are hampering activity in prime central London. While fewer buyers are heavily indebted - almost half buy cash - uncertainty surrounding the short-term outlook is impacting prices. </em><em></em></p>
<p><em>&ldquo;The lettings market remains competitive, stock levels have improved on their 2022 lows but there are still more prospective tenants than there are properties. This has resulted in further rent increases this quarter, with rents almost 20% higher than they were in 2020.</em><em></em></p>
<p><em>&ldquo;The lower end of the rental market continues to see a steady stream of (formerly) prospective buyers moving across into lettings. With smaller properties, mainly one- and two-bedroom flats, recording the highest annual increase in rents, while prices for similar properties are seeing more significant falls than homes in more expensive price bands.&rdquo;</em></p>

JLL – Prime Central London (PCL) Index – Q2 2023

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The recent rise in interest rates does not impact all sectors of the housing market equally.&nbsp; With more than half of all owner-occupied homes having no mortgage secured against them and cash purchase, particularly in higher value prime markets, making up a significant proportion of homes sold.

The recent rise in interest rates does not impact all sectors of the housing market equally.

Prime Central London (PCL) Index – Q2 2023

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JLL Tenants Survey 2023

Our 2023 Tenant Survey Report shines a spotlight on&nbsp;what tenants are looking for in a home - and how that&nbsp;could change in the future.

Our 2023 Tenant Survey Report shines a spotlight on what tenants are looking for in a home - and how that could change in the future.

Our 2023 Tenant Survey Report shines a spotlight on&nbsp;what tenants are looking for in a home - and how that&nbsp;could change in the future.<div><span style="color:#333333;"><br /></span></div>

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<p>The Renters (Reform) Bill was introduced to parliament on 17th May 2023. It follows the 2022 private rented sector white paper, which outlined the government&rsquo;s aspirations for the future of privately rented homes. The bill aims to deliver on the
    government&rsquo;s plan to &ldquo;bring in a better deal for renters&rdquo;, which includes the ending of &lsquo;no fault&rsquo; evictions. These changes of course have implications for landlords too, but the bill aims to allay some of their concerns
    by strengthening Section 8 powers under which landlords can recover their properties.</p><p>Further regulation includes proposals for a new property portal and rental redress scheme, which aim to make it easier for landlords and tenants to resolve issues and for councils to track and penalise rogue landlords. For landlords, increased use of
    Section 8 could also make it easier to identify tenants with a history of rent arrears and antisocial behaviour, aiding the tenant referencing process and mitigating risk for those taking on new tenants.</p><p>But we are still at an early stage. The bill is entering the approval period, where questions on the detail behind the proposals can be answered and views sought. The bill must follow a set path before receiving Royal Assent and becoming law. The next
    step will be a second reading, giving MPs the opportunity to scrutinise the bill and make any amendments to the proposals. This will also be an opportunity for interested parties to contact their MP to put forward their views on the proposals.</p><p>The bill must then progress through committee, parliament, and the House of Lords before details are agreed and Royal Assent is sought. This is a lengthy process, with the time from bills being introduced to becoming law often exceeding 12 months.</p><h2>Current proposals include:</h2><p><strong>The end of the AST - </strong>Section 21 will be abolished, aiming to provide tenants with greater security. Fixed term tenancies will be scrapped, meaning a tenancy will end only if the tenant chooses to leave (usually by giving two months&rsquo;
    notice) or the landlord is able to provide a valid reason to end the tenancy. To assist with this Section 8 will be strengthened to allow landlords to recover their properties. From six months into the tenancy landlords may give the tenant notice
    (usually two months) to vacate if they are looking to move back into the property, sell or redevelop. Landlords can also gain possession if the tenant is in breach of their tenancy or falls into arrears.</p><p>If implemented, it is likely changes will apply first to new tenancies, with existing tenancies transitioned across into the new structure within a pre-defined period. There are some exemptions for students lets, however this could we be one of the elements
    of the bill where we see some changes introduced.</p><p><strong>Annual rental reviews&nbsp;</strong><strong>&ndash;</strong><strong>&nbsp;</strong>Rental increases will be limited to one per year, with new powers for tenants to challenge above market rate rental increases through a tribunal.
</p><p><strong>Pets&nbsp;</strong><strong>&ndash;</strong><strong>&nbsp;</strong>Landlords must have reasonable grounds to refuse a tenant the right to request a pet in their rented property. It is not yet clear what constitutes &lsquo;reasonable grounds&rsquo;,
    hopefully this will become clearer as the process progresses, but tenants who are refused can use the new redress scheme to refer the final decision to the ombudsman. For landlords, existing regulations will be strengthened to ensure tenants are liable
    for any damages caused by their pets.</p><p><strong>Redress scheme &ndash; </strong>Proposals for a single redress scheme for both landlords and tenants. The ombudsman will provide a free service if tenants have complaints regarding their landlord, the standard of the property, or any outstanding
    repairs. Under current proposals landlords would not be able to make a complaint about a tenant to the ombudsman but they could be offered mediation services to settle disputes between them and their tenants. Landlords would be required to join the
    scheme with local councils empowered to take enforcement action against those who fail to sign up. Lettings agents will not be required to join.</p><p><strong>New property portal &ndash; </strong>Landlords will need to sign up to a new property portal. This will be a digital record of the landlord and their properties. Landlords will need to be registered and keep records on themselves and their rental
    properties up to date to legally market a property to let. Proposals are for councils to have access to the portal to enable them to flag any unspent offences or restrictions in the landlord&rsquo;s name.</p><p>More detail on the bill can be found <a href="https://www.gov.uk/guidance/guide-to-the-renters-reform-bill" target="_blank">here</a>.</p><p>Our team here at JLL will keep you updated throughout the process and are here to answer any questions you may have on the bill or the implications for you as a landlord or tenant.</p><h2>JLL Research | June 2023</h2><p>JLL is a leading global professional services firm specialising in real estate and investment management, with $16.6bn annual revenue in 2020, operations in over 80 countries and a global workforce of over 90,000. With over 7,000 employees and 15 offices
    in the UK, we support our investor, developer and occupier clients at every stage of the property lifecycle across both commercial and residential asset classes. This includes land purchase, access to capital, planning, development advisory, leasing,
    building management and sales.</p><p>JLL&rsquo;s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare
    and student housing.</p><p>&nbsp;</p><p><sup>Disclaimer: <sup>&copy;</sup> 2023 Jones Lang LaSalle IP, Inc. All rights reserved.Data within this report is based on material/sources that are deemed to be reliable and has not been independently verified by JLL. JLL makes no representations or
    warranties as to the accuracy, completeness or suitability of the whole or any part of the report which has been produced solely as a general guide and does not constitute advice. No part of this publication may be reproduced or transmitted in any
    form or by any means without prior written consent of JLL. JLL, its officers, employees shall not be liable for any loss, liability, damage or expense arising directly or indirectly from any use or disclosure of or reliance on such report. JLL reserves
    the right to pursue criminal and civil action for any unauthorized use, distribution or breach of such intellectual property.</sup>
</p>

Renters Reform Bill

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The Renters (Reform) Bill, introduced on 17 May 2023, outlines the government's plans for the future of privately rented homes, following the 2022 white paper.

The Renters (Reform) Bill was introduced to parliament on 17th May 2023. It follows the 2022 private rented sector white paper, which outlined the government’s aspirations for the future of privately rented homes.

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Affordable and attractive London hotspots for First Time Buyers

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Despite rising national house prices, the dream of owning a first home persists for many, though it's a challenging step onto the housing ladder.

House prices have risen significantly nationally over the last three years, and it feels as if the first step onto the housing ladder has become more challenging. Despite this, the dream of owning their first home for many is not dwindling.

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<p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1683722906/resi/gb/Articles/PDFs/PCL_Report_Q1_2023_-_V8.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p><p>A higher proportion of homes bought with cash and a sustained lack of stock in the most sought-after locations means Prime Central London (PCL) is less tied to fluctuations in UK mortgage rates.<strong> </strong>However, the central London market is not
    immune to changes in economic conditions, with sentiment rather than interest rates often having a greater impact on activity and pricing. And while Prime Central London is less reliant on debt the discretionary nature of many purchasers buying decisions
    means PCL is often more reactive to changes in sentiment and economic headwinds than mainstream, both when prices fall and when they increase.</p><p>&nbsp;For the rental market, uncertainty often increases demand with prospective purchasers holding off on their decision to purchase and renting or remaining in rented instead. We continue to see demand outstripping supply for prime homes, but there
    is more balance in the market this year than we have seen over the last 12 months. Stock levels, while still significantly lower than the pre-pandemic norms have improved, and rental growth recorded in the Q1 2023 JLL Prime Central London Index has
    returned to single rather than double digit annual growth.</p><p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1683722906/resi/gb/Articles/PDFs/PCL_Report_Q1_2023_-_V8.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p>

Prime Central London – Q1 2023

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How has the Prime Central London (PCL) housing market performed so far this year, and how much of an impact will the ongoing economic headwinds have on the sector?

