What the new government’s housing priorities should be

Our Director of Research, Richard Donnell, reveals what the new government needs focus on when it comes to housing.

Current housing conditions

The sales market has been more resilient in the face of higher borrowing costs than many expected - but the adjustment is still ongoing.

Historically, moving from 1% to 5%+ mortgage rates would have led to a double digit drop in house prices.

Mortgage regulations introduced by the Bank of England in 2015 - designed to stop a debt-fuelled house price bubble driven by ultra low rates - limited the over-valuation of house prices and this is why we have had modest price falls over the last 18 months.

Someone buying a home in 2021 paying a 1.5% mortgage would have to prove to their bank they could afford a 6.5-7% mortgage ‘stress’ rate to get the loan approved.

Banks were also limited to how much business they could do at high loan to income ratios and have had to hold more capital for risker high loan to value lending.

These regulations have capped buying power and constrained house prices especially in higher value housing markets.

The impact is greatest for first-time buyers (FTBs), who account for over a third of all housing sales and higher for most mainstream builders.

In 2023, the average FTB buying in London had a £90k income and a £150k deposit, while across the rest of southern England FTBs needed a £60-£65k income and £100k deposit.

Across the rest of the UK, FTBs need to earn a £50k income and a £35k deposit.

This big north-south divide in affordability matters and impacts what we need to build locally in order to support sales rates and address housing needs.

In unaffordable areas, there is a need to build a wider price range of freehold and leasehold homes.

The national government needs to empower local government and city regions to get into the detail of what is needed and works for their needs - this can’t be set from the centre.

 

Rented housing markets face large supply/demand mismatch

The private rented sector stopped growing in 2016 after doubling in size from 2000, while the social housing sector has seen static headline supply for over 20 years.

There is a modest shake out in the rental market as private landlords, who are no longer seeing renting out homes as a viable business, exit the market.

It’s not an exodus - but the business model has shifted from landlords making money on their properties over many years, to one of focused on monthly cashflow.

The sector is becoming more professionalised and 50% of rented homes are now owned by 20% of private landlords.

While there is more corporate investment, private landlords still hold the key to the overall balance of supply/demand for the next decade or more.

The new government should ensure long term private landlords, who want to deliver decent homes, are encouraged to remain.

Long term, cashflow-focused landlords have nothing to fear from proposed rental reforms.

While supply has been static, the demand side has been booming - a strong labour market, record high immigration from people looking to work and study, has led to an unaffordability of homeownership.

Pre-pandemic, we saw 5-6 people chasing every rented home on Zoopla, it peaked at over 30 in 2021 and is now down to 15 people per rental.

Rents have been outpacing earnings growth for almost 3 years - private rents are 31% higher compared to earnings, which have risen 24%, while the Consumer Price Index has risen CPI 20% - and housing benefit has only risen 15%.

Rental inflation is slowing due to growing affordability constraints rather than more supply. Rents have over-shot in some cities and there have been some modest falls. Across the UK overall, rents won't fall but business plans for rental investments need to have realistic assumptions on how much rents will rise over the next few years.

I should point out renters on low incomes are particularly impacted by strong competition and little-to-no growth in social housing.

Building more affordable rented homes and getting more financial capacity and certainty into the affordable sector is a key pillar to getting more homes built overall, it’s an area where demand is arguably greatest.

Outlook for the market

Rents for new lets will rise by 4-5% this year and affordability constraints among renters will drag on rental inflation in expensive rented markets

We’re now entering an era of much lower nominal house price inflation. House prices are up 1-2% this year and are currently 8% ahead of where they should be in London and southern England.

We expect house prices to rise 2-3% over the next 2-3 years, which is enough to support the development of new homes by builders.

On average, 1.2m homes are sold every year, this year, we expect 1.1m homes to sell, up 10% from 2023.

What a new government’s housing priorities should be

1. Introduce rental reforms but not rent controls, and reset Housing Benefit levels so that they are in line with the current market

2. Build more homes but ‘set the big picture’ nationally and enable a framework for success locally

3. Reform the planning system, with land assessments and housing targets

4. Greater investment in local authority planning teams

5. Clarity for affordable housing providers to encourage investment

Demand for homes exists, but there’s a huge variation in what is needed across various price points and tenures across the UK.

We need to ensure there is the investment capacity to support more supply of homes at scale and give new homes developers the confidence that there are buyers out there.

Key takeaways

• More new homes across a range of price points
• Housing Benefit to rise in line with inflation and wages growth
• Greater investment in local authority planning departments

 

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by Blackstones

House prices set to rise 1.5% by end of 2024

The average house price today is the same as it was in May 2023: £264,900. But some areas are rising while others are falling. Find out what’s happening near you.

UK house prices starting to rise across the UK

Our House Price Index, which measures the rise and fall of house prices across the UK, reveals house prices have risen across all areas of the UK over last quarter.

House price inflation is no longer in negative territory and stands at 0% year-on-year, meaning the average house price is now £264,900, the same as it was a year ago.

Despite this, southern England does remain in negative territory in terms of annual inflation, although that gap is now lessening, while prices have risen elsewhere in the UK.

Sales market momentum is continuing throughout the build-up to the election, with demand for homes up 6% on this time last year.

The number of sales agreed is also up 8%, and we believe that 75% of the 1.1m sales projected for this year have already completed or are on their way through the pipeline.

We calculate that UK house prices are currently 8% ‘over-valued’, a hangover from the sharp price rises that took place during the pandemic, and we expect this to have rectified by the end of the year.

