richard donnell
@richard_donnell
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Executive Director @Zoopla - data-led insight on UK housing and mortgage markets - I never stop learning. Formerly @Savills & @HometrackGlobal - views my own.
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Joined March 2011
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If you bail out mortgage borrowers (all of whom could have afforded 7% rates if they took the loan since 2015) you need to bail out renters who have faced similarly large increases in annual repayments ... lenders will be expected to provide the support
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4,000 private rented homes in London are being put up for sale a month finds
@Zoopla
as landlords feel the squeeze on cashflows
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There are 102 local authorities where
#residential
rents are rising faster than
#CPI
#inflation
adding to cost of living pressures - mix of cities and rural areas - according to the
@Zoopla
Rental Index for new lets.
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Chatting to various people in the mortgage industry not many borrowers are going for a term extension to ease pain of higher repayments - they are paying up and hope the cost comes down in 12-24 months - sucking spending power out of the economy in the process
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The extension to 40% for help to buy London was a step too far - while it priced in people on £80k incomes the next buyer needs closer to £120k income to buy unaided i.e. no equity loan - simple maths but a reduced pool of possible buyers
🏠 Scheme encouraged people to buy property now beyond their means, say critics
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Enjoyed chatting to the arch UK housing bear
@moving_charlie
and his analytical [and debt mountain] accomplice
@alexgroundwater
this evening - its not a bed of roses but the economic outlook will dictate what happens by 2025 - good debate and
#disagreeagreeably
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Higher mortgage rates have squeezed (crushed) the economics of BTL. This table shows the rent needed to make a 75% LTV BTL work and how 6% stress rates (up from 4% last year) mean 75% isnt attainable - right hand column has max. LTV for a higher rate taxpayer
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This has been a drag on London residential values for some time now - flat values static since 2016 in nominal terms - double digit real price falls
Over one in ten Londoners considering selling their homes over leasehold costs
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Anyone hoping for 4% UK mortgage rates anytime soon will be left waiting
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Flats have underperformed house prices in the UK, particularly in areas with
#leasehold
as primary tenure based on
@Zoopla
HPI -
#cladding
, service charges, search for space have hit values. Better value for money factors will drive more demand - buyers just need to choose
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NEW
@Zoopla
rental report finds 1) rents for new lets have outpaced earnings for 21 months, 2) Rental affordability worst for a decade but 3) talk of landlord exodus overdone - higher mortgage rates hit 20-30% of landlords with >50% LTV loans
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UK house prices arent going anywhere in 2024 - two thirds of homes in markets with price falls - improvements in north of England but price falls embedded in southern England as affordability constrains prices which need to adjust relative to icnomes - its going to take a while
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Canary Wharf is going to become a major new residential suburb like Nine Elms as the big office occupiers downsize .... the transition has been happening around the fringes but the core is the next to change and evolve
Canary Wharf’s woes deepen as Moody’s plots to leave. Blow comes weeks after HSBC announced it would leave its Docklands tower
#canarywharf
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Rent controls in Scotland might benefit existing renters but not those looking for new tenancies reports
@Robert_Booth
@guardian
Loophole in Scotland’s rent controls sees new tenants facing largest rises in UK
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They say London leads the way for the rest of the UK housing market - this chart of central London resi values is static for 8 years ... this market was v over valued in 2016 before BREXIT, pandemic, tax changes and now higher rates hit demand and buying power
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London centric UK distorts the economic picture finds
@FT
and
@jburnmurdoch
- its the same with housing data on values and rents where London often distorts the national picture
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Renters have already seen a £2,820 increase in
#rents
for new lets in last 5 years so on a par with the £2,900 hit estimated by
@resfoundation
for mortgagees where the impact more drawn out - renters tend to be on lower incomes with more unsecured debt
If you bail out mortgage borrowers (all of whom could have afforded 7% rates if they took the loan since 2015) you need to bail out renters who have faced similarly large increases in annual repayments ... lenders will be expected to provide the support
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sub 5% mortgage rates coming later this year but 4-5% will be the new normal
UK's biggest mortgage lender will reduce rates by up to 0.71 percentage points from Friday, with a five-year fixed deal priced at 5.39% from 6.10%.
