Despite a drop in the number of sales and a recorded softening of house price growth, headwinds to the market look set to improve in the near term. The predicted soft landing will be the most likely outcome, supported by a strong labour market, growing consumer confidence and an increasing acceptance of a higher mortgage rate environment.
The UK HPI indicates a modest start to the year, showing a property market still iced over by the mini-budget fallout. A gentle slowdown of 1.2% was recorded between February and March, but up 4.1% year-on-year. Nationwide has recorded house price growth softening, with a 0.1% month-on-month fall in May, following a 0.4% rise in April. Rightmove however, paints a much more positive picture, with a monthly increase of 1.8% in May on the average price of a property coming to market, the biggest jump of the year so far. Despite tougher market conditions, the market is showing stable resilience. Homes are selling, although at a slightly lower rate and many at a lower price than seen over previous months. Flatlining prices are luring a steady stream of buyers, with agreed sales over the past four weeks having reached their highest point so far this year, up 11% on the five-year average on the same period (Zoopla).
CPI inflation is finally falling, to 8.7% in April, which may help reassure prospective buyers that they will be able to afford their mortgage repayments. Despite mortgage rates being likely to creep up in the coming weeks, the increase in competitive mortgage products will help put more people on the property ladder. Confidence is growing, with 70% of buyers canvassed in April stating they were confident they would purchase a property within the next three months, and just 7% stating they were concerned about securing a mortgage to fund the purchase (OnTheMarket).
HMRC report 82,120 sales took place in April 2023, a fall of 7.9% on March and 25% on the same time last year. Despite this, the sunny weather and triad of May Bank Holidays have given buyers the opportunity to rekindle their property search, which may start to be reflected in the data from next month. Buyers are benefiting from a market with more breathing room compared to a year ago, with time to consider their options carefully. There has been a jump in the number of buy-to-let landlords selling up, currently accounting for 11% of properties for sale (Zoopla), as property investors are confronted with higher mortgage rates, energy bills and increasing legislation. Sellers should be cautious of recent positive data on the housing market and price their homes realistically. Indeed almost four-fifths of offers are currently being accepted below initial asking price (Dataloft Inform Poll of Subscribers).
The prime market continues to show resilience, the average price of a property in the prime market is £1,301,093, down 0.1% on last month but up 7.9% year-on-year. Over 1 in every 25 sales in the past year that have been eligible to pay the Higher Rate of Additional Dwellings Tax have been for £1 million or more, the highest proportion recorded since the tax was introduced in April 2016 (HMRC, StatsWales). With temperatures finally heating up, gardens remain popular. 88% of homes in the UK have access to a garden or outside space (ONS). A well-maintained garden can add a premium of between 5% and 20% to a home (AXA), with a south-facing garden adding 7% (Rightmove).
