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.

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February 1, 2023

Affordability improves and prices slip for fifth month – Nationwide; January recovery in housing demand returns to pre-pandemic levels – Zoopla

Company news

Renew Holdings (RNWH, 35p, £413m mkt cap)

Engineering services group supporting UK infrastructure. AGM statement. Guidance: “Trading for the first quarter of the year has continued in line with the Board’s expectations. The order book at 31 December was £861m [+16% Y/Y]. The Engineering Services order book stood at £758m [+10%]. We are pleased with the momentum within the group. This, combined with the structural growth drivers in our regulated infrastructure markets, give us confidence in the year ahead”. Trading update, 3 April.

 

SIG(SHI, 732p, £577m)

Supplier of energy efficiency and specialist building materials to trade customers across Europe. Directorate change. Former Grafton CEO, Gavin Slark appointed as CEO, as previously announced. On 8 September the group announce that, after its successful turnaround and return to profitability, Steve Francis would step down as CEO early in 2023, with Slark his successor.

Economic data

House prices slipped for the fifth consecutive month in January, bringing the accumulated decline to 3.2% since the August peak, according to Nationwide . The average price fell by 0.6% to £258.3k, following 0.3% in December but at a lower rate of decline of 1.0% in October and 1.2% in November. This brings the annualised rate to +1.1%, from +2.8% in December. The rolling three-month change for January was -2.3%, from -1.8% in December (below, left). However, the softening in prices and rising incomes has started to reverse the sharp rise in the house prices to income multiples (below, right). The leading lender indicated that the recent spate of more competitive rates from lenders [including its own loan offers] could further improve affordability: “Should recent reductions in mortgage rates continue, this should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth (wage growth is currently running at around 7% in the private sector), especially if combined with weak or negative house price growth”.

UK-Houseprice-to-earnings-ratio

Housing market analysis. House price growth stood still in Q4 2022, in response to the 50% drop in buyer demand in the final months of 2022, but there are signs that buyer interest has since followed the same trajectory as January in the two pre-pandemic years of 2018 and 2019, according to the latest House Price Index report from Zoopla (registration required). The annual rate of house price inflation in the quarter fell to +6.5%, from +8.3% at the end of 2021, according to the UK’s second largest property portal. Most regions registered small price falls in Q4 2022, with the largest increase in Scotland, followed by the East and West Midlands, Yorkshire & Humberside and Wales. Demand has recovered at the same rate as pre-pandemic levels, in line with 2018 and 10% higher than in 2019 (below). There is currently a greater focus on flats with a shift away from houses in response to higher borrowing costs and the hit to buying power. The report concludes: “We expect demand to improve further in the coming months as mortgage rates continue to fall and would-be movers realise that large price falls are unlikely to materialise”.

House-buyer-demand-2018-2023
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