Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

September 29, 2023

HOME | Housing starts surge to 50-year high (guess why?) | Fortnight ahead

Company news

Home REIT (HOME, shares suspended)

Real estate investment trust funding the acquisition and creation of properties providing accommodation to the homeless. Property Sales. “The Company has exchanged on the sale of a further 137 properties, representing 5.6% of the Company’s portfolio by number, in a series of public auctions held over the last eight days for £22.8m with completion expected in approximately one month’s time. AEW, as Investment Manager to the Company, identified a portfolio of properties that were in poor condition, largely vacant and requiring significant capital expenditure in order to be brought up to specification. Of the properties exchanged for sale, 100 were subject to leases with tenants in liquidation which will be surrendered prior to completion.  The proceeds from represented an average of 32% per cent of their purchase price and will be used to reduce borrowings and provide working capital as part of AEW’s strategy to stabilise the property portfolio”.

Economic data

Housing starts in England reached a 50-year high in Q2 23, according to the ONS, as housebuilders raced to lay down foundations (and not much else, as they qualify as ‘starts’) ahead of the 15 June deadline when carbon emission reduction rules came into force. Starts in Q4 totalled 73,620, a 35% Y/Y increase. Cumulative starts in Q3 22 – Q2 23 were 191,270 – 10,310 above the previous four quarters; meanwhile cumulative completions were 4,470 below.

Viewpoint: This supports my longstanding contention that there were at least 10,000 ‘false starts’ ahead of the new Building Regulations. The unadorned concrete slabs (which are widely visible passing housing sites on several train main lines) may provide an unintended positive for manufacturers of bricks, blocks and the rest: when house buyers do eventually return they (and the manufacturers) will not have to wait for the foundation subcontractors to do their pouring; it will be straight onto the ‘brickies’. Next data, December (TBC).

Housing Starts England

Housing market activity. Completed UK residential transactions in August fell 16% Y/Y to 95,000, non-seasonally-adjusted, the HMRC has reported. However, on a seasonally-adjusted basis, transactions were 1% higher than July, the third consecutive month to show an increase.

Viewpoint: This supports anecdotal suggestions from agents and housebuilders that the normally quiet summer months were relatively resilient given the economic backdrop … but the same people are reporting no great uplift so far since the schools went back (backed by the mortgage data below). The next couple of months of mortgage and other data should indicate whether the rates pause will trigger a late uptick in the autumn.

UK Residential Property Transactions

Mortgage approvals for house purchases, net of cancellations fell from 49,500 in July to 45,400 in August, in the latest Bank of England Money & Credit data, the lowest level in six months. Net approvals for remortgaging (which only capture remortgaging with a different lender) saw a significant decline from 39,300 in July to 25,000 in August, the lowest since July 2012 (24,400). The ‘effective’ interest rate on newly drawn mortgages rose by 16 basis points to 4.82% in August. Similarly, the rate on the outstanding stock of mortgages saw a 9 basis point increase to 3.06%.

Money & credit data

Fortnight ahead

Sept 29 2023 Fortnight ahead
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