Signs of green shoots are appearing in the property market with buyers returning, supported by falling mortgage rates, wage growth outstripping inflation and a strong labour market.

With the Bank of England holding the interest rate at 5.25%, the consensus is that we are at the top of the rate rise cycle. Interest rate expectations in the monthly consensus forecasts have been improving over recent months as the economic outlook brightens.

Rates are predicted to start falling in the second half of the year, reaching 4.4% by the end of 2024. With inflation under control and forecast to fall to 2.2% by the end of the year, confidence in the housing market is improving.

DUAL DRIVERS

First-time buyers were biding their time during 2023 but it’s now expected that more first-time buyers will enter the market throughout the year, encouraged by the dual drivers of earnings growth and reduced mortgage rates improving affordability. According to Moneyfacts, the average 2-year and 5-year fixed-rate deals have now been falling for six consecutive months.

The availability of deals at the 95% loan-to-value tier has increased to 274 deals, its highest level since 2022, demonstrating that lenders are still keen to support borrowers with smaller deposits.

The start of 2024 has seen an upswing of new buyers, with agreed sales in the first six weeks of 2024 16% higher than the same period last year and 3% higher than in 2019 according to Rightmove.

MARKET MOMENTUM

Average asking prices rose 0.1% year-on-year in February, the first annual increase since August 2023 and an indication of growing market momentum.

Bank of England data revealed that the number of mortgage approvals rose for the fourth consecutive month to 55,227 in January, the highest level since October 2022. Meanwhile, the Chancellor announced in the Spring Budget that property gains tax is to be reduced to 24%, which may encourage landlords to sell, boosting transactions.

The December UK House Price Index from the Office for National Statistics showed a mixed picture around the UK. However, the Nationwide House Price Index reported month-on-month house price growth in February, increasing by 0.7% as market momentum grows.

INDICATIONS OF RECOVERY

According to the building society on an annual basis house prices saw a 1.2% increase in February, the first positive year-on-year growth since January 2023. This contributes to the emerging indications of recovery in the housing market. And according to the HM Treasury Average of Independent Forecasts although prices are forecast to soften slightly by -1.0% this year they are expected to recover by 0.8% in 2025.

Early signs for the market in 2024 are increasingly positive, with metrics for buyer demand, sales and new instructions all turning positive.

Choice for buyers is also on the rise, with Zoopla reporting that available homes for sale are 20% higher than a year ago.

BOOSTING CHANCES

Improved market conditions are boosting the chances of a sale, although sellers must continue to present their property well and at a reasonable price if they are serious about moving in 2024.

Half of agents in the Dataloft Inform Poll of Subscribers say offers are currently being accepted up to 5% below initial asking price; however, 15% report this level or higher.

This may well be underpinning house prices in many areas of the UK.”

Looking at housebuilding figures, just shy of 240,000 new builds were completed in 2023, the numbers holding up relatively well in a slower sales market but still short of the government’s 300,000-per-year target. In most UK regions there were fewer completions in 2023 than 2022, overall, down by -8.6%. This may well be underpinning house prices in many areas of the UK.

The average time to sell in the UK has slowed compared to the same time last year. However, with brighter days beckoning, momentum is likely to be injected into the market.

Over the last five years, with the exception of the Covid year of 2020, properties have taken 10 days less to sell in spring than winter, meaning this could be an ideal time for vendors to put their home on the market.

Iain McKenzie (main picture) is Chief Executive of The Guild of Property Professionals

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Over the past few weeks, the shadowy side of the real estate world has been brought to the forefront.

It was reported that an Azeri tycoon used dirty money to acquire a £50 million property empire in London and a former Bangladeshi land minister in the UK has quietly amassed over 350 properties, totalling nearly £200 million.

These incidents raise significant questions about how effectively we monitor foreign money entering the market. These were sophisticated schemes but there’s no doubt conveyancers, estate agents and lenders will need to be increasingly vigilant to do their part in preventing money laundering.

The property market remains a hotbed for dirty money. However, we can strengthen compliance by using technology that promotes transparency and upholds the integrity of the financial ecosystem.

