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 8, 2024

SFR | Economics – RICS survey strongest evidence to date that housing market has turned the corner

Company news

Severfield (SFR, 56p, £174m mkt cap) – SFR is a client of PERL

Britain’s leading structural steel group, with sales to Europe and a rapidly growing Indian JV. CDP ‘A List’ for climate change. Severfield has been recognised for leadership in corporate transparency and performance on climate change by CDP, the global environmental non-profit organisation, securing a place on its annual ‘A List’. Based on information reported through CDP’s 2023 Climate Change questionnaire, Severfield is one of a small number of companies that achieved this ranking, out of over 21,000 companies assessed. Achieving an ‘A’ rating demonstrates the group’s commitment to best practice when it comes to reducing its impact on climate change. This includes: achieving a 33% in our Scope 1 and 2 greenhouse gas (GHG) emissions from 2018, exceeding the group’s short-term target to reduce emissions by 25% by 2025; switching to green electricity tariffs with 94% of its total purchased and consumed energy coming from these sources in 2023; being accredited as carbon neutral for the third year running after third-party verification for Scope 1, 2 and operational Scope 3 GHG emissions.

Economic data

Housing market. The latest RICS Residential Market Survey shows improvements in almost all data points in January, including the first increase in the key leading indicator of buyer enquiries in April 2022. The seasonally-adjusted balance (% of surveyors reporting rise minus % reporting fall) for buyer enquiries to estate agents rose to +7 from -3 in December and a low of -50 in October 2022, immediately following the mini-budget. Most regions turned positive, notably the three home nations of Scotland, Wales and Northern Ireland. There was also a rise in vendor instructions – supporting liquidity in the sales market. The RICS ‘headline’ price balance was one of the few negative data points, but reduced to -18 in January from a low of   -25 in August – indicating prices have still been falling over the rolling three-month monitoring period, but at a lower rate of decline. Price expectations turned positive on a 12-month view, +18, and the three month view narrowed to -2, from -12 in December. Sales volumes (an actual number, not a balance) rose for the fifth consecutive month, seasonally-adjusted, to 16.0 (rolling three-month total per office) from 12.0 in August. In the lettings market, the net balance of +28 was the most modest since January 2021. The imbalance between supply and demand is still expected to drive rental prices higher over the coming months, albeit the latest net balance eased to +41 from +52 and +61 in the two previous quarters.

Viewpoint: Despite the limitations of RICS’s ‘state of trade’ balances, it is probably the best lead indicator of forthcoming changes in housing market dynamics. Either actually or relatively, almost all measures in the survey are improving. This follows early anecdotal indications in October then reports on pricing and volumes from other data sources, which the ‘Daily’ has regularly highlighted. There are always left-field interruptions (wars, new pandemics etc and elections have a habit of producing wobbles) that could still knock recovery off track, but, for now this represents the most tangible evidence to data that the market has turned the corner. Not bad timing for yesterday’s announcement from Barratt and Redrow …

Housing market activity. A record number of future sellers getting their home valued in January, according to Rightmove. According to the UK’s largest property portal, the number of people requesting a home valuation by an estate agent was 23% higher in January than in January 2023. The number of new properties coming onto the market for sale is 13% higher than last year, while buyer demand over the same period is 7% higher.

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