Leasehold pledge and good news on prices
This week brought better news on the outlook for house prices while promises were made in the King’s Speech but what will come to fruition in the long run? Sharon Dale reports
THE King’s Speech this week outlined two property-related Bills the Government would like to enact in the next year-long session of Parliament.
The Leasehold and Freehold
Bill looks set to ban leaseholds on newly-built houses in England and Wales but not on flats.
It is also expected to increase the standard lease extension from 90 years to 990 years while existing ground rents could be capped at a ‘peppercorn’ level. Banning marriage values for new leases or phasing them out is also likely to be included.
However, challenges from freeholders, who will lose out financially, are expected.
The Renters Reform Bill will ban no-fault evictions in England. However, Section 21 of the Bill, which allows landlords to evict tenants on a short-hold tenancy, will not be scrapped until the court possession process is modernised and speeded up.
Linz Darlington, lease expert and founder of lease extension specialists Homehold, says: “Banning marriage value will be particularly beneficial to those people who have leases that have dropped below 80 years.
“In many cases this will reduce the cost of a lease extension or freehold purchase by between onethird and two-thirds. However, the removal of marriage value is something which large freehold investors will almost certainly lobby and litigate against.
“We need reform before the next election which removes some of the issues with leasehold, including those relating to onerous ground rents and expensive lease extensions. This should be followed by more comprehensive reform after the next general election.”
This week also brought the latest Halifax house price index, which revealed that UK house prices rose in October, up 1.1 per cent on a monthly basis, breaking a run of six consecutive monthly falls. However, they are still 3.2 per cent down year on year.
Yorkshire saw a 3.6 per cent drop in house prices year on year bringing the average house price in God’s Own County to £200,321. The neighbouring North East saw a 3.3 per cent fall bringing its average house price to £166,216 and the North West saw a three per cent drop in price bringing its average property price to £221,897.
The greatest fall was seen in South East England, where prices decreased by six per cent over the last year.
Kim Kinnaird, director, Halifax Mortgages, said: “Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale. This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak.
“Medium-term, we expect house prices to fall further with a return
to growth from 2025. The current picture should continue to be seen in the context of the longer-term house price trend as, on average, prices remain around £40,000 above pre-pandemic levels.”
She added that despite weakness in overall buyer demand, the first-time buyer market has held up relatively well largely because buying remains attractive for many, especially against the backdrop of rising rents.
The good news for homeowners this week is that Savills believe that the market will “bottom out” around the middle of next year and its forecasters predict that the average property value in Britain will increase to £300,108 in 2028, marking a £45,521 or
17.9 per cent increase from the average house price of £254,587 in 2023.
Breaking down the data by region, it says Yorkshire and the
Humber will see its average house price rise by £38,692 to £230,323 by 2028. The North West is forecast to see an average £40,645 uplift bringing the average house price to £241,944 and the North East is expected to see a gain of £32,940 over the next five years bringing the average home value to £186,695.
The average UK house price is projected to fall by three per cent in 2024 but Savills said this will be followed by price increases in 2025, 2026, 2027 and 2028 as affordability pressures slowly ease.
Lucian Cook, head of residential research at Savills, said: “Interest rates are expected to have peaked and the worst of the house prices falls look to be behind us, but the first cut to interest rates still looks to be some way off.
“This means continued affordability pressures are likely to result in further modest house price falls over the first half of 2024, resulting in a peak-to-trough house price adjustment in the order of minus 10 per cent.
“The expectation of a gradual reduction in rates suggests a progressive restoration of buying power and steady recovery in demand.”