Overall, UK house prices are on track to rise 1.5% over the whole of 2024, a sign that the housing market is remaining resilient.

Our Executive Director of Research, Richard Donnell, says: “The housing market continues to adjust to higher borrowing costs and the summer slowdown is now arriving, tempering activity. The timing of the first cut in the base rate is key and will give a boost to market sentiment and sales activity.”

The average prices for different property types across the UK 

The average price of UK properties is holding steady, with a minor increase of £110 month–on-month and an annual price change of 0% year-on-year.

Meanwhile, if you’re a buyer, this could be the time to look into detached propertes, as they are now nearly £2,300 cheaper than they were this time last year.

Equally, flats and maisonettes are down in price, and are now £2,000 cheaper on average than this time last year.

Where are UK house prices rising and falling in June 2024?

Regions where house prices are rising

Homes in Northern Ireland have seen the biggest rise in prices over the last 12 months, up 3.3%.

They’re hotly followed by homes in the North West (1.5%), the North East (1.4%), Scotland (+1.3%), Wales (+1%) and the West Midlands (+0.5%).

The lower property prices in these regions means there’s less of an impact here from higher mortgage interest rates, supporting demand and consequently, house price rises.

Down in Southern England, the picture is less rosy, with the East of England (-1.4%) leading the way in terms of house price falls.

It’s followed by by the South East (-1%), South West (-0.9) and London (-0.4%).

The East Midlands is also experiencing slight falls of 0.4%.

However, prices in these regions are starting to stabilise, and with prices starting to rise, the falls are now narrowing year-on-year.

Top 10 cities where house prices are rising

Belfast is leading the way in terms of rising house prices, with homes here up 3.4% in the past year, a rise of £5,680, taking the average house price to £173,900.

It’s hotly followed by Rochdale (+2.7%), where prices have risen by an average of £4,460, taking the average house price to £170,100, and Bolton, where homes have gone up 2.3% (£3,790) to hit an average of £171,900.

10 cities where house prices are falling

Cities in the south of England are faring less well, with Ipswich leading the way in terms of house price falls. Prices here are down 3% year-on-year (an average of -£6,520), taking the average house price to £212,100.

In the coastal town of Hastings, house prices are down 2.8% since last May, a fall of £7,890, taking average house prices to £271,400, while in historic Norwich, homes have dropped 2.1% (£5,550), taking the average house price here to £260,900.

Top 10 local authorities where house prices are rising

The north, where homes are traditionally less expensive than in the south, is seeing the greatest price growth in terms of housing.

Sunderland is leading the way, with prices up 5.2% year-on-year, a rise of £5,990, taking the average house price to £121,900. It’s followed by Dumfries & Galloway in Scotland (up 3%, or £4,830), where the average house price is now £148,000, and Lanarkshire.

Homes in North Lanarkshire are up just over £3,000, averaging out at £123,500, while homes in South Lanarkshire are up £3,700, averaging out at £146,100.

Local authorities where house prices are falling

Down in the more expensive south, prices are continuing to fall, after climbing rapidly during the pandemic years.

Leafy Kent and its seaside towns are taking a hit, with historic Canterbury leading the falls, where house prices have fallen  -4.1% (£14,430) to an average of £339,300.

Canterbury’s followed by the coastal areas of Thanet (down 3.9% or £11,630 to £286,200) and Dover (down 3.8% or £11,630 to £293,400).

Prices in Essex are also down, with Tendring, Braintree and Colchester also experiencing falls of around 3%, or £8-10,000.

Momentum continues in the sales market

Momentum in the sales market has continued over June, albeit at a slightly slower pace than the previous 2-3 months as the market is enters the quieter summer period.

And while house price inflation remains negative in the south, improving sales volumes over the first half of the year has led to a firming up of prices.

“All regions and countries of the UK have registered an increase in house prices on a month-on-month basis since January,” says Donnell. “But price rises are unlikely to pick up speed in the coming months.”

That said, on average, they are on track to be 1.5% higher at the end of this year.

75% of this years’ sales are completed or in progress

Our data shows the market is still on track for 1.1m sales this year, and three quarters of these sales have either been completed, or are working their way towards completion.

This figure is 10% higher than the number of sales that took place in 2023 but still below the 20-year average.

“It is positive that sales are rising despite higher borrowing costs,” says Donnell. “It shows more realism on the part of sellers and renewed, cautious confidence amongst buyers.”

How higher mortgage rates have affected house prices

The housing market has been very resilient over the last year given the rise in mortgage rates. These averaged below 2% in late 2021 and stand at 4.7% today, spiking well over 5% in October 2022 and again over the summer of 2023.

“Higher borrowing costs have reduced the buying power of new buyers. But rather than sizable price falls, the main impact has been a sharp decline in the number of sales, which were 23% lower over 2023,” says Donnell.

“House prices haven’t fallen as there have been few forced sellers. And unemployment has stayed low by historic standards, meaning there are a relatively small number of people struggling to pay their mortgage and falling into arrears, despite wider cost of living pressures.

“We expect house price inflation to remain muted, likely to rise more slowly than household incomes over the next 1-2 years.”

Interest rates hold the key

Looking ahead, the near-term outlook for the sales market really depends on the outlook for mortgage rates, which are dependent on interest rates.

“Any reductions in the base rate over the summer and into the autumn will deliver a boost to market sentiment and sales activity, even though the impact on fixed rate mortgages will likely be more muted,” says Donnell.

