Fully expected, and yet a total shock: on Thursday February 24th, 2022, war came once again to Europe, as Russia invaded Ukraine on a pretext about as solid as a rotten sole plate. I have watched, mesmerised, as footage has rolled out across 24 hour news; I have been driven to dark dismay by news stories of little girls the age of my youngest daughter being killed in the fighting; I have been awestruck by tales of courage and bravery coming out of beleaguered Ukraine - everything from grandmothers challenging Russian tanks, to farmers stealing them with their tractor and a towing rope, to Ukrainian Sailors telling Russian warships to go fuck themselves rather than surrender, to the President of Ukraine himself, Volodymyr Zelenskyy, rising to the occasion - a true leader at the very moment his country needs one most.
With all of this unfolding before our eyes, it has felt somehow crass and even guilt-inducing to continue to behave 'as normal'; to attend that event; to grab that pint at the pub; to celebrate that new listing; to revel in that quick sale. Our lives go on, whilst lives in Ukraine - and in Russia, for that matter - are being shattered even as I write. Neither have I felt I can express my thoughts about what is going on, for fear of being misinterpreted as doing so with selfish intentions. I know I'm not alone.
I say 'our lives go on', but whilst it's easy to feel that this is happening somewhere else to somebody else, the effects of it will be far reaching and will be felt here. We are fortunate that we can live here without fearing the sight of Russian tanks rolling down our own High Street, and we may feel guilty relief at the thought. Nevertheless, it is worth taking stock of the various ways in which we will be affected here in the UK, and that includes the effect it could bring to the UK Property Market - important, if not as obviously serious in the way that lives being lost in Ukraine clearly is, but important nevertheless because this market drives so much of our national economic activity. Here are some points to consider - but I hasten to add, I write as an individual and as an Estate Agent, and I am certainly not claiming to be an economist; besides which, my views are my own:
Inflation and Interest Rates
Inflation has been shooting up even before there was a European war going on, driven not in small part by the rising cost of food and fuel. When inflation rises, central banks often aim to control it by increasing interest rates, and we have seen The Bank of England do this already with two increases within the last quarter - a 0.4% rise on where the base rate was. It hasn't had huge impacts so far, but I already had a sense that interest rates would be likely to go up at least once more before June, and we could well see this expedited and, perhaps, go further than it might have; maybe another increase at the next meeting of the board, and perhaps by another half of a percent in one go, rather than by just a quarter. That would be a 0.9% rise within a four to six month period, and we would see consequent increases to mortgage rates as a result, with a more noticeable impact on mortgage ability than we've seen thus far - for first time buyers and second-steppers, but also for those remortgaging. The reason we can expect this is due to those aforementioned food and fuel prices; Ukraine is one of the largest producers of agricultural produce in Europe, so the supply of staples such as grain - and wheat in particular - is going to be hit, thus pushing food costs up. Likewise, Russia is a major exporter of gas and oil, and whilst it only supplies 3% of the UK's gas and only 6% of our crude oil, it supplies greater quantities to Europe and the rest of the world. Europe and other countries will be drawing more gas and oil from other suppliers, including those that supply the UK, making those commodities more scarce and in turn more expensive - so expect to feel it at at the petrol pump soon. With regards to fuel, the energy price cap was already raised in the UK earlier this year, to add around £700 to our household bills each year. This cap could well be raised again to cope with increased procurement costs, and this will fuel inflation - already through 5%, predicted to head towards 7% and I think likely to bust through even that, to 8 or 9%, with these added pressures.
Sanctions against Russia and Russians
The British government, like many others, has imposed sanctions and penalties against Russia which will bite - not least the withdrawal of SWIFT which allows the movement of money internationally. There are around 150,000 Russians resident in London alone, let alone throughout the rest of the UK, and their inability to move money will have some impact on the property market. Some, but not as dramatic as one might think. The 3% stamp duty levy imposed on international property purchasers, as well as restrictions Russia imposed itself to keep Russian money at home, has already reduced the number of Russians purchasing UK property - and so whilst there could well be some noticeable wobble in the super prime and luxury property market, the general property market should remain largely unaffected compared to where it has been in more recent times. Something to bear in mind, but not dwell on, particularly outside of the capital.