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A chart that didnt make our
@Zoopla
HPI today showing how homes stuck on market unsold after 3 months are cutting asking prices more aggressively than homes that are selling - sellers need to be realistic on price if they want to move home - asking price is not home value
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I am surprised by the optimism on house price inflation for 2024 - the south of England is a drag anchor that i think will keep UK prices flat at best - this affordability problem isnt going to disappear overnight - firmer prices are helping people move which is good news
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No wonder
#house
prices are falling in S. England - income to buy an ave. home with 75% LTV loan at 4x LTI is over £70k in many places and requires >£100k deposit - the higher the income to buy the more people are priced out, hitting sales and prices. HPI +ve in affordable areas
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5 year GB swap rate 0.6% off peak as rate expectations shift to 5%. Lenders add 0.7% to get a mortgage rate. Those flush with other sources of funds to lend can be more aggressive - we may see sub 5% mortgage rates for low risk (LTV) lending this autumn
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Private rents have roared ahead of frozen housing benefit levels reducing availability of private rented homes for those looking to get out of
#homelessness
- our latest work with
@crisis_uk
finds just 4% of 1 beds on
@Zoopla
were below LHA with big local variations
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Latest
@Zoopla
HPI out today - most homes for sale in 8 years - supply rising faster than sales - this will keep prices in check i.e. flat over 2024
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everyone is tying themselves in knots on how to help first time buyers ahead of an election - today we have 99% mortgages, linked to mortgage guarantees, then 25 yr fixes and with HtBv2 lurking in background as nuclear option - its a knotty problem with no easy answers as
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Feels like we are getting close to 5.5% rates for a 75% LTV 5 yr fix - mortgage rates will likely fallback slowly over H2 as lenders price very competitively for business
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Looks like i need to dust off this chart from last August - only question is do i add 7% ? I dont think so but lots of nervous excitement and speculation returning. 5% mortgage rates the tipping point but they need to stay above to get the -ve HPI impact
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The mortgage rate outlook is getting more concerning with rates rising and rising in line with the cost of finance - we have consistently said 5% is a 'tipping point' and the outlook for the next 12m depends on where rates are by the end of summer
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NEW
@Zoopla
HPI out today - 12% more buyers this month, who are unwilling to compromise on what they want, house prices -0.5% yoy. Still rooted in a buyers market with 4.2% gap between asking and achieved prices. 1 in 5 sales agreed at >10% below asking.
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This is the spring bounce as mortgage rates fell to 4% - prices will start falling in H2 now rates back above 5% - crash unlikely - long drawn out no growth and double digit real price falls
House prices are slipping but there is no sign (yet) of a crash according to
@HalifaxBank
this morning. Without a catalyst to prompt a large scale sell off prices look likely to remain steady.
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4-5% mortgage rates are manageable with +/-2% house price inflation and 1m sales. 6% mortgage rates have a much bigger impact, esp if banks test affordability at >8%. Financial markets are driving mortgage rates not the BoE
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the adjustment to higher mortgage rates will take time to feed through to housing affordability - incomes growth has to do the hard work for longer - prices could fall faster but homeowners dont want to go there and are sitting tight for some time yet ....
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The real
#housing
story from higher
#mortgage
rates is
#transactions
which we expect to be down 23% yoy - house prices are 'sticky on the way down' esp. with bank
#forbearance
as per the recent
@NationwidePress
and
@HalifaxBank
indices
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Asking price reductions of >5% are being applied to 6-7% of homes on
@zoopla
- this is running 30-40% above 5 yr average. Sellers need to get realistic if they want to move home in 2023, something that might become more challenging so this trend will grow in H2
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One month on from the reopening of English
#housing
market and sales 'sold subject to contract' are back to last years levels. Demographic analysis shows a broad based pick up - COVID has created an unlikely spike in sales - lets see how long it lasts
#ukhousing
#property
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Calling for
#rentcontrols
to ease rental inflation in
#London
misses the supply side problem where we are starting fewer new build homes than since 2011 woth no sign of any improvement - our recent
@zoopla
rental repot shows London has the lowest availability of rental supply
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Thanks
@HenryPryor
. Our data on demand and sales doesnt indicate the wheels are falling off the housing market. Things are expectedly weaker but deals are still being agreed with sellers having to be realistic
Please ignore this total crap. 💩
Only 'YouTube Charlie' is suggesting a 30% fall & to his credit he goes to H U G E lengths to confirm that he is NOT an expert.
Listen to
@richard_donnell
&
@TomBill_KF
who actually know their subject. 🤬
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Rents still rising faster than earnings - slowdown in London as affordability restricts rental inflation. The bad news - we are just about to enter the period when demand for renting takes off ...