“Based on city forecasts for base rates, we expect mortgage rates to remain in the 4-4.5% range going into 2025. This is sufficient to support sales volumes and low, single digit levels of house price inflation.”

Meanwhile, house prices in the south of England are expected to continue to under-perform compared with the UK average, as prices realign with incomes.

“Real income growth will be the key to supporting sales and demand into 2025,” says Donnell.

 

Key takeaways

• House prices are now at 0% inflation compared to May 2023
• However, the average UK house price is set to rise by 1.5% by the end of the year
• We believe house prices are currently 8% ‘over-inflated’ to where they need to be, but this will correct itself by the end of the year
• 75% of 2024 house sales have already completed or are in the pipeline

 

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by Blackstones

Bank Rate holds at 5.25%, so when will rates drop?

The Bank Rate holds at 5.25%, despite inflation hitting its 2% target for the first time in 3 years.

Bank rate holds at 5.25%

The Bank of England has kept the Bank Rate at 5.25% for the seventh time in a row.

The Bank has held rates at 5.25% in an effort to combat inflation, leading to higher mortgage repayments but also higher savings rates.

The Bank Rate, sometimes known as the 'base rate’ or ‘interest rates’, affects the rates that lenders charge their borrowers.

Inflation hits 2% target for first time in three years

Inflation slowed to 2% in the 12 months to May, hitting the Bank of England’s target for the first time in almost three years, according to data released by the Office for National Statistics on 19 June.

With rising prices coming back under control, all eyes had been on the Bank to see if the news might mean a cut in the interest rate, which has been frozen at a 16-year high of 5.25% since August 2023.

However, uncertainty over whether cuts would come had led to a rise in mortgage rates in recent months, with average rates on two- and five-year fixed rate deals creeping up since February, according to Moneyfacts.

The average two-year fixed rate now stands at 5.93%, while the average five-year fixed rate stands at 5.50%.

John Fraser-Tucker, Head of Mortgages at online mortgage broker Mojo Mortgages said: “Naturally, the BoE tends to stay neutral during a General Election, so making a rate change weeks before voters head to the polls could be seen as influencing voters.

“Moreover, the housing policies of the elected government are likely to impact the outlook for the base rate going forward.

“Labour’s manifesto seems to focus more so on first-time buyers as they’ve stated that they’ll make the existing mortgage guarantee scheme permanent under the name 'Freedom to Buy'. Comparatively, the Conservatives have focused on policies that they believe will bring down mortgage costs.

“Given the contrasting focuses, it makes sense for the BoE to wait and see which government is elected before lowering the base rate, otherwise it could add more uncertainty to the mortgage market right now.”

Choice of mortgages available increases to highest level since 2008

Meanwhile in good news for borrowers, the choice of mortgages available has increased, with borrowers now having 6,629 mortgage deals to choose from, the largest number available since February 2008, according to Moneyfacts.

However, buyers will need to act quickly to secure the best deals, as the average shelf life of a product has reduced from 28 days at the start of May to just 15 in June.

What does the news mean for existing borrowers?

Borrowers on variable or tracker mortgages will be relieved that their rate is unlikely to go up. Though they’ll be disappointed the Bank Rate wasn’t cut.

According to the HomeOwners Alliance, the average standard variable rate (SVR) now stands at 8.18%, down from 8.19% last November. The rate has stayed at this level since the start of April.

Meanwhile, borrowers locked into fixed-rate mortgages will not be impacted - yet. But borrowers who are due to come off fixed-rate deals and remortgage soon are likely to see their mortgage repayments jump, squeezing household budgets further.

Annual mortgage repayments for the average buyer are now a staggering 61% higher than they were three years ago, before mortgage rates started climbing.

It means that in pure monetary terms, they have soared from £7,100 to £11,400. Two thirds of that hike is fuelled by higher mortgage rates, while one third is due to higher house prices.

First-time buyers are finding it tricky to afford mortgage repayments in the first place. Because of recent interest rate rises, mortgage affordability is now the biggest challenge for first-time buyers, according to the Building Societies Association (BSA).

What is the forecast for interest rates? 

The Bank is generally expected to cut interest rates this year (assuming there are no surprises in store). But opinions on when exactly this could happen, and by how much, naturally vary.

Some economists believe the rate will be cut in August, while others are suggesting it may be as late as September.

As a general rule: if interest rates fall, the mortgage rate forecast would be for mortgage rates to fall too. But time will tell if this happens.

Our Executive Director of Research, Richard Donnell, believes that even if inflation and interest rates edge down, mortgage rates are unlikely to drop much further this year.

Donnell explains: “Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling.

“Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.”

 

Key takeaways

• The Bank of England has held the Base Rate at 5.25% for the 7th time in a row
• Many had been hoping for a drop in the Base Rate after inflation hit its 2% target for the first time in 3 years in May
• The news will be disappointing for mortgage holders, who have been longing for mortgage rates to go down since the bank rate hit its highest level in 16 years in August 2023

 

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by Blackstones

The Parent Trap: how millions of UK parents feel 'trapped' into living near grandparents

With grandparents stepping in to help reduce the cost of childcare, millions of parents are finding themselves feeling trapped in locations close to granny and granddad.

UK parents are stuck in a ‘parent trap’ and feel forced to live near to their children's grandparents in order to get help with childcare, according to our latest research.

Our data of 2,000 UK parents with children under the age of 13, found that half (50%), live less than five miles from their child’s nearest grandparent and seven in 10 (68%) live within a 30 minute journey.