Russian Roubles, Global Economics
The measures imposed on Russia by countries right across the world has perhaps taken it by surprise, and after just a few days it is clear to see the immediate and rather extraordinary effect this has had. Russian citizens - and let's remember here, not all are in favour of what is going on in Ukraine, not by a long way - have started to run on the banks, withdrawing money to purchase commodities as the value of the Rouble plunges. At the time of writing, it has fallen by 40% and looks to be falling further, whilst by contrast the FTSE has already recovered the majority of the value that it lost after the initial Russian invasion on Thursday. Still, although (perhaps surprisingly) the Russian economy makes up just 2% of the global one, we won't see such dramatic losses within that economy without feeling the effects here; we are all too interdependent and interlinked in the 21st century not to. We can feel some comfort in knowing that very little of British pension funds are directly exposed to Russian markets; but, there will still be some ripple effect, and as global markets adjust - depending on how long troubles do last in Ukraine (and one suspects that the damage will be long-lasting, even should tanks and troops remove themselves sooner than later) - the general downturn that we can expect is bound to have an impact on property prices here. Whilst they may not drop, I do think that when combined with inflationary living costs and rising interest rates, we can definitely expect property price rises to slow down and that the volume of property transactions will be behind where they may otherwise have been.
As a general summary, when it comes to the property market, my prediction is that we will be looking at a slower market with shorter price growth than I might have predicted at the beginning of the year, particularly relative to the very fast pace and peaked prices that we have seen over the past months. The noticeable effects of this will probably kick in by the third quarter of 2022, but my expectation is that it will look like a 'flattening off' rather than a drop. It is not a disaster - and certainly not by comparison to what life might look like if you were in Kyiv right now. This article is certainly not written to in any way suggest an equivalence; it is written because 63% of householders in the UK own the homes that they live in, and therefore this matters - even if it only matters relatively speaking.
Allow me to sign off by describing with no room for doubt my own personal shock and outrage that this is going on at all in this day and age, an equivalent outrage to that which I feel about recent events in Syria, Ethiopia, Myanmar, the Amazon, and in so many other parts of the world. I unequivocally stand with Ukraine, as I do with all oppressed peoples around the world whom have war and oppression brought to them against any will whatsoever.
Живи, Україно, прекрасна і сильна! - Zhyvy, Ukraino, prekrasna i syl'na! - Live, Ukraine, beautiful and strong!
Sometimes, something comes along that just knocks my socks off, and SoloHaus by Hill Group is one of those things.
Hill is a familiar name in the property game, constructing high spec, high quality housing developments across London and the south. In Oxford, Mosaics at Barton Park, on the northern edge of the city is one such build. With almost twenty years in the game myself, I am well advised on Hill developments but I hadn’t come across SoloHaus until just recently – and now that I have, I am determined to get the word out!
I’m jumping ahead slightly so let me just reverse here and provide some background to what becomes the most fantastic story. Hill Group was founded by Andy Hill back in 1999, after he was made redundant. Building a construction firm that has gone on to become one of the most recognisable names in the industry in the UK, The Hill Group is the second largest privately owned housebuilder in the UK. He admits that he was only able to achieve this with help and support from family, something that he recognises many people just simply do not have when facing similar circumstances. In 2019, to celebrate the 20th anniversary of the business, Hill pledged to give back to the communities in which he operates by setting up Foundation 200, a £15 million initiative to provide modular homes for people experiencing homelessness. Following a report in 2019 about the staggering homeless crisis we have in the UK (over 250,000 people being classed as homeless on any given night in England alone) and recognising that circumstances such as he faced twenty years earlier can push many people into homelessness if help and support is not at hand. In April 2020, as the Covid-19 pandemic was just beginning to bite, Hill set up Foundation 200 with his pledge ‘to build and gift 200 free homes in order to provide hundreds of people a meanwhile home, in a safe, secure, purpose-built single dwelling.’
The SoloHaus is that solution, and it is remarkable.
Hill joined forces with Volumetric Modular Ltd, taking a 50% stake in what was at that time a start-up design and manufacturing business in Shrewsbury, whose mission was to design and produce MMC (Modern Method of Construction) properties. Thus, SoloHaus was born – a self-contained dwelling, fabricated and assembled in a factory environment in as little as 15 days. The homes are easily transported and deliverable on the back of a flatbed truck, able to be lifted off and into place within just 30 minutes. They are designed to be stackable (to two storeys) meaning that small sites can be put to use to create multiple dwellings, requiring only waste, water and electric connections. Each unit provides 24 square metres of comfortable living accommodation. These are the first homes of their type to be designed specifically for the homeless, and this has been realised in collaboration with homeless stakeholder groups to ensure the design is anti-ligature, secure and created to provide a safe place. Built to Future Homes Standards, well insulated to retain heat in the winter but cool in the summer, the homes have proven to be cheap to run – just £5 in electricity costs, and this on a card-operated meter to encourage budgeting. For the end user, they provide safe, secure, comfortable and incredibly dignified accommodation, including fitted kitchen with integrated low energy white goods, fully furnished living room and bedroom with built in storage, plus a shower room with controlled-flow shower and dual flush cistern to reduce water consumption. These really are high quality individual homes that are quickly constructed and delivered, low carbon and sustainable – and with a 60 year BOPAS accredited life span, SoloHaus qualifies for grants, loans and mortgages.