AZERBAIJANI

Last week, the National Crime Agency (NCA) alleged that Azerbaijani politician and businessman, Javanshir Feyziyev and his wife Parvana acquired 22 homes, mostly purchased jointly, using the proceeds of crime and corruption. They used a complex network of shell companies across various jurisdictions, including the Marshall Islands, Seychelles and the British Virgin Islands, to channel funds for properties in the UK, such as two in Belgravia’s Chelsea Barracks.

The NCA claims the scheme involved forged invoices, false accounting, and deceptive transactions, including those labelled as “payment for nutritious baby food.”

This story is one of many that we see cropping up in the news and demonstrates there are loopholes, especially with funds flowing through multiple countries. Verifying sources of funds and strengthening international cooperation and information-sharing among regulatory authorities could help address these cross-border challenges.

LAUNDERING PROBLEM

The UK has a long-established money laundering problem in the property sector, particularly in the lavish streets of London. Transparency International’s 2023 ‘Through the Keyhole’ report details how almost 52,000 UK properties are still owned anonymously despite a new transparency law designed to reveal their true owners.

High asset values, complex ownership structures, large financial transactions and gaps in legislation make it easier for criminals to legitimise dirty money via the property market, making it a prime target. As a result, laundered money infiltrates the economy, weakens stability and distorts market dynamics.

Generally, there are too many areas in the UK’s financial institutions where dubious funds can slip through the net. An example in property is that the conveyancing sector has strict rules on establishing the source of funds, while mortgage lenders don’t have similar scrutiny on lump sum mortgage repayments.

PLUG HOLES IN A DAM

Regarding anti-money laundering (AML), it’s like trying to plug holes in a dam. While implementing source of funds checks during property purchases acts as a significant hurdle, money launderers are now actively seeking alternative weak points throughout the entire property ownership process.

Ensuring the legitimacy of funds is a shared responsibility for all involved parties, but legal firms often bear the brunt of conducting source of funds checks. Despite their best efforts to align with AML standards, the number of operating firms within the sector presents a considerable challenge for regulators. The diverse landscape of legal entities engaged in property transactions adds complexity to the regulatory landscape, emphasising the need for comprehensive and adaptable oversight in this crucial aspect of financial compliance.

OPEN BANKING

Every day, property and conveyancing businesses are swamped with huge amounts of paperwork, slowing down processes and making the truth harder to keep track of. Open Banking gathers key information from a buyer or seller’s account to determine where the funds have come from. This technology, together with AI and machine learning, is key to unlocking effective AML checks as it provides transparency for all parties involved, and can help firms identify riskier customers.

It eliminates the need to manually verify a client’s funds as well as ownership of accounts. A client check can also be conducted across multiple bank accounts, providing the required information from those accounts in a single report. Ultimately, this also makes it easier for legal professionals to conduct necessary AML checks and spend less time on data collection and verification, both lengthy tasks.

FINANCIAL BEHAVIOUR

Open Banking enables legal professionals to focus on the reasons for the financial behaviour, rather than the data itself. This is especially useful for legal firms based in areas of the country with high property prices, like London, which must take extra care when processing property funds.

Cracking down on dirty money pumping through the UK is simpler than we think.

In essence, we must reduce our relationship with paperwork and use technology that makes property transactions quicker and more transparent. At the same time, regulators and industry players must work together to implement and enforce robust AML protocols to cover all parties involved in a property purchase.

Mike Ward (main picture) is Executive Chairman of Armalytix

The post BLOG: How to combat dirty money in the UK property market appeared first on The Negotiator.

A developer once said that after a slowdown you need no further bad news for two consecutive quarters for a recovery to take hold. Perhaps an overly-simplistic rule but one that comes to mind when looking back at the last few months.

Inflation fell faster than expected in the final quarter of last year and by Christmas money markets were pricing in five interest rate cuts of 0.25% in 2024.

POSITIVE MOOD

The positive mood didn’t last long into 2024 due to stubborn underlying inflation and mortgage rates have begun to creep back up.