Yet this may not always be by choice. More than half (57%) rely on childcare support from at least one grandparent (rising to 72% of those living within 30 minutes of their nearest grandparent).

Average family receives over £4,600 of free childcare from grandparents

The average family relies on nine hours of grandparent childcare support a week, equating to 468 hours per year. With parents estimating they spend £9.90 per hour on childcare (including nursery, babysitting, summer camps etc), this is worth a whopping £4,633.20 of free childcare annually, at a time when costs are already spiralling.

With nursery costs now higher than the average UK monthly mortgage*, it’s not surprising that many parents are reliant on the ‘nursery of grandma and grandpa’.

However, the flip side is that over half (52%) of parents who receive childcare support from grandparents say they now feel ‘trapped’ when it comes to where they live.

A key reason for this was financial restrictions, with 36% of parents who have grandparent support saying they could not afford to be without it as professional childcare would be too expensive.

Parents would need to earn £8,000-a-year more to forgo free childcare

This support is particularly crucial for parents who have children under school age. Although 18% of parents in this category who receive more than 10 hours a week of grandparent support say that they prefer grandparents looking after their children, the financial stretch required to swap to professional childcare is clear for the remaining 82%.

These parents believe they would need to increase their personal incomes by an average of £8,055 a year in order to be able to forgo free childcare.

Many are even having to put their own home owning aspirations on hold to get free childcare support.

Parents unable to afford larger homes near grandparents

More than four in 10 (44%) of parents feeling trapped would like to move to a larger home, but prices are not affordable in the area they need to be in order to receive grandparent support.

A quarter (24%) say that they would like to move to a different area but can’t as they need to remain near their parents.

Some are even being prevented entirely from getting on the housing ladder, with almost a third (29%) of those who get grandparent support saying that they would like to buy somewhere but are having to rent in order to stay near to their parents or parents-in-law.

20% of parents choose to move nearer grandparents

Whilst some put their moving aspirations on hold, others make a conscious decision to move closer to grandparents after having children.

Nearly two in five (19%) parents said that, since having children, they had moved closer to grandparents, whilst 11% are currently planning to move.

Over the summer holidays, grandparents increase their weekly support by 26% - from 9 hours a week on average to 11.3 hours weekly.

Some parents even admit to asking their parents or parents-in-law if they will move closer to help with childcare support.

Of all the parents surveyed, 28% had discussed moving homes with their children’s grandparents to be closer for childcare reasons. Of those, a notable 31% have had a parent or parent-in-law move house to be closer to help with childcare.

Parents agreed that on average, around seven miles away was the ideal distance to live from a grandparent - close enough to be on hand for regular support, but far enough away that they would not drop in constantly and unannounced.

The research also showed that many parents make do with little to no familial support, with 32% receiving no childcare support from grandparents or any further relations.

Our Consumer Expert Daniel Copley says: “As a parent, I know first-hand how expensive childcare can be, and how valuable family support is. As such, many Brits feel that they are trapped when it comes to where they live, with it being vital that grandparents are nearby to help out.

“This is leaving many in the tricky spot of not being able to afford to buy a place close to their parents, forcing them to rent when they might otherwise be able to get on the housing ladder. Or simply living in an area they don’t really want to live in.

“My advice would be to have open and honest conversations with grandparents about the support they are prepared to offer, and how far they would be willing to travel. Zoopla’s travel time tool can then show all the properties that are within that distance. Equally, grandparents may be amenable to moving. Many may be looking to move to a smaller home, or free up some of the equity in their home to fund their retirement, and moving to a more affordable location may work for them as well.”

* Research conducted by Mortar Research in June 2024 amongst 2,047 UK parents with kids under the age of 13.

Key takeaways

• More than half (57%) of UK parents rely on their children’s grandparents for childcare support, with the average family receiving 468 hours of free childcare a year, worth over £4,600
• This is leading to over half (52%) of reliant parents feeling ‘trapped’ into living nearby their children’s grandparents
• Housing aspirations are being prevented by the ‘parent trap’ - with four in 10 (44%) unable to move to a bigger home because of affordability within proximity of grandparents
• To help, we have a range of tools, from our travel time tool to the new, AI-powered personalised listing recommendations which match users with suitable properties based on their recent site behaviour, to help parents finds their ideal home

 

 

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by Blackstones

General election 2024: What does each party’s manifesto say about housing?

We've compared the housing policies of the major political parties so you don’t have to.

The general election is nearly here, and all the major political parties have now released their manifestos. Of course, we’re particularly interested in what each political party has to say about housing, but there’s a lot to compare and get your head around.

That’s why we’ve done the hard work for you - breaking down the housing policies of the Conservatives, Labour, and the Liberal Democrats so you can easily compare their pledges in each area.

What are the political parties’ policies on housing?

 

 

Key takeaways

• All three parties pledge to ban no-fault evictions for renters
• All three parties pledge to reform or end the leasehold system
• All three parties pledge to build at least 1.5 million new homes over the next parliament

 

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by Blackstones

What income do you need to buy a home in 2024?

The required income to buy a home has increased in recent years. But what does that mean in real numbers? And where is the most affordable place to buy in the UK?

Affordability is one of the greatest barriers facing people looking to buy a home. We talk a lot about deposits, but the household income needed to finance a mortgage is an equally important factor. This is because income levels are used to assess the affordability of a mortgage through the loan-to-income assessment.

First-time buyers tend to have lower deposits than existing owners who may be looking to buy a larger home. Typically, the higher the deposit, the lower the income needed to buy.

