Property is a favourite British conversation topic. Nearly everyone has an opinion on where house prices are heading, the next property hotspot or where homes should – and shouldn’t – be built.
But to get a true sense of what’s driving the market, it is worth listening to the people who live and breathe property day in, day out.
In this series, we put an expert through their paces each month.
We want to know their view on all of the hot-button topics mentioned above as well as mortgage rates, buy-to-let and housebuilding.
Investment analyst: Anthony Codling is head of European housing and building materials for RBC Capital Markets
This month we spoke to Anthony Codling, head of European housing and building materials research for investment bank, RBC Capital Markets.
Codling analyses companies and market trends in the housebuilding and building materials sectors, to help institutional investors and fund managers decide whether to buy, hold or sell shares in publicly-traded companies.
What will house prices do over the next 12 months?
I believe that house prices will rise by about 5 per cent in the year ahead.
Nominal wages are rising, and we expect mortgage rates to fall over the next 12 months.
Rising wages and falling mortgage rates mean that homebuyers can secure larger mortgages, and larger mortgages will feed into higher house prices.
What about the next 10 years?
I believe that house prices are likely to rise by more than 50 per cent over the next 10 years.
If we look at the average 10-year increase since the turn of the century it is 76 per cent. Even if you’d purchased at the pre-credit crunch peak, you would have seen your house price increase by 13 per cent by 2017.
House prices have been broadly flat since the mini-Budget of 2022, and as mortgage rates fall are likely to catch up on lost ground.
We also believe that the policies the Government employs to stimulate housebuilding will be supportive of house price growth.
Where will mortgage rates be this time next year?
I wouldn’t be surprised to see rates for a home mover buying with a 25 per cent deposit at around 3.75 per cent.
I don’t think we have the capacity to build 1.5 million homes. At most, I believe we have the supply chain and skilled trades in place to build 250,000 homes a year.
I think the total ahead of the next election is likely to be closer to 1million than 1.5million.
A lot depends on what housing policies and taxes are announced in the Budget on 26 November.
If the Budget slows down the housing market, we might even come in below 1million homes.
The Government has done a lot of good work, changes to planning, funding for social and affordable housing and infrastructure projects, but what we need is action as well as talk.
These policies need to be enforced: we need to see more planning approvals coming through and the announced funds being spent. Until that happens, we are unlikely to see an increase in housebuilding.
What is the most urgent property crisis?
There are two big problems: supply and demand.
We need the Government to ensure that local authorities are approving significantly more planning applications and we need them to accelerate the deployment of the £39bn of additional funding in order to get Britain building.
We also need to invest in skills and trades. We need more bricklayers, carpenters and electricians if we are to get close to 1.5 million homes.
On the demand side, we need to provide deposit support to help those without the bank of mum and dad get on the housing ladder.
The average deposit from the bank of mum and dad is now more than £56,000. You need to look under an awful lot of sofas to find that much money.
Today, getting on the housing ladder is less about how much you earn and more about whether or not your parents own their home.
Falling short: Codling thinks the government is likely to build around 1million homes by the next election, not the 1.5million it promised
What could stop house prices rising?
Rising taxes will temper house price growth, but history shows us that it is difficult to make house prices fall.
If we look back to the global financial crisis, the last time we saw significant house price falls was when we had a big decrease in mortgage availability.
Market stress typically leads to a reduction in housing transactions rather than house prices – we choose not to move rather than crystalise a fall in house prices.
What will be the biggest change we’ll see in the property market over the next decade?
Given the challenges of buying a home we will see continued growth in the rental market, and the build-to-rent market in particular, due to the changes to taxes, policy and regulation facing small buy-to-let landlords.
How would you help first-time buyers if you were Chancellor?
We need to help those without access to the bank of mum and dad. This could either be through a deposit assistance scheme, or perhaps a more radical idea allowing first time buyers to buy without a mortgage.
This is very achievable. Use the Help to Buy Isa money or a new similar investment product to buy homes.
Those looking to buy, pay a 5 per cent deposit and then pay market rent on the balance, with any overpayments being used to buy the home.
The Government buys homes, rents them out and renters can purchase the home.
Such a scheme could be funded almost entirely by the private sector, and therefore wouldn’t cause any additional Budget headaches for the Chancellor.
New builds or period homes?
There are pros and cons to both, new build tends to win on running costs and period homes on character.
However, the old clichés continue to ring true; its all about ‘location, location, location.
Ideally you want a property in an area where demand outstrips supply.
What investment would you make in the property sector right now?
For any investment in a property company’s shares ahead of the Budget I would say only invest what you can afford to lose, and invest with at least a five-year time horizon in mind .
It is unclear at the moment whether the Budget will be good news or bad news for share prices in the sector.
On a five year view housebuilders such as Barratt Redrow and Taylor Wimpey look good value to us, and we also believe that Rightmove’s shares fell too far after the announcement of their new targets on 7 November.
