Worcester, Droitwich & Malvern Market Update – August 2023
Swap rates give us a good indication of changes to come in mortgage costs – reflecting the cost of borrowing for lenders.
Inflation data for June, released on 19th July, was better than expected with headline inflation down to 7.3% and core inflation 6.4%. This better news filtered through into lower interest rates on 5-year swaps, seeing them dip back below 5%, reversing the previous trend.
Also, at the end of last month, Housing and Levelling Up Secretary Michael Gove made a major speech signalling the importance being given to a new national housebuilding strategy. In the speech, he said “Most people agree that we need to build more homes – the question is how we go about it. Rather than concreting over the countryside, we have set out a plan today to build the right homes in the right places where there is community support – and we are putting the resources behind it to help make this vision a reality.”
The Government says it will be taking steps to unblock the bottlenecks in the planning system and introduce new flexibilities to convert shops, takeaways and betting shops into homes to help rejuvenate failing high streets. Red tape is also going to be cut to enable barn conversions and the repurposing of redundant warehouses and agricultural buildings. New freedoms to extend homes, convert lofts and renovate buildings will also help provide new accommodation within existing properties. This renewed commitment to housing should act as a reminder of the importance of a healthy housing market to the economy and successive governments.
LOCAL MARKET ROUNDUP
The latest available Land Registry statistics, for the year ended 31st March 2023, reveal that there were 32% fewer sales in Worcestershire than the previous 12 months, when the transaction numbers were boosted by stamp duty incentives. The actual number of transactions was 3724. Sales in Worcester were down 34% at 1628. Malvern was down by 29% at 568 and Droitwich down 28% at 439.
Over the last 12 months, transaction values varied across the county, but all have shown growth. Malvern’s average transaction remains highest at £310.1K up 6% with Droitwich next at £298K up 7%. In Worcester, where 44.2% of the sales were recorded, the average sales price also increased by 7% to £259.5K.
The increases in average sales price over the last five years are shown below:
Across the WR postcode area, the average rent for homes, let over the last 12 months, has increased by 7% to £814. 46% of the properties let were flats, achieving an average of £704 with houses having achieved £930 per month. The average rent for properties let in Droitwich at £735 is 10% lower overall due to flats here averaging £588 and houses slightly lower at £920. In Malvern, the average rent on homes let in the last 12 months is 28% higher at £934 despite being made up of 67% flats, which achieved an average of £850 per month, and houses £1,149 per month. Worcester remained closer to the average at £798.
Source: Dataloft Market Rental Analysis (rental data is limited and based on achieved rents for approximately 10-15% market share, depending on location).
Month-on-month property prices remain consistent, however both the Nationwide and Halifax report average prices in June are lower than this time a year ago. Prices however remain significantly higher than at the start of 2021.
HMRC report just over 80,000 sales took place in May. Except for 2020 during the lockdown, this is the lowest May total since 2012 and 12% lower than the 10-year (2010-2019) average. While the number of mortgages approved in May was higher than in April, the level of lending is considerably lower than a year ago, according to latest data from the Bank of England. So far this year there have been 32% fewer loans approved compared to last year.
Amid a sharp fall in petrol prices, inflation fell further than expected in June to 7.9% and eased forecasts for upcoming Bank of England interest rate rises. This better news on inflation filtered through into lower interest rates on 5-year swaps, dipping back below 5%.
The UK economy shrank by 0.1% in May following growth of 0.2% in April. In the three months to May, economic growth remained static. The labour market remains strong with unemployment just 3.8% (ONS).
UK wages rose by 7.3% in the three months to May, their fastest rate (excluding the pandemic) in 20 years. The Bank of England has warned that continued high pay growth is likely to prolong high rates of inflation.
Annual growth in rental prices in the UK is at its strongest since records began at 5.1% in June. The Index of Private Rented Housing Prices reports on both new lets and renewals.
A monthly rise of 1.3% took the average rent in the UK on newly agreed rental contracts to £1,229 in June, a 10.4% year-on-year increase (Homelet).
According to research by Savills, 75% of mortgaged buy-to-let properties have a loan-to-value of less than 60%, and one in three less than 50%. Only landlords leveraged at 80% or more have seen current profits move to negative territory.
In response to the regular feedback we receive regarding the value of our Market Updates we have decided to publish more regular market insights online. We are emerging from an unprecedented period of activity at the same time as having to cope with equally unusual economic pressures; added to which there is a measure of political uncertainty fuelled by the mainstream media.
In the midst of this turbulence we believe it is important for you to hear clear, evidence based messages to help you navigate in the current market and make the right choices.
With nearly two decades of experience our MD, Matt Nicol is keen to ensure you have access to expert advice and invites you to ask him directly via our website or by following us on our social media channels.