Data shows that the typical first-time buyer (FTB) takes a mortgage that is 3.3x their household income. Existing homeowners looking to move take out mortgages that average 3x their household income.

Using these average loan-to-income ratios, and the average asking price of homes for sale on Zoopla, we can calculate the household income needed to buy a home for FTBs and existing owners.

A FTB looking to buy a typical first home (priced at £250,000), with an average 20% deposit, would need an annual household income of £60,600 in order to buy. This figure is £2,400 higher than a year ago.

Those upsizing to an average-priced home currently on the market (priced at £335,000), with a larger average deposit of 35%, would need a household income of £72,600. This is £3,400 higher than a year ago.

The average UK household income is currently £33,300, according to the ONS. This means that two average earners buying together have a household income of £66,600, which is enough to buy a typical first-time buyer home. However, homeowners on the same income are likely to struggle to upsize to an averagely-priced UK home without a bigger deposit.

First-time buyers need two average salaries to buy

First-time buyers often buy with smaller deposits - 20% on average - according to ONS. To help make buying affordable, FTBs tend to look for cheaper properties. For example, the average asking price of a home chosen by a first-time buyer is 34% lower compared to the market average.

The income a first-time buyer will need in order to buy is closely linked to the value of homes in the area. FTBs in northern England and Scotland require lower earnings compared to those in the Midlands, Wales or southern England.

Those looking to buy their first home in the North East require the lowest income to buy in the UK. A typical FTB home in the region costs £120,000, which requires an income of just under £29,100 in order to buy. In areas such as Hartlepool, homes priced around £80,000 are most popular with FTBs. Although homes sold at this price point are typically fixer-uppers or small flats, the household income needed to buy these types of properties is only £19,400.

At £31,500, Scotland has the second-lowest required income for first-time buyers. And in areas such as Ayrshire, savvy folks can buy with a household income of under £20,000.

Back in England, the further south you go, the more you need to earn in order to buy. The average first home in the Midlands is priced below £200,000, meaning the required income is below £49,000. And in southern England, the average income to buy ranges between £33,900 in Great Yarmouth to a whopping £193,900 in Kensington and Chelsea.

Upsizing homeowners need an income of £72,600 to buy

Those looking to move up the next rung of the ladder will find that a higher house price will need a higher income to buy. The average asking price of a home currently listed for sale on Zoopla is £335,000. Homeowners looking to buy such a home with a 35% deposit will need an income of £72,600.

Those planning to buy an averagely-priced home in northern England need a household income between £31,400 (Blackpool and Hull) and £78,000 (Trafford in Manchester).

A homeowner upsizing to an average home in Scotland  (£200,000) would require a household income of £43,300. Yet, the income needed to buy can range from £27,100 in East Ayrshire to £62,800 in the East Lothian area.

Those buying in the Midlands or Wales will typically need a household income above £54,000. However, upsizers won’t be as required to earn as much in locations such as Blaenau Gwent (£32,500), Stoke-on-Trent (£39,000), Bolsover (£46,600) and Boston (£46,600).

Upsizers in the south of the country will need a household income higher than the income of two average earners, which currently stands at £66,600. This is down to higher house values, with asking prices commonly exceeding £300,000.

However, home owners buying in smaller cities in the south may require a lower income. House prices in cities such as Plymouth (£52,000), Norwich (£54,200), Peterborough (£56,300), Portsmouth (£57,400) and Southampton (£58,500) offer more opportunities to buy on a smaller income.

Those upsizing in London will need the highest level of income in Britain - £124,600 on average. However, our analysis shows that those looking to buy an averagely-priced home in East London (Barking and Dagenham, Havering and Newham) and South East London (Croydon, Lewisham, Bexley) will need an income below £100,000.

Why are the required incomes to buy so high in 2024?

The required income to buy has increased by 4% over the last year largely due to higher asking prices and a slight decline in the loan-to-income ratio.

To adapt to this, buyers can put down a larger deposit to reduce the size of the mortgage. If this isn’t an option, a more practical solution could be to look further afield by extending your search area, or consider other types of property.

Our data shows that relatively few first-time buyers are changing what they want from a property as they balance home ownership with complex family needs. The key route to getting more value for money is to widen the search radius and consider more markets.

We find that 2 in 5 buyers in southern England are looking further than a 10 mile radius to find their next home due to the affordability pressures of the region.

Key takeaways

• The average first-time buyer (FTB) needs an income of £60,600 to buy a home - the equivalent of two average UK salaries
• An existing home owner looking to upsize needs a household income of £72,600 to buy an averagely-priced home
• The required income to buy has increased by £2,400 for FTBs and £3,400 for upsizing home owners over the last year
• The most affordable areas to buy on lower incomes are in northern England and Scotland

 

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by Blackstones

Rental Market Report: June 2024

The average rent for new lets in the UK is £1,226 after a +6.6% rise in the last year. Rents for new lets will rise more slowly this year, but only a major supply boost will help with rental affordability.

The average rent for new lets in the UK is £1,226 as of April 2024 (published in June 2024).

Rents have risen 6.6% in the last year, the slowest rate of growth in 2.5 years.

Key figures

UK rental inflation lowest for 2.5 years

UK rental inflation lowest for 30 months

The average monthly UK rent has risen by £80 in the last year, taking it to £1,226pcm.

Overall, the rate at which new lets are rising annually has now slowed to 6.6%, down from 10% a year ago.

