Specialist bank and wealth manager Investec has warned that despite positive signs for the housing market, the Governments housebuilding targets are “unrealistic.”
Phillip Shaw, chief economist at Investec, shared insights into the current trends and future forecasts, highlighting both the challenges and opportunities within the UK’s housing sector.
Shaw discussed positive signs in the housing market, such as increased turnover, higher mortgage approvals, and rising transaction levels, indicating a healthy market overall.
Shaw said: “When we examine house price inflation, it varies depending on whether we reference Nationwide or Halifax, but it generally falls within the range of 3% to 5%.
“This indicates a moderate price growth. More importantly, housing turnover has been positive for quite some time.
“We can observe the distortions caused by Stamp Duty holidays and Covid-19, but currently, both indicators of turnover, after a lacklustre period, are approaching their 10-year averages.”
Shaw added: “They may still fall below their longer-term averages, but within the context of the past decade, the figures are encouraging.
“Mortgage approvals for purchases have increased by 31% over the year, while total transactions, excluding those without mortgages, are up by just over 13%.”
He said: “Metrics such as new buyer inquiries, sales per surveyor, and new instructions to sell have been on the rise for quite some time.
“We anticipate that if interest rates decrease, particularly bank swap rates for mortgages, that would significantly enhance the market environment.”
He added: “Additionally, recent discussions suggest that regulators may encourage lenders, especially banks, to ease some of their criteria for lending.
“While this is still speculative, it wouldn’t be surprising to see such adjustments in the near future.”
However, he cautioned that the Government’s housing targets are overly ambitious, describing Labour’s plan to build 1.5 million homes as “very unrealistic.”
UK completions in the year to June 2024 were just 193,000, and the pace needed over the next four years may need to approach 325,000 per annum – a level not seen since the mid-1970s.
Nevertheless, he acknowledged that meeting these targets could significantly boost the economy.
Shaw said: “I don’t think we’re going to get to 1.5 million, but if we get to over a million, that’s not a bad outcome.
“It will be a big boost the economy and help your businesses as well.
“I think it’s realistic to expect an upturn.”
Despite these challenges, the housing market’s current momentum suggests modest growth.
An interactive poll conducted during the event via SLIDO revealed that 91% of attendees expect their businesses to grow, reflecting cautious optimism within the sector.