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Bank of England holding rates not as surprise as there is more cost to come for households that will take money put of the economy not least higher rents and mortgage payments for millions of households - dont expect mortgage rates to move lower quickly in short term
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40% of stamp duty comes from 3% housing sales that are over £1m ... those with broadest shoulders ...
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First time buyers
#FTB
need another £7.5k income to buy due to higher prices since 2020 - now need £55k - they are are taking longer mortgages and looking to smaller homes and to get away from a red hot rental market. Full report here
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Annual house price inflation is close to a 50:50 split between prices falling and still rising across 65 UK cities - close link to pricing levels but some low value markets falling on a weak local economy
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Shared ownership is being pushed as a solution to the
#affordability
challenges for
#FTBs
- as with any support scheme that helps you buy there are extra costs to watch out for and its not really a product for people whose incomes arent going to rise at a decent pace
Good report this from
@ResourcesShared
. Being made to sign up to spend as much as you can afford on something which inevitably gets more expensive over time has always struck me as a bad way to design a housing product
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Record immigration to UK in 2022 ... no wonder enquiries per rented home were through the roof ... pushing rents higher
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Landlords selling remains steady at 30k of sales listings or 1 in 10 - not much change
@HenryPryor
- 30% stay in the rental market - the
#PRS
has a 'hole in the bucket' but its not a mass exodus - we are losing the HPI/leverage focused investors who dont see it as a business
Plenty of chatter about it but still no hard evidence of landlords selling up according to
@CarolLewis101
in
@TimesProperty
. Not sure why there might therefore be a need to give those with a mortgage a tax break. (£)
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@MerrynSW
some quick calcs on buying the home you rent with a 100% mortgage - optimistic on the 5% product rate but an stress rate at 8% means you need to be on £40-£60k income for this to work in low to mid value housing markets - it will help some for sure but volumes will be low
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Lots of common sense here from
@Barker4Kate
and its pretty much spot on.
Economist Kate Barker: ‘To tackle inflation we should put taxes up for the better-off’
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House price indices
#HPI
often diverge when the market slows as they have different inputs and volumes - we have a shift in the mix of homes selling just now and
@Halifax
has more
#FTB
lending and new homes - FTBs are holding up as they buy ex BTL homes. The weak market is the
Annual rate of house price growth recorded by
@HalifaxBank
slowed to +1.6% (vs +2.1% for previous three months in a row).
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House price indices can move in strange ways when volumes drop as fast as they have and the mix of what is selling with a mortgage changes - its the 12m trend thats more important than the mom change which the creators of these indices flagged when they designed them ...
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Our latest house price index shows demand for homes down 44% since mini budget - sales down less by 28%yoy. Sellers having to accept growing discounts to achieve a sale. Report here
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Long term 35-40 yr
#mortgages
'hold buying power' in the face of higher rates but interest bill is c45% or £80k higher v 25 yr loan for an average buyer -
#homeownership
today but at a higher cost over time -
#FTB
need to buy a 3 bed home they are going to stay in for some years
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New
@Zoopla
housing update out today - worst of price falls behind us - soft landing for pricing as new sales agreed now 15% above 5 year ave. Sellers taking 4-5% discounts, 24% of homes for sale with asking price reduction in Q1 - lower than Q422. Report here
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It was great to support our charity partner
@crisis_uk
with this important work into the availability of homes for rent to those on housing benefit - faster rental growth has opened the gap to
#HB
levels and worsened the availability of 1 beds - need to boost supply and reset
“I feel trapped in a life I don’t want.”
Our report on the collapse in affordability of private rented properties for people on the lowest incomes, and the heartbreaking consequences.
1/3:
In Thanet, Hollie and her one year old daughter are homeless.
Producer:
@MariahHedges
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the end of Help to Buy was always going to hit new housing volumes - which were supported by the pandemic boom - but higher borrowing costs, high cost inflation and multiple direct/indirect taxes on builders are compounding the impact on the industry
Planning permission for new homes in England 'at record low'
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Housing markets with house prices >£350k are where the prices falls will be most concentrated - anywhere red/orange down in the south on this map (PCA boundaries)
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First time buyers are having to inject £145k deposits in London to get the income to buy down to below £100k when the income to rent is £70k (which is high) - less extreme in rest of UK - explains the divide in house price inflation which is going to remain
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Our latest
@zoopla
rental market quarterly is out looking ahead to 2024. Rental inflation for new lets projected to halve to 5%, signs rents have over-shot in some markets. Scotland recording highest growth in rents. Report here
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@navtejbassi
@Robert_Booth
@guardian
agreed - the point is rent controls tend to make things worse - need to grow housing supply
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#ukhousing
rebound retains momentum - sales agreed at pre covid levels as is flow of new inventory. Demand has drifted lower 11% over last 2 weeks off a high base - still 40% over early March. YoY HPI to hold at +2-3% for next quarter. Latest report
@ZooplaAdvantage
#property
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a rapid cooling in the labour market, and rising unemployment, is the most important downside risk for house prices and will cool runaway rents - latest report from Bloomberg
@business
reports loosening of tight labour market
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Brits like to keep their housing simple - they just want 3 bed houses - that's both home owners and first time buyers (FTBs). Gone are the days of overly leveraged FTBs buying 1 bed flats as an investment with the expectation of buying a larger home in 2-4 years.