<p><strong>How has the Prime Central London (PCL) housing market performed so far this year, and how much of an impact will the ongoing economic headwinds have on the sector?</strong></p>

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<p><strong></strong><strong>Recently news of a rate rise at a Monetary Policy Committee meeting has become almost a foregone conclusion, with rates increasing ten times since December 2021 and the last meeting in February. But views on the outcome of the March meeting were mixed. On one hand, the uncertainty surrounding the collapse of the Silicon Valley Bank and the takeover of Credit Suisse by UBS, alongside more encouraging news on the outlook for inflation from the OBR suggested the committee may stick. But unexpected double digit inflation figures, showing an annual uptick in CPI of 10.4% in February increased the odds of a rate rise. &nbsp;</strong></p><p><strong>Despite the announced 25 basis point rise, taking base rates to 4.25%, we still expect this signals a topping out (or near topping out) of rates. This remains in line with the base rate expectations in our November forecast, with JLL expecting house prices will fall by 6% nationally in 2023, with the market starting to see annual growth return in the latter part of 2024.</strong></p><p><strong>Updated Office for Budget Responsibility (OBR) forecasts following the Spring Budget show the UK economy is not now expected to enter a technical recession in 2023. However, forecasts suggest a small contraction of 0.2%. At present the UK inflation rate remains stubbornly high, however the OBR has forecast inflation will fall to 2.9% by year end. Despite economic uncertainty, the labour market continues to rally. Although job vacancies have fallen vacancies remain 300,000 above levels recorded pre-pandemic. &nbsp;</strong></p><p><strong>Despite expectations the UK will avoid recession, the outlook for growth is more muted. The OBR have forecast GDP growth of 1.8% in 2024, followed by 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027. </strong><br /></p><p><strong>The Spring Budget</strong></p><p>The Budget was light on specific housing policies and initiatives to boost the supply of new housing in the UK. The costs of living crisis has exacerbated issues surrounding housing affordability and the need for greater innovation on supply side policy. </p><p>The news on the energy price cap remaining at &pound;2,500 per annum will, however, be well received by households across the UK. The cap will remain in place until the end of June, by which time the government is hopeful that falling energy prices and more balmy weather will negate the need for further support.</p><p>There appear to have been a handful of small steps made to improve the UK&rsquo;s renewable energy sources. The Department for Energy Security and Net Zero was one of four new departments created in February. In addition, the Chancellor has announced that the government is launching Great British Nuclear (GBN) to address constraints in the nuclear market. </p><p><strong>The Housing Sales Market</strong></p><p>The latest set of responses from the RICS survey saw the majority of agents reporting a continued fall in house prices and new buyer enquiries in February. A net balance of 29% professionals reported a fall in new buyer enquiries, an improvement on the 45% recorded in January. The story is similar across London with a net balance of 44% of professionals reporting a fall in house prices.</p><p>The Nationwide UK House Price Index reported house prices fell 1.1% in the year to February 2023, the first annual decline since June 2020. Higher interest rates and cost of living pressures have been slowly filtering through to the housing market over the past five months or so. Albeit recent reductions in mortgage rates and continued resilience in the labour markets have kept annual falls to a minimum so far. According to Nationwide, the average house price in the UK is &pound;257,406, 19% higher than pre-pandemic levels (February 2023 vs. February 2020). </p><p><strong>The Rental Market </strong></p><p>The Homelet index suggests annual rental growth remains strong at 9.9% across the UK in February 2023, with the current average rent of &pound;1,175 matching the November peak. The latest RICS survey continues to show an imbalance between supply and demand in the both the UK and London rental markets. </p><p>In London, the worsening demand supply story has continued to underpin rents, with annual growth of 12.4% in February 2023. The average rent across London reaching &pound;1,975 per month.</p><p><strong>Forecasts</strong></p><p>Despite some clear challenges, the UK housing market remains in a strong position. Unemployment is still at near record lows, with recent data showing there are over 300,000 more job vacancies now compared to the beginning of the pandemic. JLL are forecasting single digit price falls nationally in 2023 as buyers and vendors adapt to higher mortgage rates and the squeeze in the cost of living. But prices falls will not be universal, we anticipate certain markets, such as central London and high demand city centre locations, will see more modest price falls or marginal price rises this year. &nbsp;</p><p>In the rental market the lack of quality rental stock is an ongoing issue. We also expect to see a higher number of prospective buyers, as well as those who would under normal circumstances have transacted under Help to Buy remain in the rental market for longer, adding further demand in an already constrained market.&nbsp;</p><p>&nbsp;</p><style>table {
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<table><thead><tr><th data-role="resizable">Residential Forecasts</th><th data-role="resizable">2023</th><th data-role="resizable">2024</th><th>2025</th><th>2026</th><th>2027</th><th>Total 2023-27</th><th>Average pa</th></tr></thead><tbody><tr><td>UK House Price Change (% pa)&nbsp;</td><td>-6.0&nbsp;</td><td>1.0&nbsp;</td><td>4.0&nbsp;</td><td>5.0&nbsp;</td><td>5.0&nbsp;</td><td>8.9&nbsp;</td><td>1.7&nbsp;</td></tr><tr><td>&nbsp;UK Rental Value Change (% pa)</td><td>4.0&nbsp;</td><td>3.5&nbsp;</td><td>2.5</td><td>2.5&nbsp;</td><td>2.5&nbsp;</td><td>15.9&nbsp;</td><td>3.0&nbsp;</td></tr></tbody></table><p><em>Source: JLL Research</em><strong></strong></p><p><strong>And in case you missed it&hellip;</strong></p><p>JLL released our latest <a href="https://residential.jll.co.uk/insights/research/big-six-residential-development-report-winter-2022-23">Big 6 Residential Development Report</a>, comparing
    activity, pricing and rents across six UK cities outside of London. <em>Veronica Spanos McGill, Senior Analyst at JLL</em>, speaks to Egi on <a href="https://www.egi.co.uk/news/btr-needs-to-grow-threefold-to-fill-londons-widening-private-rental-gap/">the shortfall of rental stock</a>, with JLL highlighting increasing unaffordability in the housing market will drive demand for an additional 300,000 rental households over the next ten years. And on the story of the rental
    market, <a href="https://www.jll.co.uk/en/trends-and-insights/research/london-build-to-rent?utm_source=linkedin&amp;utm_medium=orgsoc&amp;utm_term=hootsuite&amp;utm_content=adcb033a-8f34-44da-8ef1-476f9bbc2f3c">investment of &pound;15bn has seen London's BTR market grow to 40,000 homes in 2022</a>.<strong></strong><strong></strong></p><p><strong>JLL Research | March 2023</strong></p><p>JLL is a leading global professional services firm specialising in real estate and investment management, with $16.6bn annual revenue in 2020, operations in over 80 countries and a global workforce of over 90,000.&nbsp; With over 7,000 employees and 15
    offices in the UK, we support our investor, developer and occupier clients at every stage of the property lifecycle across both commercial and residential asset classes. This includes land purchase, access to capital, planning, development advisory,
    leasing, building management and sales. </p><p>JLL&rsquo;s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare
    and student housing. </p><h5>Disclaimer: &copy; 2023 Jones Lang LaSalle IP, Inc. All rights reserved.</h5><h5>Data within this report is based on material/sources that are deemed to be reliable and has not been independently verified by JLL. JLL makes no representations or warranties as to the accuracy, completeness or suitability of the whole or any part of
    the report which has been produced solely as a general guide and does not constitute advice. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. JLL, its officers, employees
    shall not be liable for any loss, liability, damage or expense arising directly or indirectly from any use or disclosure of or reliance on such report. JLL reserves the right to pursue criminal and civil action for any unauthorized use, distribution</h5>

Residential Market Update March 2023 – Spring Budget Overview

financing

JLL Residential Market Update March 2023 &ndash; Spring Budget Overview

<strong>The Spring Budget, 2023</strong><div><strong style="color:#313131;"><br /></strong></div>