In the background is a swirl of bad news that includes an increasingly heated countdown to the general election and overseas military conflicts. And then came this month’s Budget.

The key headline for prime London markets was the abolition of the non-dom tax regime from next April. To date, those with non-dom status have not paid tax on their worldwide income for up to 15 years under a fairly complex set of rules, making the UK somewhat of a global outlier.

PAY NOTHING

From next year, new arrivals will pay nothing for four years before paying the same as other UK residents, a simplification the government has said will raise £2.7 billion a year by 2028/29. There were 69,000 non doms in the tax year ending in 2022.

Current non doms may well feel the rules of the game have changed in the middle of the match but the property market in London’s most expensive postcodes could get a boost from next April when a two-year transition period begins during which they will only pay 12% on their worldwide income.

Meanwhile, the average annual price fall in prime central London (PCL) was -2.4% in February while the comparable figure in prime outer London (POL) was -1.6%. It was an uncertain start to 2024.

Source: Knight Frank

On the demand side, the number of new prospective buyers was 9% higher than the five-year average in February. That was lower than the equivalent rise in January and reflects the slightly gloomier mood in the second month of the year in relation to the outlook for mortgage rates.

This change was also visible in the number of offers made, which is a good measure for buyer sentiment. While the number was up by 1% in January versus the five-year average, there was a 12% decline in February.

INSTRUCTIONS

And while the number of instructions for sale was up 9% in February versus a 5% rise in January, that was the result of a the relatively higher number of market appraisals carried out in the first month of the year. Market appraisals were only up by 3% in February compared to a 13% jump in January.

For buyers and sellers, they should look for some hope in what the Bank of England says rather than what it does (it is unlikely to cut) when it meets later this month.

Tom Bill (main picture) is Head of UK Residential Research at Knight Frank 

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Chancellor Jeremy Hunt delivered his much-anticipated Spring Budget statement on Wednesday telling MPs that his plans will create a ‘budget for long-term growth’, promising that new measures will mean ‘more investment, more jobs, better public services, and lower taxes’.

After being largely overlooked in the 2023 Autumn Statement, measures aimed at supporting the housing sector were widely expected to include proposals for a 99% mortgage scheme, a cut to inheritance tax and stamp duty relief for downsizers.

DISAPPOINTED

Unfortunately, many in the industry have once again been left disappointed by the lack of significant proposals to support homeowners, landlords and the UK property market.

Whilst a reduction in capital gains tax could see a boost in property transactions, property investors were dealt a blow with the abolishment of the Multiple Dwelling Relief.

And a tax break for second homeowners who let out their furnished properties to holiday makers was also axed, amidst claims that it was depriving long-term renters of affordable accommodation.

The Chancellor had little to no headroom to make any real ‘big news statements’.”

Regrettably, and despite earlier hopes, the Chancellor had little to no headroom to make any real ‘big news statements’ in what is likely to be the Conservatives final budget for some time.

The removal of interest tax relief on holiday lets will no doubt be welcomed by many local people whose towns have been awash with investors buying property for short term lets. However, it is questionable as to whether this will have any real benefit for the struggling private rented sector.

RING OF TRUTH

A further cut of £0.02 in national insurance contributions must be welcomed, however the accusation of giving with one hand and taking from the other does have a ring of truth about it.

I am afraid this Conservative government is approaching the end game and to be frank, a period in opposition is exactly what they need.

How the Tory party have reached this position after the landslide election result in 2019 is beyond credulity and former Prime Ministers Boris Johnson and Liz Truss should hang their heads in shame.

Jeremy Prior (main picture) is Managing Director of Auction House

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Back in 1983 when I qualified as a surveyor, I was just one of three women among 40 students on my university course.

At that time, around 10% of the profession were women. While that ratio has crept up over time, we’re a long way from parity. A recent study showed women accounted for just 18% of RICS members across the UK, which demonstrates glacial progress.

Today, on International Women’s Day, we need to recognise this as a rallying call to all women who are passionate about property, and consider joining our profession.

While the general make-up of the surveying profession is heavily male-dominated, we know that women can do the job just as well.