This is the lowest rate of annual rental price inflation for 30 months (since Oct 2021) as demand slows from a high base and affordability constraints among renters mean rents can’t rise much further.

If the rental increases that took place in the last three months were converted into a yearly rate, the annual rate of inflation would be 3%.

This is the lowest it’s been for the month of April since 2021, and points to a continued slowdown in the rate of rental inflation for the rest of 2024.

Demand weakens off a high base but supply remains low

The chronic imbalance between rental supply and demand is starting to narrow but remains well out of kilter.

Demand for rented homes is slowing off a very high base as one-off pandemic factors start to recede and mortgage rates fall below 5%.

Rental demand is down 25% over the last year but competition remains high, with 15 households chasing every rental home. This is more than double the pre-pandemic average of just six which was seen between 2017-2020.

More choice of homes for renters

The average number of homes for rent per estate agent has increased by almost a fifth (18%) on this time last year, which is boosting choice.

However, the supply of homes for rent remains a third lower than the pre-pandemic period, as low investment in rented homes keeps the overall stock of private rented homes broadly flat.

The national picture of lower rental demand and a modest increase in supply is replicated across all regions and countries of the UK.

Demand is down by up to 30% across the East of England, followed by London (-28%), the South East (-27%) and Scotland (-27%).

Traditionally, more rental homes become available during spring before demand kicks in between May and September each year, and supply is currently up the most in both London (23%) and Scotland (24%).

London leads the slowdown in rent inflation

The headline rate of rental inflation has slowed modestly across most areas of Great Britain over the last year.

London has led the slowdown with average rents rising by just 3.7%, down from over 13% this time last year.

The average growth in rents across the rest of the UK outside of London is currently 8%, with the highest increases in rents are being recorded in the North East (9.5%) and Scotland (9.3%).

The underlying level of rental inflation - 3-month growth expressed on an annual basis – is lower than the annual rate of growth across all areas, pointing to a slowdown in momentum in rental growth.

In London, the underlying rate of rental inflation is negative (-1.3%) as average rents have fallen by 0.3% over the last 3 months

Rents start to fall in several cities

Rents have fallen over the last quarter across a small number of cities. This is down to rent levels for new lets adjusting to localised changes in available supply and more price-sensitive demand.

Seasonal influences are also a factor, with January to April traditionally being a quieter period before the usual seasonal upturn in rental demand between May and September.

This upturn is linked to both the jobs market and the end and start of the academic year.

Our index shows average rents have fallen slightly over the last quarter in:

• Nottingham (-1.4%)

• Brighton (-1.1%)

• York (-0.4%)

• Glasgow (-0.4%)

• Cambridge (-0.3%)

• London (-0.3%).

These are modest falls in the context of the recent rapid growth in rents, but this is clear evidence that rental market dynamics are starting to turn in some markets.

Rents have continued to increase across other UK cities over the last 3 months, where there is affordability headroom for rents to rise.

Rents in regional towns and cities such as Gloucester, Sunderland and Northampton have risen by up to 3% over the last 3 months.

Growth in rents and average earnings starts to narrow

Rents for new lets have been rising faster than average earnings for over 2.5 years, since October 2021.

As rental inflation slows, the gap to earnings growth, currently at 6%, is starting to narrow.

The growing unaffordability of renting should start to act as a drag on rents rising.

However, rent levels are being supported by continued strong demand-side pressures and low levels of new investment in private rented housing.

The picture varies across the country and much depends on how affordable rents are relative to earnings and the scale of the headroom for rents to rise further.

At a region and country level, the proportion of gross earnings spent on rent is at its highest level for a decade.

The rapid rise in rents over the last 3 years has worsened rental affordability. However, there is a wide variation in how much of average earnings are spent on rent.

It is not surprising that rents are currently rising fastest in the North East and Scotland, where rental costs account for the lowest proportion of gross earnings.

In contrast, London has the highest rents, which already account for a higher proportion of average earnings. That explains why rent levels here are now back to 2015 levels, having fallen over the pandemic.

Wide divergence in rent inflation across London

London is a complex and highly segmented rental market, making regional averages potentially misleading.

Rents are the highest in inner London, where there is strong corporate demand, with more renters sharing properties compared to outer London.

Rental inflation has slowed the most in inner London areas, with rents in Westminster and Tower Hamlets up by less than 2.5% over the last year and posting modest quarter-on-quarter declines.

In contrast, rents are up by over 10% in outer London areas such as Barking & Dagenham, Redbridge and Havering, where average rents are 20% below the London average.

Supply-demand imbalance unlikely to improve

Looking ahead, we do not believe that the imbalance between rental supply and demand will improve materially over the next 12 months.

Levels of new investment in the private rented sector remain low, while demand is set to remain above-average.

This means rents will continue to increase at a slowing rate.

Rental demand shows little sign of moderating

The demand drivers of rented housing show little sign of moderating significantly in the near term.

The labour market is the primary driver of demand, alongside the need for student homes and the difficulty of becoming a first-time buyer (FTB) with higher mortgage rates.

Additional pressure is also coming from a lack of affordable homes available for households in acute housing need.

The labour market has been losing momentum in recent months, and there is continued reliance on immigration to fill gaps in the jobs market.

The number of overseas students studying at British universities has also expanded, adding to rental demand across most UK cities.

Three-quarters of FTBs come from the private rented sector. Higher mortgage rates since 2022 have made it harder for FTBs to buy a home and this has kept more households in the rented sector.

