Inflation is finally showing signs of easing, having fallen to its lowest level in over a year, raising hopes that the mortgage market may be more competitive in the next few months. Motivated buyers are still out there for correctly priced homes, supported by a relative shortage of property for sale compared to historic norms. A house price cooling is widely expected, although at a slower pace than forecasts made at the start of the year.
Despite the economic conditions, transaction numbers are holding steady. There were 85,870 transactions in June on a seasonally adjusted basis, 6% higher than in May, although down 15% on June 2022 (HMRC). Mortgage lending showed an uptick in June to £20.0bn, with net approvals, an indicator of future borrowing, rising to 54,700, its highest level since October 2022 (Bank of England).
The average price of a property coming to market has fallen slightly by 0.2% this month, as sellers begin to accept constraints in buyer affordability and increasing mortgage costs (Rightmove). We are also seeing some downward adjustment in asking prices: 6.5% of available homes have seen cuts of 5% or more to asking prices, which is significantly higher than the 5-year average (Zoopla/Hometrack).
In their latest market update, TwentyCi report ‘no sign of a housing market crash’, based on sale volumes in Q2, and almost 70% of all properties listed having sold so far in 2023. However, the economic backdrop remains concerning, with fall-throughs up by over 10% on Q1. Buyer and seller sentiment remain surprisingly resilient, with two-thirds of sellers confident they would find a buyer within the next 3 months, and 74% of buyers confident they would purchase a property within the same timeframe (OnTheMarket). With buyer demand 3% higher than 2019 according to Rightmove, correctly priced homes are still attracting motivated buyers.
Despite the uncertainty, those who are committed to moving are still doing so. Smaller, sensibly priced homes in affordable locations close to major employment hotspots, remain popular. There is some evidence that mortgage interest rates are having more impact in higher value parts of the market for buyers who are more stretched by borrowing costs. Zoopla report that new sales of three and four bedroom family homes in the last month are much lower than is usual for this time of year.
Energy efficient homes are also in high demand. 58% of respondents to the latest RICS survey noted that prices for homes with higher EPC ratings were holding up better than those with a lower rating, and over a third reported greater interest in more energy efficient homes. A recent survey of buyer preferences found that more than half of respondents said being within a 20-minute walk of a park or green space was a key priority, followed by quick access to work and good transport connections (Jackson-Stops).
The prime market continues to show resilience, the average price of a property in the prime market is £1,299,767, down 0.1% on last month but up 8.2% year-on-year. Many buyers in this part of the market are not affected by mortgage rate fluctuations and cash remains king in the current climate. The shortage of prime stock experienced during the pandemic seems to have eased, with availability in the £1m+ price bracket having risen by 45% since the start of the pandemic (TwentyCi).