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<p><strong>Early February saw the Monetary Policy Committee (MPC) meet, with base rates increased by a further 50 basis points, to 4%. Although this was the tenth consecutive rate rise, the market now widely expects we are nearing the peak. With expectations that base rates will top out at between 4% and 4.5% this year. </strong></p><p><strong>Q4 figures showed the UK managed to narrowly avoid falling into a recession in 2022, with the economy flat in the fourth quarter, however economic output was down -0.5% in December. Forecasters are not discounting the possibility of recession this year, albeit any recession in the UK economy is now expected to be shorter and shallower than originally forecast. </strong></p><p><strong>The Mortgage Market</strong></p><p>The mortgage markets have become more competitive over the past month, with more lenders joining the sub-4% club. HSBC was one of the first to launch a five-year fixed rate earlier this month. Since, the Co-Operative Bank has launched a five-year fix
    at 3.75%, the cheapest rate offered to borrowers since September 2022. </p><p>The number of mortgage approvals fell by -44% from November to December 2022, with December figures the lowest since lockdown months in 2020. Albeit we anticipate an increase in more competitive mortgage products on the market will result in a rise in
    mortgage approvals over the next few months. </p><p><strong>The Sales Market</strong></p><p>The latest responses from the RICS survey saw the majority of agents reporting a drop in house prices and new buyer enquiries in January. The story is similar across London with a net balance of 41% of professionals reporting a fall in house prices, more
    negative than the -30% in December. The fall in new buyer enquiries is also impacting the time properties spend on the market, with the number of days taken to sell a home rising to 52 days in December.</p><p>Wealthy overseas buyers have been taking advantage of a weaker pound to secure homes in central London. Analysis of JLL new homes reservations data shows the number of reservations from international buyers was up 33% in 2022 compared to 2021. Buyers
    from the Asia Pacific region continued to dominate the market; The number of new homes reservations from mainland China, Hong Kong and Malaysia was up 26%, 26% and 35% respectively in 2022 compared with 2021. </p><p>Outside central London, more challenging market conditions and cost of living pressures are beginning to filter through to the market. The Nationwide House Price Index reports growth nationally is slowing, prices 1.1% higher in January 2023 than they
    were a year ago, although it should be noted that this is on mortgaged properties only. Land Registry data, which records completion dates, is still showing a 9.8% annual increase in UK house prices for December 2022.</p><p>According to Land Registry, the East Midlands region saw the highest house price growth in the year to December 2022, at 12.3%, with London recording the lowest annual growth at 6.7%. Scotland and Wales recorded annual growth of 5.7% and 10.3% respectively.
</p><p><strong>The Rental Market </strong></p><p>The Homelet index suggests annual rental growth remains strong at 10.2% across the UK, although the monthly change in rents have recorded marginal falls of -0.2% in January. The latest RICS survey continues to show an imbalance between supply and demand
    in the both the UK and London rental markets. In London there is evidence of worsening demand/supply imbalance as RICS reports a sharp rise coupled with a fall in landlord instructions. </p><p>Continued pressure on the cost of living, alongside higher borrowing costs, suggests demand for rental properties will remain strong in 2023. But affordability will continue to be challenged, with analysis of Homelet data suggesting renters in the UK
    are spending 31.3% of their income on rent, rising to 36.1% in London. <strong></strong></p><p><strong>Forecasts</strong></p><p>Despite some clear challenges, the UK housing market remains in a strong position. Unemployment is still at near record lows and fewer households have high loan-to-value loans secured against their properties. The outlook for the UK&rsquo;s city centres
    remains strong, with house prices still expected to rise this year. Cities where we have seen the highest house price growth have continued to see demand outstrip supply of late, with the return of students and young professionals. </p><p>The lack of quality rental housing is an ongoing issue. This demand for rental stock supports institutional investor appetite for purpose built rental homes. We expect that more prospective buyers, as well as those who would under normal circumstances
    have transacted under Help to Buy, are more likely remain in the rental market in greater numbers this year. This adds further fuel to an already constrained rental market and will, we expect, perpetuate the supply demand imbalance in 2023.</p><div><style>td,
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<div style="overflow-x:auto;" align="center"><table cellspacing="0" cellpadding="0" border="1" align="center" width="100%"><tbody><tr class="red"><th scope="col">Residential Forecasts</th><th scope="col">2023</th><th scope="col">2024</th><th scope="col" data-role="resizable">2025</th><th scope="col">2026</th><th scope="col">2027</th><th scope="col">Total 2023-27</th><th>Average pa</th></tr><tr><td>UK House Price Change (% pa)</td><td>-6.0</td><td>1.0</td><td>4.0</td><td>5.0</td><td>5.0</td><td>8.9</td><td>1.7</td></tr><tr><td>UK Rental Value Change (% pa)</td><td>4.0</td><td>3.5</td><td>2.5</td><td>2.5</td><td>2.5</td><td>15.9</td><td>3.0</td></tr></tbody></table></div><p><em>Source: JLL Research</em></p><p><strong><em>And in case you missed it&hellip;.</em></strong></p><p>Annual investment in the UK Living Sector soared to record heights of &pound;18bn. Purpose-built student accommodation contributed 45% of investment. Read more in our latest <a href="https://www.jll.co.uk/en/trends-and-insights/research/uk-living-capital-markets-2022">UK Living Capital Markets 2022 in Review</a> report.&nbsp; The average cost of a starter home is up &pound;50,000 over the past five years. <em>Marcus Dixon, Director of Residential Research at JLL</em>, <a href="https://www.standard.co.uk/homesandproperty/property-news/first-time-buyer-property-prices-soar-up-to-a-fifth-b1057600.html">chats to the Evening Standard</a>&nbsp; and explains the figures &ldquo;clearly demonstrate the extent to which people are being priced out of the heart of the capital when looking to buy their first home&rdquo;.
        And keep an eye out for our <em>Big Six Residential Development Winter 22/23 Report, </em>out soon.&nbsp;</p><p><strong>JLL Research | February 2023</strong></p><p>JLL is a leading global professional services firm specialising in real estate and investment management, with $16.6bn annual revenue in 2020, operations in over 80 countries and a global workforce of over 90,000.&nbsp; With over 7,000 employees and
        15 offices in the UK, we support our investor, developer and occupier clients at every stage of the property lifecycle across both commercial and residential asset classes. This includes land purchase, access to capital, planning, development
        advisory, leasing, building management and sales. </p><p>JLL&rsquo;s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living,
        healthcare and student housing. </p><p>Disclaimer: &copy; 2023 Jones Lang LaSalle IP, Inc. All rights reserved.</p><p>Data within this report is based on material/sources that are deemed to be reliable and has not been independently verified by JLL. JLL makes no representations or warranties as to the accuracy, completeness or suitability of the whole or any part
        of the report which has been produced solely as a general guide and does not constitute advice. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. JLL, its officers, employees
        shall not be liable for any loss, liability, damage or expense arising directly or indirectly from any use or disclosure of or reliance on such report. JLL reserves the right to pursue criminal and civil action for any unauthorized use, distribution
        or breach of such intellectual property.</p><p><br /></p></div>

Residential Market Update February 2023 – A competitive mortgage market is arising

Early February saw the Monetary Policy Committee (MPC) meet, with base rates increased by a further 50 basis points, to 4%.

