According to new data, a January spike in AML activity across the property sector suggests that those predicting the catastrophic decline of the market in 2023 have done so both prematurely and incorrectly.
The analysis of unique AML data has enabled a comprehensive look at buyer and seller activity within the property sector. In doing so, this data allows early insight into the health of the market before it is reported by any house price report or mortgage data release. Their historic data has already mapped a number of previous market trends. It shows a -30.6% month to month reduction in AML market activity in December 2021 following the first Bank of England base rate increase.
But while many were quick to call the impending collapse of the market, Credas Technologies, the company responsible for compiling the data, predicted the opposite. AML market activity climbed 52.4% between December 2021 and January 2022, peaking in June of last year as the market continued to perform strongly. Following last September’s disastrous mini-budget and the resulting turbulence seen across the mortgage sector, the data also shows AML activity drop at an average rate of -8.1% per month between October and December 2022.
However, 2023 has seen a degree of stability return to the market and the latest figures suggest that the market has bounced back at a considerable rate. They estimate that by the end of January, AML market activity will have increased by 45.3% versus December of last year, up 21.6% when compared to January 2022, returning to the same levels seen during much of last summer. Tim Barnett, CEO of the leading identity verification provider Credas Technologies, said “we saw a heightened level of market turbulence following last September’s mini-budget which caused an immediate decline in property market activity. At which point, the property sector naysayers re-emerged to once again make predictions of doom and gloom, having been previously proved wrong when doing so at the start of 2022. However, our ahead-of-the-curve insight suggests that the property sector has bounced back at an impressive rate when compared to the decline seen during the final quarter of 2022. At the same time, the current level of market activity has also exceeded that of January 2022 by quite some margin, suggesting that any momentary market wobble could well be in the rear view mirror. Whilst nobody has a crystal ball, what our data does indicate is that those who have made the most dire of predictions for the housing market in Q1 may well prove, for the second time in a year, to be wildly pessimistic. Early indications are that the outlook is much healthier than many have so confidently predicted."
How can the UK meet the demand for Hosuing?
Government must make it easier for SME builders to compete. Last month, housing secretary Michael Gove watered down the government’s pledge to build 300,000 new homes per year by altering the targets from ‘mandatory’ to ‘advisory’.
The question remains: how can the UK meet demand for housing?
Paul Brett, managing director of intermediaries at Landbay, said the planning system is clunky and incapable of providing enough properties. To make matters worse, materials are in short supply due to global supply chain issues and there is a shortage of labour in the construction market. The government said it wants to encourage homeownership, but house prices are high and deposits are hard to save for, especially for first-time buyers, and now we have the cost-of-living crisis as well as higher mortgage rates to add into the mix.”
Brett believes there is a paradox here – homeownership is in decline and the government is effectively forcing people into rented accommodation.
Landlords are stymied by housing policies
At the same time, Brett said "government policy towards landlords is discouraging some from investing in the growing private rented sector because of increasing regulation and taxation burdens. The vagueness from the government surrounding the Energy Performance Certificate (EPC) proposals that rented property must be at least EPC C rated by 2025 and 2028, for new and existing tenancies respectively, does not help either.”
Brett said he has seen a rise in landlords buying new-build property, which is mostly B rated, in preparation for when these new EPC rules do become law. “There has never been an easy answer as to how to meet this country’s housing demand, but we know it always exceeds supply and new housing is needed.”
Should government help smaller housebuilders?
Phil Quinn, head of intermediary sales at later-life lending specialist LiveMore, said "the government needs to make it easier for small and medium-sized (SME) builders to compete on a level playing field with the larger ones. According to the Home Builders Federation, the number of SME builders has declined by 80% since the late 1980s. There are not enough house builders to build the new homes we need; for numbers to increase, it would be good to encourage more smaller house builders into the market.”
Lack of commitment could mean lack of housing supply
In light of the change in government policy, Karl Wilkinson, chief executive at Access Financial Services, said "authorities will now be less likely to review green belt boundaries and further housing delivery delays will be inevitable. Without a commitment of substantial numbers of new houses built each year, he believes the knock-on effect will be a lack of availability for new buyers looking to get on the property ladder. Competition for those new houses that are actually built will also be fierce, as landlords wishing to avoid the investment costs of raising Energy Performance Certificate (EPC) ratings are increasing likely to buy new-build property for the superior EPC ratings.”
He believes the commitment to deliver significant numbers of new homes each year is fundamental to the sustainability and growth of the housing market; Wilkinson said he believes that the government should reinstate the mandate.
Why have housebuilding targets been missed?
Jeff Knight, director of Grey Matter Marketing said "the challenge of building a set number of new homes each year has been a goal for as long as he can remember and that the government’s new approach of targets being advisory, rather than mandatory, is nonsense and abdicates responsibility."
Knight said "the property market needs a proper review of why there is year-on-year failure to hit new housebuilding targets and he questioned whether the targets are unrealistic, if there are sufficient resources and labour for the construction, and if planning rules are too restrictive. “What we need is not a pledge for new home construction; we need a proper strategy for building new homes and enhancing communities with the environment taken into consideration. It is no longer sufficient to just focus on building without a joined-up strategy.”