Irrelevant

Gender is entirely irrelevant because what’s important is an eye for detail, a methodological mind and a burning interest in property.

We are proud that our vocational Diploma in Residential Surveying and Valuation helps people achieve their goals and start a new career in the profession. Women have every right to be a part of this fulfilling and respected profession and we would like to encourage more women to consider a career in surveying.

We are champions of equal opportunities and I’m very proud that among the technical team at Sava, all four of us are women.

In 2022 one of our former students, Zoe Baker, won the RICS Young Surveyor of the Year Award. She has since set-up her own business and published a book about buying property, while the current President of the RICS is a woman and there have been an additional two before her. These achievements demonstrate how women are enjoying thriving careers in the industry.

I’ve often been asked about whether my gender held me back and in my case the answer is a firm no but I know that’s not the case for all.

I didn’t follow a traditional career path and fell into surveying after not being entirely sure what I wanted to do as a teenager.

Sisterhood

A relative who was already working in the profession suggested I shadow him and the rest is history. Nowadays, there is more of a sisterhood in the profession than ever with networks offering strong support.

To thrive within surveying, no one needs to be a DIY aficionado because the profession is about understanding how to inspect residential property, conduct residential property valuations and achieving a strong grasp of professional conduct and law.

If we think about it in more simple terms, our students do not learn how to become bricklayers but they will understand if the bricklayer has done a good job.

Go for it

My advice to any woman thinking of a career in surveying is ‘just go for it’ and don’t overthink it. Countless female graduates have reported how the profession is never boring and is personally as well as financially rewarding – with those working for three years generating an average income of £61,000.

With such attractive prospects and supportive networks, I’m very excited about the future.

Author bio: Hilary Grayson joined Sava in 2003 and is now a Director focusing much of her time on the development of new qualifications. Sava provides education, technology and professional services to help look after the UK’s 29 million homes.

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Although I am a traditional Tory voter, who believes in capitalism with a small ‘C’, I am struggling to find a positive case to vote for the Tories at the next Election.

I’m not sure the deterrent effect of persuading myself that the Labour Party will be worse, is motive enough. Maybe I’ll just abstain and be a conscientious objector?

IRRITATION

My latest irritation is the soundings that our ‘esteemed Chancellor’ Jeremy Hunt has been deliberately putting dark rumours around the corridors of Westminster.

The latest is that the grand Satan, flagship policy, born from the politics of envy of the Labour Party, is about to be confiscated by the other side and announced at the Spring Budget later today.

What a caustic amalgam of policies the Tories have been spewing out for the international residential property investors who are chewing on them like a Bull Dog eating a wasp!

STAMP DUTY

Firstly, they made sure that the Stamp Duty rate is at a suffocatingly high level then they increased Corporation Tax instead of reducing it. And while they’ve been doing this they’ve stubbornly refused to reinstate the VAT reclaim facility, which is so important to retailers in the UK, and now they are considering kicking the Non-Dom’s in the proverbial, for completeness.

Have the Tories lost their senses and are they starting to steal the Labour Party’s rhetoric as they are bereft of ideas of their own?

It is yet to be proven whether there will be any tax gain at all for the Exchequer by abolishing the Non-Dom facility.

REDUCED SPENDING

What is far more certain is the predictable loss of revenue from reduced retail spending, employment, Corporation Tax and VAT which will be the inescapable casualties which flow directly from the exodus of wealthy investors.

If you are in any doubt about the worth of these high net worth (HNW) citizens, you only have to look to the Continent and see how many socialistic countries are hurriedly creating special tax breaks for disaffected UK Non-Dom’s.

The Europeans are not stupid and if we don’t want these resourceful people and their money, they do.

DIE-HARD TORY

With overall taxation being at a post war high you have to be quite a die-hard Tory to find a good reason to warm to them.

I can’t help but think that the higher end of the residential property market will not be affected by this.

I notice with great interest there has been a spate of buying by Americans of prime central London trophy homes but they also benefit from the Non-Dom tax arrangements as presently arranged even though they pay full tax in the USA.