#ukhousing
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Higher mortgage rates will hit hardest in high value markets in S Eng. Monthly rental costs are on a par with 5% mortgage repayments in other areas assuming a renter buys the home they rent but many dont, typically aiming for a 3 bed house.
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@JonathanEley
I think we will see UK prices drift sideways for a decade, lower in real terms - the price of a flat in London has done this since 2016 - down 24% in real terms as the market was over-priced. For $ buyers prices are back to 2013 levels
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It is tough for home builders like many businesses. The industry is facing taxes, costs and risks rising fast - not much incentivising them to take more risk buying land and starting new sites.
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Our latest HPI is out today - the big impact of higher mortgage rates is on sales volumes more than house prices - on track for 1m sales, lowest since 2012 - down 21% v 2022 driven by fewer mortgaged buyers- cash buyer numbers same as last year - report here -
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UK house price indices drifting into low nominal growth as sales rise - we are all tracking prices where the buyer can get the deposit and has the high income to buy - the price trend for those excluded due to low/no deposit and lower income isnt tracked ...
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Reality is this is what a normal FTB should be - the actual FTB has much higher salary/income at closer to £50-65K+ to be able to afford and over £100k in London .... impact of mortgage regulation
Mortgage payments almost 40% of take-home pay for first-time buyers.
Only a couple of times in recent history (late 80s, pre-crash) has housing been less affordable.
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'scarcity of supply' was mentioned as a reason nationwide HPI went up mom - but there are more homes for sale now than at any time in last 5 years! while demand is down new sales are holding up which might explain why HPIs arent falling more - new sales are +14% yoy
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some quick calcs for 'buying the home you rent' with a 100% mortgage - works best in lower value markets - the mortgage repayments will be higher than rent but you get to buy with no deposit - stress testing mortgages means it works for those on £40-60k h'hold incomes
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Lots of debate on whether
#landlords
selling or not - rented supply is static since 2016 so new landlord buyers being offset by those rationalising/exiting. We are still seeing 35% fewer homes for rent and demand at 5 year high - see charts
@BeadleBen
@HenryPryor
Stock of private rented homes static since 2016. New entrants being offset but those rationalising / selling up. Yet record immigration last year and strong jobs market = demand highest for 5 years while no. of homes for rent is c35% lower on
@Zoopla
see charts - rents going up !
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Its the 30% of private
#landlords
with loan to values >50% who feel the biggest hit from higher
#mortgage
rates sending them cashflow negative and forcing them to inject more cash, push up rents or sell
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Not sure i agree with 'its fine to build executive homes' - 75% of private homes are 3+ beds and hhold sizes are falling and pop'n growth is in single person households - the UK needs more decent smaller 1 and 2 bed homes to align with demographic change
What do we mean by the term 'executive homes'? And does it really prevent first-time buyers from entering the market?
In this guest post,
@AnnaClarke_____
of the
@HousingForum
explores our possible misconceptions with this phrase.
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Cant see much changing here other than commitment to forbearance and use of interest only for worst impacted households - these just kick the can down the road for those whose circumstances have changed - case by case rather than national scheme
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This is a big factor behind my view we are in for a prolonged period of very low nominal house price inflation - incomes are rising slowly meaning prices are only pushed along by more BOMAD or longer term mortgages but higher mortgage rates have thrown spanner in works
Everyone got substantially better off from mid-1990s to mid-2000s. Since then? Only those aged 60+ have done so
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Christmas slowdown starts early for the
#housing
market. New sales are still being agreed in wake of mini budget, albeit at a slower pace. Our index of new buyer demand shows a 29% drop and looks more like the trend that kicks in at the end of Nov.
