Insight From Our Chairman: An Update on the Resilience of the Housing Market and Investing Into Property

The resilience of the housing market in recent times and the role I believe alternative investments – and property in particular – can play in combatting volatility and maximising potential returns are two topics I have discussed before. But the landscape is ever-changing.

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The narrative and statistics regarding both the performance of the housing market and where is “best” to invest your capital amidst a turbulent economic backdrop fluctuate, therefore it’s necessary to revisit and take a look at where we stand now. 

With regards to the housing market, you’ve likely seen some contradictory reports in the news. Some say the market is steady and recovering, whilst others remain more pessimistic. Halifax’s most recent house price index reported that annual house price inflation slowed to 0.1% in April, down from 1.6% in March. 

However, Rightmove report that the average new-seller asking price for a home coming to market in May has increased to £372,894 from £366,247 in April, whilst Zoopla state that house prices have continued to rise in all areas of the UK with the exception of six parts of inner London and three parts of Aberdeenshire.

Tim Bannister, Rightmove’s Director of Property Science, said: “This month’s strong jump in new-seller asking prices looks like a sign of increasing confidence from sellers. One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely. What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years”.

This is also evidenced by recent buyer demand. The current economic uncertainty has undoubtedly unsettled the market, with rising interest rates impacting mortgage availability and affordability and high inflation affecting households’ disposable income. But this has not resulted in as significant a drop in demand as some had predicted. 

Zoopla states the market is now seeing a “steady and sustained recovery in buyer demand and continued growth in the number of agreed property sales”, and as the number of mortgage deals available increases – exceeding 5,000 for the first time in over a year – this will likely help bolster it further.

In fact, following the Easter break, demand from buyers reached its highest level this year and was even 14% higher than pre-pandemic in 2019. It remained 42% down on this time last year, when the market was still experiencing unprecedented and arguably unsustainable growth in both demand and pricing. 

On this, I’d like to once again reiterate my stance that the return to somewhat normality within the market we are now experiencing should not be considered a negative. The remarkable pandemic-induced performance was likely to be unsustainable long-term as soaring house price growth was pricing an increasing number of prospective buyers out of the market, and there simply isn’t a great enough supply of new homes to match demand. 

What is clear is there are regional pockets where the market is performing particularly well. According to Zoopla, up to now in 2023, there have been the most property sales in the North East, London and Scotland.

Anecdotally, I’ve seen first-hand that vendor expectations remain high, whilst houses aren’t selling as quickly unless they’re in a prime location. This comes back to the idea that there will always be healthy demand for ‘the right homes in the right locations’, and this is demand that new-build, regional housebuilders in particular are able to cater to through strategic land acquisition and a superior knowledge of the needs of local areas.

What’s more, Halifax found that existing house prices have fallen by 0.6% over the last year, but new-build house prices have continued “to provide some support to the wider market”, rising 3.5% year-on-year. 

With all of this in mind, I believe the UK housing market’s further resilience this year, defying many experts’ expectations, has worked to prove once again that it is certainly an asset worthy of consideration from investors. 

And the ability to support regional, SME builders in delivering the aforementioned, much-needed ‘right homes in the right locations’ – at a time when the data shows new-build popularity is not waning – whilst also targeting returns often in excess of 9% via property bonds is something investors with the appropriate risk appetite should consider. 

Further to this, I feel it’s important to add that given Prime Minister Rishi Sunak’s decision to soften the Government’s commitment to deliver 300,000 new homes per year by the mid-2020’s from “mandatory” to “advisory” may have a significant impact on already-too-low housing delivery, property bonds become even more important from an impact-driven perspective to help tackle this.