Spring is upon us and we’re looking forward to the sun shining on the housing market in England and Wales, this traditionally being a busy period. Rebalancing of the market to date in 2023 has seen buyer choice increasing and price growth moderating.
Current housing market metrics point to a mixed picture for the housing market. Sales volumes in February were some 9% lower than the pre-pandemic average, although with average conveyancing times in the region of 12 to 16 weeks, this reflects the market in the immediate post mini-budget period. Both Rightmove and Zoopla report that as spring takes hold, demand for property remains above pre-pandemic levels.
Although mortgage approvals are significantly lower than previously, the 10% uptick in approvals between January and February marks the most significant increase at the start of a year since 2011. The middle of March saw average two-and five-year fixed-rate mortgage deals at six-month lows and although the Bank of England raised the base rate of interest to 4.25% on 23rd March, there has been little change in the 5-year swap rate, indicative of longer-term stability in the market. Product choice for first-time buyers, home movers and buy-to-let investors has risen recently, with rate competition between lenders intensifying, especially for those with lower loan-to-value (LTV) ratios and who are looking for longer-term, fixed-rate options (Moneyfacts).
There were few surprises announced in the Chancellor’s Spring Budget with housing per se absent from an agenda which focused more centrally on boosting employment and enterprise. More pertinent were the official forecasts released to accompany the budget by the Office for Budget Responsibility. The UK economy is now predicted to contract by just 0.2% over the course of 2023, and is technically set to avoid recession, while interest rates are expected to peak at
a level lower than the 5% forecast less than six months ago. Although the rate of inflation rose unexpectedly in March to 10.4%, cost-of-living rises are set to ease: the government’s energy price cap guarantee has been extended until June and the rate of inflation is forecast to fall sharply to 2.9% by the end of the year. Despite Help to Buy ending on 31st March, no new schemes to support home ownership were announced, although as part of the government’s Levelling Up agenda twelve new investment zones across the UK will be created. This will support house price growth in these areas over the medium term.
With the ratio of new sales to new instructions returning to pre-Covid levels (Twenty Ci), the demand/ supply imbalance that fuelled price growth is correcting. Nationwide report that average property prices fell by 3.1% in the year to March, however they remain 17% higher than when the country went into lockdown three years ago. Over the past year, properties in the upper echelons of the market have remained resilient, with prime prices rising by 9%. That said, sensible and realistic pricing is still paramount to achieving sales success.
Rightmove report that activity levels for smaller properties (two-beds or less) are just 4% lower than in the last ‘normal’ market of 2019, while sales volumes for larger properties are lagging by 10%. With tighter budgets, buyers also appear to be more conscious of property condition; ‘ready-to-move-in’ is the most sought-after feature for current buyers, ranking above the garden or homeworking space demands that typified the post-pandemic market¹.
¹Dataloft poll of subscribers, March2023.
£277,304 £851,000
£1,293,670
£455,308 £1,230,000
£1,769,436