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<p><strong>The Bank of England Monetary Policy Committee will next meet on 2<sup>nd</sup> February, with expectation that rates could rise again. Yet reports on the economic outlook for the UK have been marginally more positive of late. Despite remaining in double digits annual growth, inflation fell back again in December to 10.5% (from 10.7% in November and 11.1% in October). Inflation is now thought to have peaked in 2022 with forecasters anticipating a gradual fall in the rate of inflation throughout 2023. Albeit remaining higher than the Banks 2% target. </strong></p><p><strong>Three of the key drivers of inflation globally, commodities, energy and shipping costs, are all falling.&nbsp; With lower gas prices meaning the governments costs to cap energy bills may well be lower than anticipated, helping to lower the rate of inflation in the coming months. But challenges remain, with households still feeling the cost-of-living squeeze as prices of other household goods including food continue to rise. The employment market too, while still robust is seeing vacancies fall as positions are withdrawn in certain sectors.&nbsp;</strong></p><p><strong>The Mortgage Market</strong></p><p>A more competitive mortgage market is beginning to emerge in the UK. Several lenders have introduced more competitive fixed rate offers. One lender having released a new two-year fixed deal at 4.84%, one of the most competitive rates on the market. New
    analysis by wealth fund Quilter, has also shown that a fall in house prices coupled with a fall in mortgage rates to around 4%, could see buyers mortgage repayments reduce by as much as 25% by the end of 2023. </p><p>The number of mortgage approvals in November 2022 fell to 47,279, the lowest levels since May 2020. However, as we see more competitive deals enter the market, it is likely we will begin to see a gradual uptick in the number of deals approved. It is also
    worth noting that a proportion of the fall in activity can be linked to the end of the Help to Buy scheme in October, skewing first -time buyer activity.</p><p><strong>The Sales Market</strong></p><p>The latest set of responses from the RICS survey saw the majority of agents reporting a drop in house prices and new buyer enquiries in December. The story is similar across London with a net balance of 32% of professionals reporting a fall in house prices.
    The fall in new buyer enquiries is also impacting the time properties spend on the market, with the number of days taken to sell a home rising to 52 days in December, seven days longer than in November. Albeit it is not unusual to see an increase
    in December. </p><p>More challenging market conditions are yet to impact Land Registry house price data, with annual growth still in double digits in November 2022, due to the time lag between offer and completion. But monthly rates of growth are slowing as rising mortgage
    rates and a squeeze on household budgets are beginning to filter through to the market. The Nationwide House Price Index reports annual growth in December of 2.8%, representing a fourth monthly decline. Across the UK house prices rose 10.3% in November
    2022, compared with November 2021, with prices 27% higher than they were in 2019 (November 2022 vs. November 2019). Regionally annual price growth ranged from 6.3% in Greater London to 13.5% in the North West.&nbsp; </p><p><strong>The Rental Market </strong></p><p>The Homelet index suggests annual rental growth remains strong at 10.8% across the UK, although the monthly change in rents remained flat in December. The latest RICS survey continues to show an imbalance between supply and demand in the both the UK and
    London rental markets. The impact of higher interest rates also means tenants are staying in the rental sector for longer as affordability is squeezed, and potential buyers wait to see where the market is heading before committing to purchase. <br /></p><p><strong>Forecasts</strong></p><p>Lessons learnt from the global financial crisis mean the UK housing market is in a stronger position, with households more equity rich and stress tested for higher rates. JLL forecasts that transaction volumes will fall 30% next year but for house prices
    we will see a correction rather than a crash.</p><p>&nbsp;In Central London, there are a larger proportion of both overseas and cash buyers, less reliant on mortgages, and subsequently effected by rate rises. Coupled with lack of stock coming onto the market, we expect this to underpin values in Central
    London over the next year of 2.5%. </p><p>Outside of Central London a combination of higher rates, poorer market sentiment and the cost-of-living squeeze will mean prices and activity levels fall across the UK housing market in 2023. Prices are expected to fall UK wide by 6% in 2023 before recovering
    in late 2024, as interest rates fall back and inflation is contained.&nbsp;</p><style>td,
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<div style="overflow-x:auto;" align="center"><table cellspacing="0" cellpadding="0" border="1" align="center" width="100%"><tbody><tr class="red"><th scope="col">Residential Forecasts</th><th scope="col">2023</th><th scope="col">2024</th><th scope="col">2025</th><th scope="col">2026</th><th scope="col">2027</th><th scope="col">Total 2023-27</th><th>Average pa</th></tr><tr><td>UK House Price Change (% pa)</td><td>-6.0</td><td>1.0</td><td>4.0</td><td>5.0</td><td>5.0</td><td>8.9</td><td>1.7</td></tr><tr><td>UK Rental Value Change (% pa)</td><td>4.0</td><td>3.5</td><td>2.5</td><td>2.5</td><td>2.5</td><td>15.9</td><td>3.0</td></tr></tbody></table></div><p><em>Source: JLL Research</em></p><p><strong><em>And in case you missed it&hellip;.</em></strong><strong></strong><br /></p><p>2022 was a record-breaking year for Prime Central London. The latest JLL analysis shows <a href="https://residential.jll.co.uk/insights/article/prime-central-london-q4-2022">buyers spent &pound;5.2bn on home last year.</a> Looking
    forward, the cost of living squeeze is expected to put energy efficiency and value for money at the top of the checklist for many renters in 2023. <a href="https://residential.jll.co.uk/insights/news/uk-rental-market-update-2023">In a UK rental market update</a>,&nbsp;
 we highlight how 85% of renters from our tenant survey said the environmental efficiency of their home was important to them. And finally, <em>Emma Rosser, Living Capital Markets Research Associate at JLL</em>, on how <a href="https://www.egi.co.uk/news/btr-attracts-6-4bn-investment-in-another-record-year/">investment in UK BTR hit a record &pound;6.3bn in 2022, despite a downbeat Q4.</a></p><h2><strong>Marcus Dixon</strong></h2><p>Director of UK Residential Research<br />+44 (0)7563 380165<br /><span style="background-color:initial;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">marcus.dixon@eu.jll.com</span></p><p><strong>JLL Research | January 2023</strong></p><p>JLL is a leading global professional services firm specialising in real estate and investment management, with $16.6bn annual revenue in 2020, operations in over 80 countries and a global workforce of over 90,000.&nbsp; With over 7,000 employees and 15
    offices in the UK, we support our investor, developer and occupier clients at every stage of the property lifecycle across both commercial and residential asset classes. This includes land purchase, access to capital, planning, development advisory,
    leasing, building management and sales. </p><p>JLL&rsquo;s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare
    and student housing. </p><p>Disclaimer: &copy; 2022 Jones Lang LaSalle IP, Inc. All rights reserved.</p><p>Data within this report is based on material/sources that are deemed to be reliable and has not been independently verified by JLL. JLL makes no representations or warranties as to the accuracy, completeness or suitability of the whole or any part of
    the report which has been produced solely as a general guide and does not constitute advice. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. JLL, its officers, employees
    shall not be liable for any loss, liability, damage or expense arising directly or indirectly from any use or disclosure of or reliance on such report. JLL reserves the right to pursue criminal and civil action for any unauthorized use, distribution
    or breach of such intellectual property.</p><p>&nbsp;</p>

Residential Market Update January 2023 – Falling Inflation

January market update

The Bank of England Monetary Policy Committee will next meet on 2<sup>nd</sup>&nbsp;February, with expectation that rates could rise again.

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<p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1673444524/resi/gb/Articles/PDFs/JLL_PCL_Report_Q4_2022.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p>
<p><strong>2022 was a record-breaking year for Prime Central London. Buyers spent almost &pound;5.2 billion on homes last year, the highest amount spent for more than ten years. </strong><br /></p>
<p>But Prime Central London has not been immune to political and economic uncertainty that has impacted the UK market in recent months. On one hand there is less reliance on debt in the prime market than in mainstream, meaning fluctuations in interest rates
    have less of an impact, however increased uncertainty, and a higher proportion of discretionary purchasers in PCL have resulted in prices falling back in Q4.&nbsp; </p>
<p>The JLL Prime Central London Index recorded a 3.5% quarterly fall in Q4 2022. With prices ending the year 2.4% lower than in Q4 2021. </p>
<p>The number of properties on the market at the end of Q4 2022 fell this quarter, in line with usual seasonal activity. At the end of Q4 2022 there were 2,847 homes on the market in PCL, 3% higher than the same point a year ago and down 9% compared to the
    end of Q3.</p>
<p>While prices fell in the fourth quarter there was little sign of a slowdown in sales activity. Sales volumes were 15% higher than Q4 2021, although the stamp duty holiday distorted figures last year. Taking 2022 in its entirety shows transaction volumes
    rose 6% on 2021, with 2022 the busiest year for PCL sales since 2014.</p>
<p>For the rental market<strong> </strong>stock levels across Prime Central London remain below historic levels. The number of properties available to let at the end of Q4 2022 was 13% higher than at the same point in 2021, when stock levels bottomed out,
    but remain 45% lower than in 2019. </p>
<p>Almost half (48%) of the properties let by JLL within Prime Central London in Q4 2022 were renewals, up from 37% in Q4 last year and 24% in 2019. With high rates of renewals continuing to impact both new lets agreed and returning stock levels. </p>
<p>Rents plateaued in Q4 2022 after six quarterly increases, the JLL Prime Central London Index falling 0.5% in Q4 2022 compared with the previous quarter. But rents are still higher than they were a year ago. The JLL Prime Central London Index recorded
    a 6.1% annual increase in achieved rents in the fourth quarter.<br /></p>
<p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1673444524/resi/gb/Articles/PDFs/JLL_PCL_Report_Q4_2022.pdf" target="_blank"><button class="Button primary" style="text-align:center;">Download full report</button></a></p>
<table>
    <tbody>
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            <td style="width:50%;">
                <h2><strong>Marcus Dixon</strong></h2>
                <p><strong></strong>Director of UK Residential Research<br />+44 (0)7563 380165<br />marcus.dixon@eu.jll.com</p>
            </td>
            <td style="width:50%;">
                <h2><strong>Lucy Morton</strong></h2>
                <p><strong></strong>Head of UK Residential Agency<br />+44 (0)7767 778653<br />lucy.morton@eu.jll.com</p>
            </td>
        </tr>
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            <td style="width:50%;">
                <h2><strong>Neil Short</strong></h2>
                <p><strong></strong>Director &ndash; PCL lettings<br />+44 (0)7841 199910<br />neil.short@eu.jll.com</p>
            </td>
        </tr>
    </tbody>
</table><strong></strong><strong style="background-color:transparent;color:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">About JLL | January 2023</strong>

Prime Central London – Q4 2022

A record year for PCL, but political and economic uncertainty impacts the market in Q4.