There were a fifth fewer purchases by FTBs in 2023-4. The decline in mortgage rates over 2024 is leading to a recovery in FTBs but there is continued demand for rented homes from would-be buyers waiting for mortgage rates to fall further.

We expect demand for rented homes to continue to moderate slowly as one-off pandemic factors recede, but the higher cost of home ownership and a lack of affordable homes means the rented sector will continue to see continued demand on multiple fronts.

Outlook and the politics of private rented housing

The market is still on track for a continued slowdown in rental inflation to 5% over 2024. Recent levels of rental growth have been unsustainable, meaning a slowdown is inevitable.

This is being driven more by changes in demand than any expansion in supply.

On the policy front, while the Rental Reform Bill failed to make it onto the statute books, it seems likely that rental reform will return in the next parliament whichever party forms the next Government.

While changing the protections for existing renters is important, the greatest imperative is to boost the stock of homes for rent – both private and affordable - through greater housing delivery.

Only by boosting supply can we improve choice for renters and increase the chances that consumer demand will start to exert more influence over landlord decisions and the quality of rented homes.

While there has been more political focus on the challenges facing the private rented sector, true progress will only be demonstrated by political parties setting out specific plans and goals for the future of the private rented sector in manifestos.

A healthy private rented sector is vital for economic growth and a more balanced housing market.

Key takeaways

• The rate at which rents are rising has slowed down to 6.6% for new lets, down from a high of 16% in October 2021
• London is leading the slowdown, with rents rising at just 3.7% in the last year, as rents start to fall in some cities
• Competition for properties remains high, with 15 households chasing every rental home (more than double the pre-pandemic average of six)
• However, choice is starting to increase, with the average number of homes for rent per estate agent up by 18% on this time last year
• We believe the rates at which rents are rising will continue to slow to 5% over 2024

 

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by Blackstones

What does a general election mean for the UK housing market in 2024?

The announcement of the UK general election for July 4th 2024 has come earlier than expected—but what does this mean for the housing market?

What impact will the general election have on the housing market?

Overall, we don’t see the election having as big an impact on the housing market as previous years. This is due to there not being a huge divide in policy between the two main parties, with neither having many specifics on housing other than a focus on reforming the private rental sector and boosting housing supply. However, the number of completed sales may now fall slightly short of the 1.1m we expected for 2024.

Businesses and landlords will want to see that political parties have concrete plans - namely for boosting housing supply across all tenures and getting the right reforms to the private rented sector. This will ensure that supply is maintained while giving renters more protections.

What will housing market activity look like over the general election period?

As we run up to summer and the slower period in the housing market, the election announcement is likely to stall the pace at which new sales are being agreed to in the coming weeks.

Most buyers who are close to completing on a house will ideally want to push through and agree a sale now. Those who are earlier in the process may look to delay decisions until the autumn after the election is over.

What does the housing market look like at the moment?

The housing market has been recovering with more homes coming to the market for sale, and an increased volume of sales overall. This is a sign of growing confidence amongst sellers, even though mortgage rates remain at 4.5% to 5%.

Currently, there are 392,000 homes in the sales pipeline that all working their way to completion over 2024. This is 3% higher than this time last year, and we don’t expect to see buyers already in the process of working toward sales to pull out.

The incentive to move remains for many households - in particular for first-time buyers who are escaping rapid growth in rent costs, and upsizers who delayed moving last year when mortgage rates increased.

Key takeaways:

• People who are close to agreeing a sale on a home will want to push ahead
• Early stage house hunters may hold back on decision-making until after the election
• Activity in the housing market has been rising with more homes for sale and more homes being sold
• There are 392,000 homes currently in the sales pipeline, and we don’t expect to see buyers already in this process to pull out

 

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by Blackstones

Where is it cheaper to buy than rent?

A third of homes for sale are cheaper to buy than rent, with the average first-time buyer saving £93 a month on a mortgage instead of renting.

A third of homes (150,000) currently for sale can be bought with a mortgage and monthly repayments that cost less than the average rent in the same area, according to our latest research.

The average monthly UK rent is currently £93 per month (8%) more expensive than the average mortgage repayment for a first time buyer (FTB) - an improvement since last summer, when mortgage rates were 1% higher and it was cheaper to rent than buy.

First time buyers should look to urban areas for affordable homes

While some regions have more affordable homes for first time buyers than others, urban areas are the best locations to find homes that are cheaper to rent.

Oadby and Wigston, a suburb of Leicester, has the largest proportion of for-sale homes (82%) with remortgage repayments lower than the local market rent.

Ipswich in Suffolk comes second (80%) and North West Leicestershire (78%) comes third.

The majority of homes for sale in Manchester (62%), Newcastle (68%), Southampton (62%) and Sheffield (51%) are also cheaper to buy than rent, thanks to an abundance of flats - the most common property type in these cities.

This is welcome news for renters who may prefer to buy locally.

Over 40% of homes in the north and Scotland are cheaper to buy than rent 

First-time buyers can find 150,000 homes (34% of the total listed) where average monthly mortgage repayments are lower than rents, assuming a 20% deposit.

The North West, North East and Scotland that have the highest proportion of these homes.

Over two-fifths of homes for sale in the North East (48%), Scotland (46%) and North West (44%) are cheaper to buy than rent with the monthly difference between the cost of renting and buying in these areas ranging between £240 and £425.

However, the availability of affordable homes is at the highest risk of falling in these regions as house price inflation has recovered earlier than in the southern regions of England.

It’s a different story for first time buyers in the south of England and the Midlands, which have a lower share of homes listed for sale that are cheaper to buy than rent.

