Market overview: A mixed bag

The start of 2023 paints a mixed picture of the housing market – a rosier start than in 2022 for some, a more hesitant one for others. Realism versus aspiration is set to be critical for sellers transacting over the coming months.

Dust settling

To a large extent the housing market continues to let the dust settle on the understandably chaotic final quarter of 2022. The Bank of England indicates that December mortgage approvals, at 35,600, were at their lowest level since the Global Financial Crisis, down by nearly a third quarter on quarter. However, Rightmove report the number of prospective buyers contacting agents at the start of the year was up 4% compared to the last ‘normal’ market in 2019. The 5th of January was the third-busiest day ever for valuation requests, considered a sign of future demand.

By the end of January, the swap rate had pared back to 3.8%, its level of early September. Although the base rate of interest has just risen to 4%, it looks likely to stay below 4.5%. These factors, together with the latest forecasts for the UK economy, mean that mortgage approvals are likely to settle somewhere above December’s level. There are signs too that inflation, the rate at which prices grow, has peaked, and the latest independent forecasts for the UK economy released by HM Treasury paint a tentatively more optimistic picture, with the economy now expected to contract in 2023 by less than 1%.

Pendulum swing

The rate of house price growth continues to moderate. Nationwide report annual price growth in January fell to 1.1%, down from 2.8% in December, and all major indices indicate month-on-month marginal falls in prices. This is in contrast to new seller asking prices which rose by 0.9% in January, the equivalent of £3,301, albeit they are over £8,000 lower than their peak in October (Rightmove). With the market of 2023 set to be dominated, at least in the short term, by needs-based as opposed to discretionary buyers, price sensitivity will be key to securing interest and offers, with the supply/demand pendulum likely to swing back in the favour of buyers. As many have commented, gains achieved in the market in recent times mean that for the majority of sellers a reduction in asking price is unlikely to translate into a financial loss when compared to the purchase price; rather, sellers need to ensure their aspirations align to current market conditions.

Year-on-year price growth in the premium markets is currently outpacing the wider market. The 10.8% annual price growth continues to be fuelled by high-value activity in London and across the South. At £851,000, the prime market price threshold has risen by over £125,000 compared to January 2021.

Home-owning nation

Recently released data from the 2021 Census indicates that there are close to 25 million households in England and Wales, of which 62% are in home ownership. This is down from 63% in 2011. Such properties are either owned outright or owned with a mortgage or a loan. Mortgage status has been recorded by the census since 1991 and Census 2021 marks the first time the data has shown that a greater proportion of homeowners are now mortgagefree, at 53%, up from 47% in 2011. Wales and the South West boast the highest proportion of mortgage-free homeowners of all regions of England and Wales, while only in London is the proportion lower than 50%.