<strong>A record year for PCL, but political and economic uncertainty impacts the market in Q4.</strong>

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<p><strong>December saw a further base rate hike as rising rents continued to dominate the headlines. But there are signs that rising rates are starting to hit prices. Despite annual inflation remaining in double digits, marginal monthly falls suggest it could be topping out. Supporting the consensus view of gradual decline in the rate of inflation as we move into 2023.</strong></p><p><strong></strong><strong>Rising interest rates and the mortgage market </strong></p><p>The 15 December saw the MPC add a further 50 basis points to the base rate, the ninth increase in a year, meaning the base rate reached 3.5%. The Bank is still having to contend with double digit inflation, far higher than the 2% target. However, the latest CPI figures do suggest that we could have reached the crest of the wave. CPI for November shows rates were marginally below forecast at 10.7% (forecast at 10.9%) and down from 11.1% in October. Governor Andrew Bailey remained cautiously optimistic that inflation had begun to ease in the latest statement.</p><p><strong>House prices</strong></p><p>The latest UK house price data from the Land Registry shows annual growth reaching 12.6% in October 2022. House prices grew 6.7% across London over the same period, having peaked this year at 9.2% in July. &nbsp;</p><p>The slowdown in the market has yet to the Land Registry figures, partly due to the time lag between offer and completion. But there are signs that the market is slowing. The latest figures from the Halifax and Nationwide indices suggest a slowing in the rate of growth in the final months of 2022. With November figures from the Halifax showing prices up 4.7% annually, and Nationwide up 4.4%.</p><p><strong>Rents</strong></p><p>Rents are still rising, as tenant demand continues to outpace properties reaching the market to let. According to Rightmove, demand for rental properties rose 20% year-on-year, with tenants returning to cities adding further pressure on these markets. The impact of higher interest rates also means tenants are staying in the rental sector for longer as affordability is squeezed, and potential buyers wait to see where the market is heading before committing to purchase. Rightmove figures suggesting the number properties on the market to let fell 9% annually in November. </p><p>The Homelet Index show average UK rents rose 11.1% in the 12 months to November 2022, with all UK regions recording annual increase in achieved rents. Greater London recorded the highest annual growth in rents (14.5%) whilst Yorkshire and The Humber recorded the lowest at 7.3%. </p><p><strong>Demand</strong></p><p>The latest set of responses from the RICS survey saw more agents reporting a drop in new buyer enquiries in the UK, albeit showing a marginal improvement since October. The story remains similar within London too, where more agents reporting falls in prices and buyer demand over the last three months. Reflecting the drop in demand, figures from Dataloft show the number of days taken to sell a home is increasing, with the average now 45 days (up from 40 days in October). </p><p><strong></strong><strong>And in case you missed it&hellip;</strong></p><p>We released our latest <a href="https://residential.jll.co.uk/insights/research/jll-uk-house-price-forecasts---housing-set-for-a-correction-not-a-crash">JLL forecasts</a> &nbsp;at the end of the year, explaining how we believe the housing market is set for a price correction, rather than a crash. As seen in the Guardian, we expect <a href="https://www.theguardian.com/business/2022/dec/26/experts-predict-housing-market-will-cool-in-2023-as-uk-enters-a-recession">a 6% fall in house prices during 2023</a>, with recovery in 2024. Meanwhile, <em>Marcus Dixon, Director of UK Residential Research at JLL</em>, discusses <a href="https://primeresi.com/boe-bumps-interest-rates-up-again-to-3-5/">the latest rate hike</a> with Prime Resi. And JLL talk <a href="https://reactnews.com/article/house-sales-predicted-to-fall-by-30-this-year-as-construction-slows/?utm_source=React%20News%20-%20News%20Alerts&amp;utm_campaign=d35f6a1822-EMAIL_CAMPAIGN_2023_01_03_04_25&amp;utm_medium=email&amp;utm_term=0_b0728480f9-d35f6a1822-%5BLIST_EMAIL_ID%5D&amp;mc_cid=d35f6a1822&amp;mc_eid=59e5cca6b9">all things 2023 with React News.</a> </p>

Residential Market Update December 2022 – 9th rate rise to end the year

market update december

December saw a further base rate hike as rising rents continued to dominate the headlines. But there are signs that rising rates are starting to hit prices.