We would be fools to ignore the consequences of these actions.

RABBIT FROM THE HAT

I suppose that Jeremy Hunt has one last chance to pull a ‘rabbit from the hat’ but his options are few and I’m afraid the Prime Minister’s hollow rhetoric at the Tory conference last autumn when he tried to proclaim that he was the ‘champion of change’ is looking conspicuously feeble, if not fatuous.

All these machinations will not affect the residential markets below £5 million but above £10 million I think there will be a dearth of buyers from abroad as the wealthy, cognoscenti, find more palatable ‘homes’ for their money, elsewhere.

A long sigh from an exasperated Tory.

Trevor Abrahmsohn (main picture) is Chief Executive of Glentree International

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The wealth of available online sales data alongside ubiquitous news headlines about the property market means that it’s incredibly common for vendors to already have valuations pre-worked out in their own minds.

Of course, we all want the best sales price but there’s cause for pricing property more conservatively in order to achieve better results.

IMPRECISE SCIENCE

Valuation is an imprecise science and the old adage is certainly true – a property is only worth what someone is willing to pay for it.

Every property sale is truly unique and circumstances, trends and climates change so quickly that comparing similar properties doesn’t always give a true comparison.

In Scotland even Home Report valuations can fall foul of this.”

And in Scotland even Home Report valuations can fall foul of this, as they consider what similar properties in the area have sold for, when that data might be out of date or no longer relevant by the time you are ready to start the sales process.

The asking price of a property tends to be a few thousand pounds either side of its Home Report valuation, with sellers expecting to then achieve over and above the official figure.

UNREALISTIC valuations?

But Home Report valuations in themselves can set unrealistic expectations. For instance, if someone is selling a home in January, a Home Report surveyor may be looking at what houses sold for six months prior, in the peak summer season, to set the property’s value, therefore starting at an inflated and potentially unattainable figure.

It’s essential for vendors to be realistic about the amount over the value that they should then be expecting to achieve. The higher the initial value, the less likely it is that buyers will be able to bid significantly above it. The asking price is there to lure buyers in and it’s this that should be considered carefully to ensure maximum appeal in a highly competitive market.

Buyers feel no need to bid competitively to secure the property.”

Our own sales data shows  that there’s a strong correlation between the amount of time a property is on the market for versus the percentage of its Home Report valuation it achieves at sale.

There’s also data that indicates that the percentage of the valuation achieved in properties that are marketed at an appealing, appropriate price is higher, versus a property that’s perhaps been overegged and then must reduce its price to make it more competitive, or buyers feel no need to bid competitively to secure it and feel more confident in making lower offers.

In 2023, we saw a huge increase in the number of properties coming to market at a fixed price, which we can assume to be a way of maximising appeal to unconfident buyers and securing a quicker sale, rather than looking for crazy bids over and above the valuation figure.

OFFERS OVER

While this has calmed down in 2024 so far, with the ‘offers over’ marketing method applied to the vast majority of properties for sale we can see how marketing your home at a sensible ‘offers over’ price helps sellers to achieve a higher net sale price overall.

Our data shows that when properties are marketed at a fixed price, the asking price is around 99% of the Home Report valuation, with sellers understandably reluctant to market their home for less than its value. Generally, fixed price properties then sell for around 98% of their Home Report valuation, meaning that buyers offer exactly the asking price, or sometimes slightly under. 54.3% of fixed prices homes sold last year achieved a figure less than their valuations, while just 11.5% achieved a sales price higher than valuation.

‘Offers over’ properties must work harder to be more appealing.”

However, ‘offers over’ properties must work harder to be more appealing than those listed for a fixed price, as buyers come to these properties well aware of the risks of a bidding war ensuing – properties must stand up to the task. It’s far better to impress than underwhelm, and pricing competitively can certainly assist with that.

From our data, we can see that properties marketed using the ‘offers over’ model have a lower asking price compared to the valuation (averaging 96%) compared to fixed price homes, which then subsequently drives a sale price of around 108% of the property’s Home Report valuation.

