As featured in ShowHouse Magazine July 2024
Keep your eyes on the data (and technology)
While the headlines cry doom and gloom, many industry experts believe the residential housing market is more stable than it appears. So, which is it? Data, of which there is plenty in this industry, is the key to knowing if we have truly turned a corner. There are a few indicators which help us form an understanding of 5 key trends shaping the market.
Trend 1. The right property at the right price
The market is active and moving, especially for homes that are priced correctly. According to research from Zoopla, there are currently 392,000 homes in the sales pipeline that are all moving their way to completion during 2024. This figure is up 3% compared to this time last year.
The same incentives to move remain, especially for first-time buyers who are looking to move away from rapidly rising rents, and home buyers looking to upsize who delayed moving last year when mortgage rates increased. This is again reinforced by Zoopla, revealing that new sales agreed are up by 12% and the number of homes under offer is also higher compared to this time last year.
Trend 2. Construction costs
Despite positive momentum in the market, various housebuilders are still reporting challenges in relation to new home reservations, in part due to an increase in their house prices and affordability. Some housebuilders are attempting to retain their profit margins following an inflation in construction and wider supply chain costs, passing on these rises to the consumer. Since the pandemic, the cost of construction materials and labour had increased substantially, however these costs are now slowly starting to fall. The latest monthly construction material price index, published by the Department for Business and Trade, revealed that construction material prices for new housing decreased by 0.2%. This figure highlights a much-needed period of cooling off in construction materials cost inflation.
Trend 3. The downsizing movement
At Spring, we are seeing a growth in homeowners looking to downsize to a smaller home that better suits their needs, finances, or lifestyle. In 2023 alone, Spring presented part-exchange offers to over 3,000 customers. This trend presents housebuilders with a good opportunity to consider the 55+ demographic when building new home developments, ensuring that all tiers of the market are catered for. Spring, who currently partner with over 250 retirement providers, developers and estate agents, can offer those looking to downsize a simple and guaranteed solution to start their next chapter with ease, speed, and certainty.
To this point, Spring recently agreed a new partnership with later living developer and manager, McCarthy Stone, becoming its largest part-exchange provider. Spring will simply buy their customers’ existing homes, freeing them up to move into their McCarthy Stone property without delay, on a date of their choice.
Trend 4. Slow searches
In the current housing market, we are witnessing a slowdown in conveyancing transactions, which is contributing to lengthy completion times. Research conducted by Spring and our data partner PropAlt, revealed that local authority searches, which form a core part of the conveyancing and sales process, are taking on average 11.5 days to be completed in England. Looking at this data in more detail, thousands of home movers across the country are left feeling stressed and frustrated due to vast discrepancies, with some searches taking up to a staggering 40 days for Tamworth Borough Council, and Islington London Borough Council respectively. This figure increases further to 45 days for Camden Council, and 60 days for Wirral Metropolitan Borough Council and Canterbury City Council.
This research represents major delays against the Government’s target for returning local searches in 2024 within a maximum of 10 working days. The large discrepancy in local authority search times can be driven by several factors including property demand, staffing and resource levels in each area.
Trend 5. Inflation distress
Although the concerning growth in terms of inflation has slowed down, there is a substantial lag in terms of wage growth in the UK. Average annual wages in the UK grew by approximately 6% from April ’23 to April ’24. However, when adjusted for inflation, wages only grew in real terms by 2.6%, according to the latest ONS figures, a stark contrast to the high rental and sales value increases that we have seen over the past few years. The underlying level of inflation from 2023 is now baked in and monthly costs remain an important consideration for all homeowners, whether they’ve decided to stay in their current property or looking to move to a new home. The cost-of-living increase is having a significant impact to many consumers across the country, and although mortgage rates are slowly coming down, the days of 2% or below don’t look like they will be returning any time soon.
How can technology play a part solving these trends?
Technological advancements have come a long way in recent years, making information-gathering and problem-solving in the volatile housing market more efficient.
Spring have developed an exclusive tech platform, MOVESMART, providing significant advantages for Spring’s growing number of partners. The innovative tech helps to aid decision-making by underwriting single property transactions, calculating risk factors, and assessing local market conditions anywhere in the UK. The platform, which translates thousands of data points into actionable insights, enables Spring to assist developers and housebuilders to evaluate opportunities, optimize sales, and maximize returns.
What’s next?
Overall, we’ve not seen the same level of stagnation in the housing market as previous elections – sales have continued to proceed, and people have continued to move. However, there are still many challenges to address such as protracted moving processes and affordability issues. Going back to my opening point about market stability, one thing is for certain; we need accurate data. Using data and tech led solutions will ensure developers design and build homes of all shapes, sizes, price points and tenures, to successfully meet the housing demands of our growing population.