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UK housing still in a buyers market - close to 1 in 4 sellers in southern England are having to accept a sale price that is 10% of more lower than the asking price - the % is still rising across rest of UK
#notoutofthewoodsyet
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Optimism on mortgage rates in news today has some hope value - 5 yr SWAP at 5% + a lender adds a margin for risk - base rates may peak but if city think inflation is sticky then higher rates in 2-3 years will keep 5yr SWAP higher - 5%+ mortgages may stick around for longer
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The % of sellers cutting
#asking
prices by >5% in last 7 days has dropped sharply. Those willing to sell look like they have made all the adjustments they are willing to make this late in the year. Holding out for buyers with <5%
#mortgages
in the new year perhaps.
#ukhousing
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Mortgage rates appear like they will be stuck at 5% or higher for some time yet despite optimisim over the base rate being close to peaking - this will keep demand for homes lower in the near term
Lots of optimistic comment on mortgage rates falling - the SWAP rate is falling but needs to go further to get rates for the lower risk products below 5% which is key to supporting demand and getting more buyers into the housing market - the rate for all mortgagees is 3%
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London housing technically the most affordable since 2014 but house prices remain high relative to earnings at 13x - way ahead of other parts of the UK
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The real re-correction in UK house prices has been sellers accepting much bigger discounts to asking prices which have widened back to pre pandemic levels - if discounts were shooting lower below 94% then we would be on for bigger price falls but they arent ...
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with so much focus on mortgage rates we cant forget the pressure facing renters who have fewer options to deal with rising rental costs
The financial shock waves caused by the rate rises is hitting renters even harder than home owners, new research from
@Zoopla
shows
@CallumCMason
@richard_donnell
@resi_analyst
@genrentuk
@theipaper
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@moving_charlie
Yes - it could be less tbh - needs to pick up speed in H2 to get to -5%. The more prices dont fall this year they will need to keep falling slowly into 2024 - all depends on mortgage rates and how quickly we get below 5%
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As the BoE looks to stamp on higher
#inflation
- with knock on impacts for the economy - its the c.4% of mortgagees who bought homes in 2021/2 at high LTV and higher LTIs that will feel the impact the most - pre pandemic buyers will have lower LTVs from
#HPI
and capital
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Housing sales market has started OK - demand 10% up on 2019 and in line with 2018. Better than many might have expected after Q4 22. Finds latest
@Zoopla
house price index out today
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@TaylorAMarr
I have just done the UK by region - here buyers take shorter fixes <5 yrs so the regulator wants you to prove you can afford an 8% mortgage 'stress rate' while you might be paying 4.5%. It shifts the dynamics and means you need more equity to buy - these regs have stopped a price
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Our latest house price index and report is out today - discounts to asking price reach 5.5% but signs of greater seller realism
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Lastest
@Zoopla
rental index out - rents for new lets up 10.4% - huge supply/demand imbalance that shows no sign of letting up - write up here
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UK GBP 5 year SWAP rate jumps above 5% today on labour data - 6% mortgage rates soon? Its going to be a slow summer with the pricing impact coming through later into Q4 if mortgage rates stay this high over the coming months .... will the BoE push rates as high as markets expect?
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The UK 5 year interest rate swap that underpins the pricing of 5 year mortgages remains pretty static despite prospect of another rate rise. Banks fund mortgages from multiple sources so on this basis mortgage rates unlikely to change materially in short term.
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@moving_charlie
Here is the stress rate v pay rate chart - it was mandatory to stress new borrowers at SVR+3% - rules have changed last year to SVR +1% but the limit on high loan to value lending remains - built some resilience to higher mortgage rates
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Mortgage rates in the Uk could start heading up with todays inflation numbers and the price of 5 year SWAPs jumping higher - which broadly set the 5 year fix rate
#mortgage
- more dampening of demand for homes just as buyers start returning to the market
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Lots of debate on house price outlook on back of
@AskNationwide
#HPI
- many expecting a big downward reset that opens up a rebound. Prices more likely to drift sideways for some years like the price of a
#London
flat which is down 24% in real terms since 2016 based on
@zoopla
@JonathanEley
I think we will see UK prices drift sideways for a decade, lower in real terms - the price of a flat in London has done this since 2016 - down 24% in real terms as the market was over-priced. For $ buyers prices are back to 2013 levels
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Mortgages over 90% LTV still almost a third of pre GFC levels - lower lender risk appetite and higher pricing of loans plus mortgage regulations limit demand and take-up .... FTBs using bigger deposits - this will grow by 95+ LTV will remain niche lending
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