INCREASED VALUE

This suggests that pricing the properties lower than the Home Report valuation drives increased value overall, compared to the fixed price system, where properties tend to break even at best. 76% of properties sold in 2023 achieved above their Home Report valuation at sale.

Asking price also affects the time the property is on the market for. Unsurprisingly, properties that sold the fastest achieved the highest percentages of Home Report valuation, with buyers keen to snap up a perceived bargain and thus submit more competitive bids. Homes that sit on the market for longer then run the risk of cheeky lowball bids, or the sellers feeling pressured to officially reduce the price.

It’s tempting to be ambitious and try to secure the highest possible price but it’s important to resist the urge to go big – if you price cleverly and conservatively at the first opportunity, the evidence shows you might just end up with a higher sales figure at the end.

Paul Hilton is Chief Executive of property portal ESPC

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Earlier this month Housing Secretary Michael Gove announced a set of proposed new rules for short-lets. This includes the need for people to seek permission from the council to turn their home into a short-let and a mandatory national registration scheme.

This type of regulation is long overdue. Although there is a general lack of data on how many properties are being used as short-lets and its exact impact on the private rental sector, there’s no doubt it’s squeezing the availability of rental stock.

short lets HOT SPOTS

This is particularly true in coastal areas, tourist hot spots and big cities where holiday makers offer the prospect of quicker, bigger bucks than renters.

With the announcement now made the real questions start. Will these changes usher in smarter regulatory systems for short-lets and help ease Private Rented Sector (PRS) pressures or are they just a political manoeuvre designed to win over marginal seats ahead of an election?

Checking in: Holiday lets can offer big bucks.

Few would argue that better regulation is needed in this section of the housing market.

This is particularly against the current backdrop of market pressures: rising rental costs for tenants, acute demand on available stock and pressures driving landlords out the market.

Whilst most moves to regulate the housing market are met with a mixed response, most lettings professionals and PRS landlords agree that more needs to be done here.

Change has been too long in coming.”

They would also agree that change has been too long in coming. This frustration is also felt by locals who are at the sharp end of the short-lets boom.

These include residents who can’t rent in their own towns and areas where holiday rentals have hollowed out the community.

OUT OF CONTROL

Adding to the frustration over how long it’s taken to get to this point is the fact that the Government could find multiple examples of how other countries have effectively tackled this. Paris, New York, Amsterdam, Barcelona; they’ve all stepped in to stop short-term lets getting out of control. And it’s worked. Tourism wasn’t killed and locals weren’t squeezed out to make room for more Airbnbs.

Will the Government be able (and incentivised) to deliver a similar success on these shores? If so, they’ll need to make sure any new regulations have teeth and close down any loopholes.

TAX DISCREPANCIES

For example, it’s vital that we address tax discrepancies as part of this change. If we level the playing field between conventional lettings (where mortgage interest is only partially deductible and Furnished Holiday Lets, which are eligible for a range of tax incentives), we can ensure managing full-time, tenanted properties isn’t less attractive.

To the same end, the Government needs to make sure beneficiaries of short-term lets are under the same rules and transparency with HMRC when it comes to reporting income – that, for instance, the same rules around Making Tax Digital (which is due to come into force in 2026), will apply to both types of lets.

The Government needs to turn promises into action.”

However, before we can make sure new rules are enforced fairly and effectively, the Government needs to turn promises into action.

The sceptics amongst us might see this as a political move, designed to curry favour with voters. There are lots of votes to be won in marginal constituencies that have issues with housing, particularly in coastal and rural areas.

INCENTIVE

With the clock running out of time ahead of a General Election (and polls suggesting the Tories won’t be around to implement any new rules), is there sufficient incentive to drive through these proposed new rules and make them stick?

Following the huge delays around the Renters Reform Bill and the musical chairs approach of Housing Ministers over recent years, it’s hard to get one’s hopes up. However, for the sake of the private rented sector and the communities most affected by short-term rentals, let’s hope that this isn’t the case.

It’s time for the Government to put its shoulder to the wheel and get some sensible changes onto the statute books.

William Reeve is Chief Executive of Goodlord

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