December update

Questions swirl as the impact of the budget is assessed more closely. Kier Starmer vows to get the UK ‘working again’ as the job market dwindles. The government’s proposals come in response to strong opposition from businesses regarding the tax increases outlined in last month’s Budget. Companies contend that the higher National Insurance contributions, combined with the minimum wage increase, will make them less inclined to create new jobs, ultimately hindering the government’s goal of strengthening the UK economy.

The industry has waited with bated breath for the publication of the NPPF changes, which happened on 13 December. But the real elephant in the room is the Devolution Bill, which was published on 16 December – it sets out what the government is expecting in terms of mayors and combined authorities, but also in local government reform. This was leaked in The Times in early December identifying ten pathfinder counties, including Kent, Essex, Hertfordshire and Norfolk & Suffolk, to come forward first. It appears the changes will be the largest ever in 50 years, and will be fundamental. We will wait and see the detail.

Economy

• GDP Growth The economy grew by just 0.1% over the three months in the run-up to the announcement of the budget. When Labour took office, economic growth was a top priority. However, many businesses have criticised the tax increases outlined in the Budget, arguing that they will lead to higher prices and fewer new jobs. Major companies, including Marks & Spencer, Sainsbury’s, and JD Sports, have suggested they may raise prices in response to the changes. The latest growth figure shown after the budget was announced was weaker than expected and marked a sharp slowdown from the 0.5% growth seen in the April-June period. Several economists have concerns about the uncertainty caused by October’s Budget and are worried about how it may influence people’s and businesses’ decision-making. Recently released growth figures show that the economy shrank by 0.1% in October.
• Inflation Rate The UK’s inflation rate rose to 2.3% in October 2024, up from 1.7% in September. This increase was driven primarily by higher energy costs and a rise in airfares. The Consumer Prices Index (CPI) also saw a monthly increase of 0.6%.
• Interest rates Higher inflation has dampened expectations of a Bank of England base rate cut in December, according to financial experts. Meanwhile, City markets are now predicting that any reduction in the base rate, currently set at 4.75%, will be smaller and occur more gradually throughout 2025 than previously forecast. Looking ahead, Michelle Lawson, Director at Lawson Financial, said: “Stand by for mortgage rates to keep increasing and a base rate hold in December. Inflation will go up again due to the recent Budget.” This held true as inflation rose to 2.6% in December.
• Housing Market Resurgence Following the recent budget, the UK housing market has seen a significant rebound. Increased buyer demand and heightened sales activity have been reported, driven by economic factors such as anticipated tax changes and adjusted mortgage rates. Mortgage approvals rise for the fourth month in a row. The latest Bank of England figures show mortgage approvals on house purchases increased by 1.1% to 65,647 during September. Nathan Emerson, CEO of Propertymark says: “Considering the economic headwinds of the last few years, the housing market has shown great resilience, delivering a positive trajectory of growth throughout the duration of the year to date.” Mortgage rates have edged up slightly in the past couple of weeks as lenders adjusted their pricing in response to the Budget, but this is expected to be a short-term trend. The average 2-year fixed rate (75% LTV) is currently at 4.6%. Inflationary pressures, including wage growth and unemployment, are beginning to ease, leading to a further reduction in the base rate in November—likely the last cut of the year. The base rate now stands at 4.75%.
• House prices Amanda Bryden, Head of Mortgages, Halifax, said: “Average UK house prices nudged up +0.2% in October, continuing the positive momentum of recent months. This brought the annual growth rate to +3.9%, slightly lower than in September.’ Northern Ireland has seen the highest property price growth of any UK nation or region, with prices rising by +10.2% year-on-year in October. The average property price in Northern Ireland is now £204,242. Wales also experienced notable growth, with house prices increasing by +5.6% compared to the previous year, bringing the average property price to £225,543. Scotland saw a more moderate increase in house prices, with the typical property now costing £206,480, reflecting a +1.9% rise from the previous year. In England, the North West continues to lead in price growth, with an increase of +5.9% over the past year, bringing the average price to £235,587. London remains the UK’s most expensive region for property, with an average price of £543,308, up +3.5% from last year.
• Unemployment The UK’s unemployment rate has risen to 4.3%, according to recent data, while average wage growth continues to slow. Unemployment increased by 0.3% in the three months leading up to September, rising from 4% in the previous period, as reported by the Office for National Statistics (ONS). At the same time, the ONS noted that wage growth slowed to 4.8% in the three months to September, and was 2.7% higher when adjusted for Consumer Prices Index inflation. The number of people on UK payrolls also declined, falling by 5,000 from September to October, bringing the total to 30.4 million. Furthermore, job vacancies decreased once again, dropping by 35,000 to 831,000 in the three months to October.

Bills in Parliament:

• Assisted Dying Bill: This bill, proposed by Labour MP Kim Leadbeater, aims to legalise assisted dying for terminally ill adults. It has garnered significant attention and debate, with a vote at the end of November which passed the legislation.
• Leasehold and Commonhold Reform: The Housing, Communities and Local Government Committee is responding to government statements on reforms aimed at protecting leaseholders and commonholders.
• Water (Special Measures) Bill: The House of Lords is reviewing this bill, which focuses on financial reporting and governance rules for Ofwat.
• Mental Health Bill: The Lords are debating the key principles of this bill, which aims to improve mental health services and support.

Current Affairs Related to Housing:

• Right to Buy Reforms The government has launched a consultation on reforms to the Right to Buy scheme, aiming to protect and increase council housing stock. These reforms include extending the length of time tenants must wait before buying their homes and exempting newly built social homes from sale.
• Affordable housing New statistics have revealed an 88 percent decline in the number of affordable homes started in London. Government data shows that 3,156 affordable housing projects began in Greater London between April 2023 and March 2024, a significant drop from 26,386 starts in the previous year. The data also indicates that Harrow, Bexley, Richmond-upon-Thames, and the City of London each saw only one new affordable home initiated. A government spokesperson stated that changes to the planning system, along with increased funding and the introduction of mandatory local housing targets, will help address the issue. Rob Anderson, Research Director at the Centre for London think tank, said: “Although policy changes, such as planning reforms to unlock areas on the ‘grey’ belt or encourage housebuilding on brownfield sites, are a step in the right direction, they won’t be sufficient to resolve this crisis.”