Just a quarter (27%) of homes in the South West and a third (33%) of homes in the East Midlands have mortgage repayments lower than local rents, largely down to higher home prices in these regions, meaning that borrowing costs remain much higher.

Two in five homes listed for sale in London are cheaper per month than renting

London also has a relatively high proportion of homes for sale where mortgage repayments are lower than rents: two in every five homes listed on Zoopla would work out cheaper to buy than to rent.

This is because the gap between rental inflation and house price inflation has been greatest in London over recent years: rents are up by 26.6%, while house prices have increased by only 8.9% over the past five years.

Low price growth and higher rents ultimately means greater options for first-time buyers, although rents remain high in the capital.

Nine out of 10 homes that are cheaper to buy than rent in London are flats, which typically come with a lower price tag.

This is due to a larger difference between typical FTB monthly mortgage payments and monthly rent payments of £470 in inner London and £170 in outer London.

This is not just the case for London too - potential homeowners keen to secure a mortgage with payments below local rents should look to flats with two in three flats currently available for less than local rent in their respective markets.

Key takeaways

• A third of homes listed for sale (34%) on Zoopla can be bought with a mortgage and repayments that cost less than the average rent in the same area*
• Buying an average home with a 20% deposit on a 30-year term works out as £93 cheaper per month than renting it
• Availability is best in the North East, Scotland and North West, with over 40% of homes having mortgage repayments below rental costs
• Oadby and Wigston area near Leicester has the highest proportion of homes listed for sale that are cheaper to buy than rent
• The majority of homes for sale in Manchester, Newcastle, Southampton and Sheffield could be purchased with mortgage payments below rents

 

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by Blackstones

Period properties swallow £700-a-month in upkeep

New research finds that period properties cost the equivalent of a small mortgage in maintenance and upkeep.

We love a character fireplace and ornate cornice as much as the next person, but these period features can come at a price in the long run.

We’ve taken a closer look at the true cost of owning a period property - one that was built before 1919. On average, period home owners have spent more than £19,213 maintaining and repairing their home since the start of 2022.

This is nearly two-and-a-half times the maintenance cost of non-period homes since 2022 (£8,496).

In total, that works out as an extra £700-a-month spent on maintaining a period home, since 2022 - a significant proportion of the current average monthly mortgage cost of £950.

And over the whole time they’ve been in their period home - which averages 16.8 years - owners of period homes have spent a whopping £68,000 on upkeep.

What are the most common issues with period homes?

Most of the time, these maintenance costs are on fixing external elements of a period home. This includes:

• Roofing

• Brickwork

• Garden maintenance

• External walls

• Leaning chimneys

Period homeowners have spent an estimated £12,865 on these external fixes since 2022, whereas owners of non-period homes only spent £4,314 on them.

And when it comes to internal maintenance, period homeowners have spent a further £6,348, covering things like:

• Flooring

• Bathrooms

• Electricals

• Removing mould

• Upgrading insulation

• Fixing wiring and electrics.

On the other hand, those in non-period homes have only spent £4,182 on internal maintenance. It drops to just £2,915 for those who own a new-build home (built in or after 2020).

Is it worth buying a period property?

The costs of running a period home have caught many homeowners out.

A fifth (22%) say they didn’t realise how much they would need to spend to maintain, repair and upgrade their property - or they didn’t envisage any costs at all..

And two in five (39%) period home owners say the final cost was more than they had anticipated.

That’s not to say it always comes with regret. 72% of period home owners say the costs are ‘worth it’ and they don’t regret their purchase.

Many period homeowners think that older homes have more character (55%), others love the architectural style (45%) and a third (33%) say original features are a key draw.

What to check before buying a period home

Period properties require regular investment to keep them in good, working order. Be sure to look beyond simply the price of a property and factor in the ongoing maintenance costs when you’re looking for your next home.

And before you buy, invest in a property survey to identify any problems.

This will help you answer questions like:

• How old is the boiler? They typically have a lifespan of 10-15 years.

• Is there any mould that’ll need fixing? Sorting out leaky roofs, rising damp or poor ventilation can be costly.

• What condition are the roof and chimneys in?

• Are there any signs of Japanese Knotweed? This invasive plant has underground roots that will damage anything in its path.

• Are there any signs of rot? You’ll need to confirm the extent of the problem and see if it’s treatable - if not, the timber may need replacing.

Looking for less maintenance? A new-build home could be the way to go

There are plenty of options when it comes to era and style of home, with many high quality homes on the market which require less investment in upkeep.

New-build homes are designed to take away the hassle and cost of upkeep compared to older properties.

New builds are constructed to the latest building standards and regulations and, with only your own wear-and-tear to deal with, you’re unlikely to need to fork out for repairs for a good few years.

What’s more, most new-build homes come with warranties to protect you in the case of any issues. Defects are usually covered for 2 years while the structural warranty lasts 10 years.

And if you’re worried about losing that homey feel of a period property, rest assured that there are plenty of design options to make sure your new build is totally your style.

You can often choose exactly how it looks, from the flooring, to the kitchen cabinets, to the garden design.

Whether you go for a new-build, or a place that has been on the block a little while longer, the most important thing is that you choose a home that works for you and your budget.

Key takeaways

• New research finds that owners of period homes built pre-1919 spend an average of £700 per month on upkeep
• The biggest costs go on fixing external elements like roofing, brickwork and walls
• Be sure to get a full survey done before you buy a period home to identify any issues and help anticipate future costs

 

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by Blackstones