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<h2>UK Market Update - November 2022</h2><p><strong></strong>The chancellors Autumn Statement attempted to calm the markets, with plans to &lsquo;balance the books&rsquo; following the roll back of Kwarteng&rsquo;s mini budget. Hunt paved the way for &pound;30bn of spending cuts and &pound;25bn
    of tax rises.</p><p>The Autumn statement, effectively a budget in all but name, saw the OBR confirming that the UK was now in recession, forecasting a 1.4% fall in the UK economy in 2023. Although the Bank of England raised interest rates further to 3%, inflation is proving
    sticky, reaching a 41 year high of 11.1% in October.</p><p>But the Autumn statement appears to have calmed the financial markets with bond yields, swap rates, debt costs and mortgage rates all falling back in recent weeks. Fixed rates on mortgages, which had exceeded 6% in the aftermath of the mini budget have
    fallen, with deals now appearing at sub 5%. </p><p>For the residential market there were a handful of announcements, none which were sufficiently game changing to impact our longer-term outlook for the market. Firstly, <strong>stamp duty</strong> cuts, one of the only surviving policies from Kwarteng&rsquo;s
    time in office were given a time limit.&nbsp; Current rates now ending in March 2025. </p><p><strong>Tax-free allowance for capital gains </strong>will fall 50% in April from &pound;12,300 to &pound;6,150 which means increasing costs for owners of second homes and small landlords. </p><p><strong>Capping of increases in social rent</strong> at 7%.&nbsp; This does not apply to shared ownership, but it is widely accepted that a similar maximum rental increase will be mirrored for these properties too.</p><p><strong>Energy efficiency</strong><em>&nbsp;</em>was also a major theme. There will be &pound;6bn made available to insulate Britain&rsquo;s housing stock and additional measures and targets for commercial buildings.</p><p>Despite sustained increases in the cost of living, lower income households saw some concessions. The minimum wage will increase by 9.7% to &pound;10.42 in April. Most benefits will rise by CPI with the government standing by the triple lock for pensions.
    But more will pay higher rates of tax, as thresholds were frozen, or in the case of the 45p rate lowered, from &pound;150,000 to &pound;125,000. </p><h2><strong>The Sales Market</strong></h2><p>As expected, with mortgage rates rising and a fall in the number of mortgage products offered by lenders, buying a home has become more expensive and demand from prospective purchasers has fallen. Latest figures from the RICS suggest new buyer enquiries
    fell for the sixth consecutive month in October. This is evident UK wide, with new buyer enquiries falling across all regions in both the September and October reports. Respondents were now, on balance, expecting some degree of price falls. </p><p>Average house prices across the UK rose 9.5% in September 2022, compared with September 2021, with prices 26% higher than they were pre-pandemic (September 2019 vs September 2022). Regionally annual price growth ranged from 5.8% in the North East to 13%
    in Wales.&nbsp; In London prices rose 6.9% in the year to September 2022. </p><p>The number of days to sell rose to 40 in October, up from a low of 31 days in April and 36 days at the same point a year ago. </p><h2><strong>The Rental Market</strong></h2><p>&nbsp;An undersupply of rental homes on the market alongside strong demand continues to fuel a rise in rents. The RICS survey reported a net balance of +46% of respondents reporting a rise in tenant demand, whereas new landlord instructions fell again
    in October.&nbsp; </p><p>Latest figures from Homelet show average UK rents rose 10.6% in the 12 months to October, with all UK regions recording annual increase in achieved rents, from a 6.0% annual increase in North East to 15.2% in Scotland. These figures are mirrored by the
    latest Q3 Rightmove asking rents, with rents 11% higher nationally in Q3 2022 and up 16% in London. </p><h2><strong>Forecasts</strong></h2><p>Lessons learnt from the global financial crisis mean the UK housing market is in a stronger position, with households more equity rich and stress tested for higher rates.&nbsp; But there is no denying that 2023 looks to be challenging for those looking
    to transact, transaction volumes are forecast to fall 30% next year but for house prices we will see a correction rather than a crash. </p><p>On 2 November Monetary Policy Committee (MPC) increased the base rate by 0.75 percentage points to 3%. Inflation remains significantly higher than the 2% target, reaching 11.1% in October. But there are signs that upward pressure on rates is weakening.
    The pound rose against the dollar, and gilt yields fell, adding some downward pressure on UK inflation and justifying Bank of England Governor Andrew Bailey&rsquo;s insistence that base rates will not have to hit the levels markets have been pricing
    in. The Bank expect inflation will fall back in 2023 to below the 2% target threshold in early to mid-2024. </p><p>JLL Residential Forecasts, released in early November, expect that a combination of higher rates, poorer market sentiment and the cost-of-living squeeze will mean prices and activity levels fall across the UK housing market in 2023.&nbsp; JLL are forecasting
    the number of sales nationally will drop to circa. 1 million transactions in 2023. Prices are expected to fall UK wide by 6% in 2023 before recovering in late 2024, as interest rates fall back and inflation is contained. </p><p>But safeguards put in place following the global financial crisis will act as a buffer against double digits falls some are predicting (worth noting in most instances as a worst-case scenario). We do not expect all areas will see price falls next year.
    The outlook for the UK&rsquo;s city centres is much stronger. House prices are still expected to grow in the centre of many of the UK&rsquo;s largest cities. Underpinned by high demand and a relative lack of stock.&nbsp; Demand has significantly outstripped
    housing supply in the period since Covid-19, as students and young professionals have looked to return to the UK&rsquo;s major cities. We expect this to continue, coupled with a rise in demand for energy efficient new build city centre homes as renters
    look at ways to minimise their energy bills.</p><p>With Help to Buy registrations closing at the end of October we were already expecting the number of prospective first-time buyers would fall next year.&nbsp; The increase in rates means we anticipate further falls.&nbsp; This will, we expect, create
    further demand for rental properties and support growth in rents of 4% in 2023 an 15.9% between 2023 and 2027.&nbsp;</p><style>td,
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<div style="overflow-x:auto;" align="center"><table cellspacing="0" cellpadding="0" border="1" align="center" width="100%"><tbody><tr class="red"><th scope="col">Residential Sales Forecasts</th><th scope="col">2023</th><th scope="col">2024</th><th scope="col">2025</th><th scope="col">2026</th><th scope="col">2027</th><th scope="col">Total 2023-27</th><th>Average pa</th></tr><tr><td>UK House Price Change (% pa)</td><td>-6.0</td><td>1.0</td><td>4.0</td><td>5.0</td><td>5.0</td><td>8.9</td><td>1.7</td></tr><tr><td>UK Rental Value Change (% pa)</td><td>4.0</td><td>3.5</td><td>2.5</td><td>2.5</td><td>2.5</td><td>15.9</td><td>3.0</td></tr></tbody></table></div><h2><strong><em>And in case you missed it&hellip;.</em></strong></h2><p>The latest JLL Help to Buy survey, surveying almost 1,000 buyers, developers and brokers, outlines <a href="https://residential.jll.co.uk/insights/research/jll-help-to-buy-survey-2022"></a><a href="https://residential.jll.co.uk/insights/research/jll-help-to-buy-survey-2022">what a market without Help to Buy is likely to look like</a>.
 In October we published the first of our <a href="https://residential.jll.co.uk/insights/research/big-six-residential-development-report"></a><a href="https://residential.jll.co.uk/insights/research/big-six-residential-development-report">Residential Cities Development Report</a>,
 featuring the &lsquo;big six&rsquo; UK cities; keep an eye out for half annually updates. And Marcus Dixon, Director of UK Residential Research, JLL, talks to the Evening Standard <a href="https://www.standard.co.uk/homesandproperty/buying-mortgages/phil-spencer-property-market-guide-recession-new-homes-b1040151.html"></a><a href="https://www.standard.co.uk/homesandproperty/buying-mortgages/phil-spencer-property-market-guide-recession-new-homes-b1040151.html" target="_blank">on the outlook for London.</a>.<strong><em></em></strong></p><p>&nbsp;</p>

Residential Market Update November 2022 – Calming the markets

Market update july 22

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<p>Since its inception in 2013, Help to Buy has helped over 360,000 people to purchase a home in England. But the scheme is ending, with no announcement from government on a replacement forthcoming. The last applications for a Help to Buy loan need to be
    lodged by 31 October 2022, with home purchases to complete before 31 March 2023. </p><p>As Help to Buy ends JLL surveyed over 700 of our buyers to understand how influential the scheme has been over the past decade. Examining how buyers bought and what they expect to do next without Help to Buy.</p><p>&nbsp;</p><p><a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1668679136/resi/gb/Articles/PDFs/JLL_Help_to_Buy_Survey_Report_-_Nov-22.pdf" target="_blank"><button class="Button primary">Download a copy</button></a></p>

JLL Help to Buy Survey 2022

H2B1

As Help to Buy ends JLL surveyed over 700 of our buyers to understand how influential the scheme has been over the past decade.

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<p><a href="https://res.cloudinary.com/jll-global-olm-np/image/upload/v1668436826/resi/gb/cms/Blogs/JLL_Tenant_Survey_-_2022.pdf" target="_blank"><button class="Button primary">Download a copy</button></a></p><p>&nbsp;</p><p>Current pressures on the cost of living, coupled with the legacy of the pandemic have forced us to re-think our priorities, particularly concerning our homes.</p><p>Rising bills means energy efficiency is becoming a priority. But even before prices began to rise legislation was mooted to improve efficiency of rental stock. The government proposing all newly let residential buildings would need to have an EPC rating of C or above by the end of 2025. But will rising costs mean tenant demand, not just the threat of legislation, will lead to more energy efficient homes in the future?</p><p>The 2022 JLL Tenant Survey examines how living priorities have changed. We asked what our tenants wanted from their homes and how this could change in the future. More than 950 people responded.</p><p>&nbsp;</p><p><a href="https://res.cloudinary.com/jll-global-olm-np/image/upload/v1668436826/resi/gb/cms/Blogs/JLL_Tenant_Survey_-_2022.pdf" target="_blank"><button class="Button primary">Download a copy</button></a></p>

JLL Tenants Survey 2022

Cities_header

The 2022 JLL Tenant Survey asks what our tenants want from their homes and how this might change in the future.