People might feel that similar concepts have been tried before, but these are very different from the recycled, converted shipping container homes that gripped my own imagination once on a 1990s episode of Blue Peter (albeit that that particular idea stayed with me ever since). They are also very different from some of the modular and ‘fold-out’ homes that we have seen hitting the industry press over the past decade or so. And one of the main differences, of course, is their intent: deliberately low cost in delivery whilst maintaining high quality construction methods, and of course, notably, being specifically for homelessness. The interest from Local Authorities and other partners has meant Hill is delivering more Solohaus than expected including many purchased privately by affordable housing providers
These smart home solutions, with their intelligent objective makes me ponder whether they could provide a solution to other housing crises. As an Estate Agent, the first that springs to mind is our general housing crisis, where young people in particular, really struggle to afford quality accommodation. SoloHaus, or homes like it, could quite conceivably, in my opinion provide low cost, low rent, affordable yet safe and secure homes – and no doubt by combining units, clever engineering-types could create larger homes fit for couples and families… and remember, the more affordable solutions that we see, the more that general house prices will soften as supply starts to meet the insatiable British demand.
However, thinking more widely than just that, these homes could be quickly delivered to provide disaster relief or create safer, semi-permanent refugee camps to replace the unsanitary and insecure ‘Tent City’ camps that we see on the news; a solution to tackle what is often the sudden need to house large numbers of desperate people.
Andy Hill… what a way to give back, eh?
If we want to tackle climate change, we have to talk about cement - which is a problem not just for the construction industry but also for the British government, which rightly sets ambitious targets for carbon reduction, at the same time as it sets ambitious targets for housebuilding. Cement is obviously a big deal in construction generally, not least for the production of concrete, for which it is a large component part and something which won't go away as a building material, no matter how green we get. But the real trouble we have therefore, is that cement is now responsible for 8% of global carbon emissions - a quite phenomenal statistic.
There is hope, however, as CEMEX - one of the largest global producers of concrete - has announced a pledge to reduce its carbon emissions by 60% by 2030, and to achieve full carbon neutrality by 2050. Gonzalo Galindo, the head of Corporate Venture Capital at CEMEX, was a guest on the property podcast PropCast earlier this month, where he spoke to Blackstock Consulting's Andrew Teacher, explaining how they aim to achieve this.
Their first step has been to tackle the process of creating cement in the first place - a process which involves incredible amounts of heat (kilns heated to 1700 degrees Celsius), which logically is achieved by cement factories around the world by burning fossil fuels. Galindo explains that they as a producer have already managed to reduce their fossil fuel consumption by 50% in favour of renewable types of energy, and expect to go to 100% renewable electricity within a decade. Excitingly, they have invested in a particular company, Synhelion, which has developed solar power technology capable of generating enough heat for industrial level chemical reactions. They hope to have their first solar powered kiln up and running within 2022, and to be able to roll this out at scale by as soon as 2023.
Another big issue in the production of cement however is the chemical reaction that occurs in the process, which necessarily produces carbon dioxide. Galindo admits there is no way to work around this chemical reaction itself - it can't be avoided and CO2 will be released as a result. What can be done however, is to recapture carbon dioxide from the atmosphere. CEMEX is investing in companies such as Carbon Clean, which create technological solutions to capture and remove carbon dioxide from the atmosphere, to then safely store it.
Galindo goes on to explain how as a corporation they are also investing in AI technology to create much better efficiency in the supply chain, reducing waste; everything from wasted materials, which by their nature have unnecessarily emitted carbon, to wasted fuel. AI is also being used to predict the way that different soil types behave, and by studying this it is possible to calculate the minimum quantities of concrete required to provide safe building foundations, depending on soil type.
Fascinating times. Fascinating stuff.
To listen to the PropCast episode featuring Gonzalo Galindo speaking with Andrew Teacher, click the link at the top of this article - or, copy and paste the following into your browser: https://soundcloud.com/propcast-property-podcast/cemex-bosscast?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing
As we entered 2021 we decided, as a business, that we would like to do something to help in the fight against climate change. It is something that affects us all, and as every member of staff at Wallers happens to be a parent too, we are all acutely aware of the world our children and grandchildren are going to inherit if we're not careful.
One thing that we settled upon quite quickly was the idea of tree planting as a means to offset our carbon footprint - or better still, go beyond that into becoming climate positive as a business.
Our journey in doing this has been fairly well documented and is well enough known, but people are often surprised how easy it is to achieve, and so I thought we should lay it all out in the hope that others might follow... we really hope everyone does!
It's not a secret at all, and in fact we do it with an organisation called Ecologi.
