February Market Update

Last year the property finance market was turbulent, to say the least.

The UK economy and the real estate industry are currently existing in a period of disruption – the era of cheap money is over. Last year saw Q4 interest rates skyrocketing, and the beginning of this year has marked a similar fluctuation – we hope to see a stabilisation of this in the first half of this year.

Growth in the real-estate sector will continue, albeit slower in the core market (<£1m). The Prime sector will remain robust, particularly in London and The Home Counties. Despite a tumultuous few years for the real estate sector, the UK is facing profound changes across market sectors. Our long-term outlook remains positive. We believe that success arises from focusing on the longer-term challenges, such as market stabilisation, and addressing the nationwide housing shortage.  

A few things to consider:

1. Residential Market Slowdown:

The start of 2023 saw a further slowing in annual house price growth to 1.1%, from 2.8% in December. Moreover, January saw a further monthly price fall (-0.6%). This has left prices 3.2% lower than their August peak, after taking account of seasonal effects. There are some encouraging signs that mortgage rates are normalising, although it is too early to tell whether activity in the housing market has started to recover. The prime market will remain resilient to change, as is often the case.

2. Bad News for Developers:

This week, developers will receive legally binding contracts committing them to repair unsafe buildings. Following Grenfell’s cladding issues, the government has set a six-week deadline for the developers to sign the legal documents. They warn that companies who fail to sign and comply will face significant consequences. In the spring, legislation will be brought forward which lends the Secretary of State power to prevent developers from operating freely, should developers disobey remediation contracts.  

3. Good News for Prime:

Despite a turbulent market, the Prime property sector continues to prove resilient. Once again, it is projected to outperform the core market next year. This sector remains cushioned from the economic headwind impacting the market, due to fewer buyers in this market being reliant upon finance from banks and secondary lenders. Typically, prime markets experience a higher number of overseas buyers, who have now taken advantage of sterling’s drop in value in recent months. Whilst the mini budget may have hindered foreign investment, the recent stable climate will have curbed concerns and reinstated confidence.

4. Increased competition in Lending:

As the property finance market continues to grow, competition among lenders and investors will become increasingly fierce. This will drive down costs for borrowers and create new opportunities for investors, however it will also result lenders and investors facing heavy scrutiny, as regulators look to protect consumers from predatory practices. The importance of working with trusted and established lenders has never been more important.

For those looking to invest or borrow in the property finance market, it is important to stay informed to these trends and market changes, and to be prepared to adapt to the changing landscape. At Century, we aim to keep our network informed to these changes.

– Paul Munford CEO