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<a href="https://res.cloudinary.com/global-cms-assets-np/image/upload/v1667401050/resi/gb/Articles/PDFs/JLL_UK_Residential_Forecasts_Q4_2022.pdf" target="_blank"><button class="Button primary">Download full report</button></a>
<p>&nbsp;</p><p>The last 15 years have seen UK house prices reach new highs on the back of a period of record low borrowing costs. Never prior to 2008 had the UK base interest rate dipped below 2%. But in the period since the Global Financial Crisis (GFC) it has averaged
    0.5% and hit a low of 0.1% during Covid.</p><h2><strong>Interest Rates</strong></h2><iframe src="https://flo.uri.sh/visualisation/11644913/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:600px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><p><br />A spike in borrowing costs &ndash; and an anticipated further steep rise in mortgage rates - alongside continued high inflation and a rising cost-of-living have prompted predictions from the most bearish forecasters of 20%-30% falls in UK house
    prices. </p><p>But UK house prices have never fallen by more than 20%. And this prompts a question of whether the underlying market prospects are now truly worse than the early 90s recession where house prices fell 20% cumulatively between 1989 and 1993; and the GFC
    where prices fell by 15% between January 2008 and May 2009.&nbsp;&nbsp;</p><p>&nbsp;</p><h2><strong>House price crashes have been rare in the UK</strong></h2><iframe src="https://flo.uri.sh/visualisation/11645505/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:600px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><p>In the early 90s, inflation was high (like today) and GDP was low and falling into negative territory (like today). But, a key differentiator was that unemployment was extremely high at circa 10% in the early 1990s &ndash; today it is at a record low
    of 3.5%. And while unemployment is expected to rise in the coming 18 months, it is expected to hit 4.9%, below the average of 6.7% since 1971 and the past 10-year average of circa 5.2%.&nbsp;</p><p>Meanwhile, the GFC was fundamentally a credit crisis built on poor lending practices through the early 2000s which saw people with poor credit history and no equity lent sums of money they could ill-afford to repay. Ultimately the &lsquo;house of cards&rsquo;
    collapsed, banks failed, millions lost their jobs and people were forced to walk away from mortgages they could never afford in the first place.</p><p>In the period since, lending practices have been tightened significantly &ndash; and the housing market is now built upon much stronger foundations.</p><h2><strong>Absence of distress</strong></h2><p>JLL analysis of the Bank of England Mortgage and Lending Report found that 62% of the UK&rsquo;s 8.4m mortgaged owner occupier households have at least 25% equity in their house. Another 34% have between 10-25% equity and 4% have between 5% and 10% equity.</p><p>Just 0.2% or circa 17,000 owner occupied households in the UK have less than 5% equity &ndash; and, statistically at least, there are no households with zero equity. Meanwhile, more than 95% of the circa 3m UK buy to let landlords who own with a mortgage,
    own at least 20% in their property.</p><h2><strong>Mortgage affordability</strong></h2><p>But ultimately the amount of equity the UK&rsquo;s homeowners possess only tells half of the story. An era of cheap borrowing is ending and mortgage affordability is about to become squeezed. However, mortgaged households in the UK have the highest incomes
    by tenure &ndash; averaging &pound;80,000 per annum. Before the recent rise in UK interest rates, the average household income spent on a UK mortgage was equivalent to 18%. With the average two-year fixed rate mortgage cost having risen to circa 6%,
    that income to mortgage expenditure percentage has risen to circa 27% - the level it was around the time of the Global Financial Crisis. And if mortgage rates hit 7%, the average household income to mortgage cost ratio would hit 30% - the rate it
    was in the early 1990s. But merely spending 30% of a household income on housing costs is not a reason to assume a collapse into distress. With low unemployment and the highest average incomes, the UK&rsquo;s mortgaged households have a more stable
    financial footing than the GFC or the early 1990s recession.</p><p>The vast majority should be able to ride out a squeeze on their household incomes avoiding the need to sell their home to make ends meet. But it will be a further extension of the current cost of living crisis.</p><p>Circa 1.1m households were on the current Standard Variable Rate coming into this recent rate rise. Another 1.2m households will come to the end of their fixed term over the next year. JLL calculates that those 2.3m households combined will be spending
    an additional &pound;8bn on mortgages by Q4 2023. This could ease some of the current high inflation, but it could also hamper GDP growth. The customers spending that extra on their mortgage would perhaps most likely be transferring that from their
    previous savings/investment allocations or from their typical discretionary spend on food, leisure and entertainment.</p><h2><strong>Low repossessions</strong></h2><p>Furthermore, banks currently have a low appetite for repossessions. In the early 1990s, banks repossessed circa 100,000 homes per annum. In the GFC the rate was about 50,000 per annum. Currently there are about 4,000 repossessions per annum which out
    of the UK&rsquo;s circa 11m mortgage properties represents a rate of about 0.04% per year. It takes two years to repossess a home &ndash; and in the current cost of living crisis, it could be a difficult public profile position to be seen to be adopting
    a repossession strategy. However, banks are a regulated entity so they cannot turn a blind eye to customer defaults. But there are other options that can be explored such as tracker rates or interest only periods and it is highly likely banks will
    exhaust all these options before pursuing a route of foreclosure.</p><h2><strong>Opportunistic buyers</strong></h2><p>Ultimately, we expect that there will be far less distress in the market as there was in previous crashes &ndash; as long as there is no sharp rise in unemployment.</p><p>But JLL predicts there will be a steep fall in UK housing transactions.</p><p>The number of First Time Buyers (FTBs) before the GFC typically totalled 400,000 per annum out of a total of circa 1.5m annual transactions.</p><p>Post GFC, FTBs fell to 325,000 and total transactions to 1.2m. JLL predicts there will now be circa 200,000 viable FTBs with sentiment among aspiring homeowners taking a hit, mortgage affordability becoming stretched to new homeowners and the ending of
    help to buy, which typically helped circa 50,000 FTBs onto the ladder per annum. This cocktail of transactional headwinds will see overall transactions fall to circa 1m in 2023.</p><p>The transactions that do occur will be dominated by slightly more motivated sellers (but not financially distressed) faced with a higher proportion of &lsquo;opportunistic&rsquo; buyers (such as cash buyers who will account for about 25% of all transactions,
    up from the current 18%). These opportunistic buyers will not expect to pay asking price. But the vendors who are not distressed will only accept a fall in values to a certain level &ndash; ie more of a discount than a fully blown correction and certainly
    not a crash.<strong></strong></p><h2><strong>Sluggish market</strong></h2><p>This dynamic will create a sluggish market in which buyers and vendors haggle over price and ultimately less transactional activity occurs with the supply of new homes for sale gradually becoming constrained.&nbsp;</p><p>Against this backdrop, JLL is forecasting that UK house prices will fall in value in 2023 by 6% which equates to an average discount of &pound;17,500 from the average UK house price of circa &pound;290,000.</p><p>Of course, as in any market, there will be winners and losers. Not all types of home, cities or regions will be impacted to same level.</p><p>On a regional level JLL&rsquo;s forecasts falls ranging from circa 4% across Greater London to around 8% in Wales, the North East and Yorkshire &amp; the Humber.</p><h2><strong>But transactions are forecast to fall sharply with price falls to follow</strong></h2><iframe src="https://flo.uri.sh/story/1729166/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:600px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><h2><strong><br />Falling supply</strong></h2><p>However, in many of the housing supply constrained UK city centres, where there is a greater concentration of equity rich buyers, price growth is still expected.</p><p>Ultimately new housing supply is expected to fall even further behind target as a result of the tightening market conditions.</p><p>JLL forecasts that there will be a national shortfall of 610,000 homes over the next 5 years alone &ndash; up from JLL&rsquo;s previous expectations for an already stark shortfall of 500,000 homes. In London private new home starts are forecast to average
    circa 16,000 per annum &ndash; well below the Greater London Authority target for 52,000 new homes per annum.</p><h2><strong>And UK housing supply will continue to fall well short of targets</strong></h2><iframe src="https://flo.uri.sh/story/1729214/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:600px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><h2><strong><br />Rental market</strong></h2><p>The current supply demand imbalance across the UK rental market looks set to endure as fewer households move across into owner occupation and demand for rental properties increases further.</p><p>We expect that prospective buyers, as well as those who would under normal circumstances have transacted under Help to Buy, will remain in the rental market. This adds further fuel to an already constrained rental market and will, we expect, mean the
    supply demand imbalance and resulting rental growth will continue. Rental growth is expected to be particularly strong at the front end of the five-year period before falling back in line with historic norms of circa 2% - 3% as inflation is brought
    back under control.</p><p>The outlook for investors is mixed. Demand for rental properties looks set to continue, and forecasts of rising rents and falling prices suggest we could see a rise in yields across the board. But the cost to service debt will remain a key issue for more
    highly indebted landlords.</p><p>The purpose-built UK BTR sector is expected to outperform the wider UK rental market in terms of rental value growth.</p><h2><strong>Economic Forecasts</strong></h2><iframe src="https://flo.uri.sh/visualisation/11646570/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:400px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><p><br /><br /></p><iframe src="https://flo.uri.sh/visualisation/11646658/embed" title="Interactive or visual content" class="flourish-embed-iframe" frameborder="0" scrolling="no" style="width:100%;height:250px;text-align:center;" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation"></iframe><h2><strong><br />Forecasts</strong></h2><p><style>.height-100 {
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</p><section><div class="row">
 <div class="column-four height-100"><div style="max-width:540px;"><h2><strong>UK House Price Growth (%pa)</strong></h2><img src="https://dev-cms-resi.eu.jll.com/images/default-source/agency/picture3c661fa16-e344-4166-b880-888d9a918512.png?Status=Master&amp;sfvrsn=69cedcd0_1" sf-size="100" alt="" /></div><div style="max-width:540px;"><div><table class="table table-borderless k-table" align="center"><tbody><tr><td style="min-width:50px;width:20%;text-align:center;">2023</td><td style="min-width:50px;width:20%;text-align:center;">2024</td><td style="min-width:50px;width:20%;text-align:center;">2025</td><td style="min-width:50px;width:20%;text-align:center;">2026</td><td style="min-width:50px;width:20%;text-align:center;">2027</td></tr><tr><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">-6</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">1</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">4</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">5</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">5</td></tr></tbody></table><h2><strong>Cumulative Growth</strong></h2><p><strong>8.9%</strong></p></div></div></div>