Ecologi is a subscription-based service, and when we signed up we established that 59 trees per month planted was what we needed in order to offset our workforce's carbon footprint. This was great, but we wanted to be able to go further, and so we settled on the idea of planting 25 trees for every new customer (i.e. new listings). We were soon hitting hundreds and then thousands of trees in the ground, and our goal was to get to 5000 by Christmas. We ended up on 4,778 on Christmas Eve 2021 - so naturally we topped it up by another 250, to finish this year on 5,028 trees in the ground.
It isn't everything, but it's something, and not only that it is really inexpensive so is something that everyone can think about doing. Not only do the new trees photosynthesise, creating oxygen for our atmosphere whilst at the same time sucking carbon out of it, but also these projects create jobs for communities around the globe; most of our trees have gone into places like Madagascar, Mozambique, Nicaragua and Honduras. So it feels like we are really giving back - but it is all so inexpensive. We probably spend more each month on our coffee machine.
So please, if you are feeling some corporate responsibility and want to join us in doing your thing for climate change, then please visit ecologi.com to find out more.
The Bank of England has raised its Base Rate for the first time in three years, from its historic low of 0.1% to 0.25%.
Cue some predictably alarmist posts by estate agents up and down the land trumpeting the news... but, what does it mean and why has it happened? You'd be forgiven for wondering, as I'm not sure I have yet seen much that offers anything in the way of informed opinion, insight or explanation.
So, we'll try and offer some perspective here.
The first thing to note is that we have been expecting this rise (and for our part, have been telling you it's coming). We were fairly surprised not to see them raise the base rate when they convened in November. And frankly, we expect it to be raised at least another quarter of a percent in the near future - perhaps as soon as the next meeting in just a few weeks' time. Actually, my own view is that they will raise it at least once more after that in the relative near term - probably before the end of the Spring in my view, but I would certainly be surprised if it didn't happen again within the year.
The reason for raising it is to mitigate the effect of rising prices. BUT, let me elaborate a little more on this point, as if you only read estate agent posts you will certainly be forgiven for thinking it is all about rising property prices.
It is to do with inflation, which has hit 5% and which is predicted to hit 6% by springtime. Don't get me wrong; house prices have been rising too, and fast (although did anyone let you know that they actually dropped in October and November? No, thought not...). Nevertheless the factors that are really driving inflation are global ones - the value of stocks and bonds and the price and availability of energy, in particular.
The Omicron wave that is breaking over us now is likely to bring some negativity to trading market places generally. However, even the prophets of doom out there tend to agree that whilst the peak is going to be a steep one, it will be relatively quickly reached compared to previous waves, and will drop quickly on the other side once reached - to the extent that actually I believe we will be unlikely to see any significant impact on property prices or buyer demand in the new year. We have more to worry about from snow than we do from Covid, when it comes to property.
But what about my mortgage, I hear you ask? Well - most people in this country have fixed rate mortgages; and I mean, 74% of mortgagees, in fact (mortgagees being about 33% of adults in the UK), and those have been fixed on historically low rates. So, the majority of people therefore will feel no immediate difference to their monthly mortgage payments, but that isn't to say that they shouldn't consider their current deal, look at when it is going to come to an end and think about whether it is worth looking at fixing a new rate now - even if it means a penalty in the short term to break the current deal.
Mortgagees on Standard Variable Rate mortgages or Tracker mortgages will see an increase. But look; this particular rise has amounted to 0.15%, and that equates on average to an extra £15.45 per month for people with Tracker mortgages, and less than £10 extra per month for those on Standard Variable Rate mortgages. Of course, these do obviously go up again if there is to be the following quarter percent rise that I have mentioned we think will come soon enough, and then yet again if there is to be the third rise that I personally do suggest will come not ridiculously far down the line afterwards. But even still, we're talking about a base rate of up to 0.75% at that point - and still therefore historically low - and mortgage payments increasing by tens of pounds per month, not hundreds of pounds. A pain, I admit, but not something that will break most mortgaged households or precipitate any kind of crash.
I'm not saying not to worry about your mortgage payments, by the way, I really am not. I am saying that we should keep things in perspective; there is probably more to worry about in terms of energy prices and food prices than there is for mortgage payments, over the next six months at least and more likely over the next twenty-four.
If you would like to discuss your mortgage options and get a real sense of the mortgage landscape, then I urge you to speak to a qualified advisor. We can certainly put you in touch with a number of advisors who can offer free advice.
And if you have been thinking of moving and have suddenly worried that the whole thing has just become unaffordable, then I hope this article has helped to settle some of those nerves. If you wanted to discuss any of this further, then you only have to give me a call; 07982 632733.
It really isn't Armageddon folks.
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