 <div class="column-four height-100"><div style="max-width:540px;"><h2 style="color:black;"><strong>UK Rental Value Growth (%pa)</strong></h2><img src="https://dev-cms-resi.eu.jll.com/images/default-source/agency/picture2a3722ef1-673e-4ce1-bb95-44b6dae7a33a.png?Status=Master&amp;sfvrsn=cdbed46_1" sf-size="100" alt="" /></div><div style="max-width:540px;"><table class="table table-borderless k-table" align="center"><tbody><tr><td style="min-width:50px;width:20%;text-align:center;">2023</td><td style="min-width:50px;width:20%;text-align:center;">2024</td><td style="min-width:50px;width:20%;text-align:center;">2025</td><td style="min-width:50px;width:20%;text-align:center;">2026</td><td style="min-width:50px;width:20%;text-align:center;">2027</td></tr><tr><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">4</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">3.5</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">2.5</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">2.5</td><td style="min-width:50px;width:20%;font-size:24px;font-weight:600;text-align:center;">2.5</td></tr></tbody></table><h2><strong>Cumulative Growth</strong></h2><p><strong>15.9%</strong></p></div></div></div></section><p><strong><em><sup><br />Forecast disclaimer -&nbsp;</sup></em></strong><em><sup>Forecasting is a complex task at the best of times, but with so many moving parts making predictions in the past six months has been made all the more difficult. As always, we at JLL will continue to revisit our forecasts on a regular basis.</sup><strong></strong></em></p><p><sup>Disclaimer: &copy; 2022 Jones Lang LaSalle IP, Inc. All rights reserved. Data within this report is based on material/sources that are deemed to be reliable and has not been independently verified by JLL. JLL makes no representations or warranties as to the accuracy, completeness or suitability of the whole or any part of the report which has been produced solely as a general guide and does not constitute advice. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. JLL, its officers, employees shall not be liable for any loss, liability, damage or expense arising directly or indirectly from any use or disclosure of or reliance on such report. JLL reserves the right to pursue criminal and civil action for any unauthorized use, distribution or breach of such intellectual property.</sup></p>

JLL UK House Price Forecasts - Housing set for a correction, not a crash

Housing set for a correction, not a crash

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<h2>Market Update October 2022</h2><p><strong>The UK&rsquo;s &lsquo;mini budget&rsquo; on 23 September caused some significant turbulence in the financial markets. Questions over how spending promises announced at the UK&rsquo;s mini budget would be funded left investors questioning the fiscal rectitude of the UK government. Bond yields, swap rates, and other debt costs soared, nearly causing an insolvency crisis in the pensions industry before the BoE was forced to intervene. A financial crisis was narrowly avoided but at the likely cost of higher inflation and a deeper recession. </strong></p><p><strong>Less than a month later Kwasi Kwarteng was replaced as Chancellor by Jeremy Hunt, with his 17 October statement rolling back most of the &lsquo;mini budget&rsquo; plans. Stamp duty savings were one of the only policies to survive the cull. Initial reactions from the market appeared positive. While it seems unlikely that this will trigger a fall in mortgage rates in the short term it is hoped that the roll back will result in greater stability in swap rates and gilts which in turn will limit the need for the kind of rate rises which were being touted at the end of September.&nbsp; </strong></p><h3>Rising interest rates and the mortgage market<br /></h3><p>Expectations of a sharply higher Bank Rate and rapidly rising debt costs have caused significant movements within the household mortgage market. It is still too early to assess the full impact of changes to the economy on the housing market. But it looks likely that transactions and prices will fall as higher interest payments add further weight to already squeezed household budgets.</p><p>It is obvious that recent shifts in the UK economy will have ramifications across the housing market. However, we do not think this is comparable to market conditions at the time of the global financial crisis.&nbsp; The UK has almost full employment and more stringent lending rules mean far fewer households have loans of 90% or more secured against their properties.&nbsp; Households have built up a significant equity buffer with 60% of outstanding mortgages at less than 75% LTV. </p><h3><strong style="background-color:transparent;color:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">Help to Buy deadline</strong><br /></h3><p>The deadline for registrations for the government Help to Buy scheme is 31<sup> </sup>October 2022 means we expect the number of first-time buyers to fall over the coming year. Coupled with difficulty in the mortgage market, we expect even further increased demand for rental properties. This adds further fuel to an already constrained rental markets and will, we expect, mean the supply demand imbalance and resulting rental growth will continue. The outlook for investors is mixed. Demand for rental properties looks set to continue, and forecasts of rising rents and falling prices suggest we could see a rise in yields across the board. But the cost to service debt will remain a key issue for more highly indebted landlords. </p><h3><strong style="background-color:transparent;color:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">House prices</strong><br /></h3><p>UK house prices continue to defy all odds over the summer, with annual growth reaching 15.5% in July 2022. House prices grew 9.2% across London over the same period, the highest annual growth recorded in the capital since August 2016.&nbsp; <strong></strong></p><h3><strong>Rents</strong></h3><p>The rental market remains competitive in the UK, with stories of bidding wars, gazumping and sealed bids. Zoopla reported that demand for rentals was up 43% on last year, whilst the number of new rental properties on the market was down 23%. The latest Homelet rental index report an annual rent rise of 9.2% in September across the UK, whilst monthly rents in London have risen by 2.5%. </p><h3>Demand</h3><p>The RICS reported demand for rental properties was still outstripping supply in September. The supply demand rental story in London is particularly delicate as landlord instructions fell sharply from July to September. In the sales market, new buyer enquiry across the UK rose marginally in September, albeit the number of agents who reported house price increases over the past 3 months has fallen. </p><p><strong style="background-color:transparent;color:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">And in case you missed it&hellip;</strong><br /></p>Our JLL Rental Index records a 15% increase in Prime Central London achieved rents; read more in our <a href="https://residential.jll.co.uk/insights/research/guide-to-investing-in-prime-properties-london-uk-jll"><a href="https://residential.jll.co.uk/insights/research/guide-to-investing-in-prime-properties-london-uk-jll">guide to investing in prime properties</a></a>. On the theme of prime markets, <em>Marcus Dixon, Director of UK Residential Research JLL</em>, discusses how <a href="https://www.estateagenttoday.co.uk/breaking-news/2022/10/jll-international-buyers-may-save-prime-markets-from-housing-downturn"><a href="https://www.estateagenttoday.co.uk/breaking-news/2022/10/jll-international-buyers-may-save-prime-markets-from-housing-downturn" target="_blank">international buyers may save prime market from a housing downturn</a></a>. Meanwhile Battersea Power Station has opened to the public on 14<sup>th</sup> October. A decade on from the acquisition of the Power Station by the current shareholders, <a href="https://www.standard.co.uk/homesandproperty/property-news/battersea-power-station-launch-london-new-neighbourhood-b1031924.html?r=54028"><a href="https://www.standard.co.uk/homesandproperty/property-news/battersea-power-station-launch-london-new-neighbourhood-b1031924.html?r=54028" target="_blank">JLL show prices have risen by 48% over the past ten years,</a>,</a> in the surrounding area.&nbsp; And finally, new research from Santander discovers that homeowners would be prepared to pay a 10% premium for a more energy efficient home. Back in May, we also surveyed some of our prospective buyers at JLL and also found <a href="https://residential.jll.co.uk/insights/news/are-buyers-waking-up-to-the-benefits-of-a-more-environmentally-friendly-home"><a href="https://residential.jll.co.uk/insights/news/are-buyers-waking-up-to-the-benefits-of-a-more-environmentally-friendly-home">buyers are beginning to wake up to the benefits of a more environmentally friendly home</a></a>.<p></p>

Residential Market Update October 2022 – Mini budget causes turbulence in markets

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