House price index (Rightmove and Zoopla) October 2022

PUBLISHED: 1st Nov 2022

The average price of properties coming to market rises by 0.9% to a new record of £371,158 according to Rightmove, as a shortage of property for sale continues to underpin prices. This may seem surprising given the market uncertainty that followed the Governments mini budget which took place in late September which resulted in some market uncertainty as mortgage rates continued to rise.

Zoopla show house price growth stands at 8.1% year on year driven by the strength of demand and sales agreed during the last 6 months

There is little sign of downwards price pressure on existing properties for sale, although the market currently stands with the number of reductions up 2% on 23% of all properties reduced. It is likely that property prices will drop in November and December as they usually do, and it will be important to distinguish these seasonal price changes from market changes caused by other factors. Though price forecasts are at the front of mind of many, there are economic events that are playing out before any predictions can be made for 2023.

Currently Yorkshire and Humberside are seeing a 0.7% month on month increase and a 10.1% increase year on year according to Rightmove, and Zoopla ranks Leeds as 4th in the UK at plus 9.1%, slightly behind Nottingham, Manchester and Birmingham.

The political and economic turmoil over the last few weeks has resulted in average mortgage rates spiking above 6%. The health of the housing market is inextricably linked to the health of the economy and in particular the cost of borrowing.

The sudden increase in mortgage rates, represents the largest interest rate shock for new buyers since he late 1980’s. The immediate impact according to Zoopla has been on houses without mortgages arranged at cheaper rates – this explains why the measure of new buyer demand fell by a third since the mini budget. It is similar to what typically happens in late November ahead of the Christmas slowdown.

The slight dry up in buyer interest has been spread uniformally across all markets, however those with cheap loans secured, as well as cash buyers, are continuing to make offers and agree sales, albeit at a slower rate than this time last year.

Pent-up demand to move remains. Households rushed to secure low-cost mortgages over summer as rates started to rise. The Bank of England data for mortgage approvals showed an unseasonal jump in mortgage approvals in August, up 17% over the month.

The shock to demand comes at the end of another strong year with around 293,000 sales in the pipeline, most of which are expected to complete. Fall throughs though are increasing, mainly as a result of a lack of affordable finance but the UK is still on track for nearly 1.3m sales in 2022.

David Phillip commented “what’s going to happen to house prices is understandably on the minds of many home-owners right now, especially after the market uncertainty following the disastrous Mini-Budget which led to an increase in Mortgage rates and a nervousness in the property market.

Since the appointment of a new Prime Minister and Chancellor, there has been a slight uplift in the market and a lowering of mortgage rates announced earlier last week. It is likely it will take a bit of time for the market to settle in to a new, more ‘normal’ level of activity over two years of market frenzy, especially with new developments happening almost daily at the moment”.

The rapid rise in average mortgage interest rates has understandably caused some would-be home-owners movers to pause their plans and wait to see how the next few weeks and months unfold.

Levels of negative equity would remain minimal, certainly by historic standards. A nationwide 10%  fall in house prices would result in a small handful of negative equity cases from purchasers with high loan to value mortgages made in 2022. This highlights how the housing market has been increasingly driven by buyers using equity more than borrowers reliant on high loan-to-value mortgages

Overall demand is down by 15% in the last two weeks compared with the same two weeks last year, but it is still 20% higher than the more normal market of 2019.

Looking at the different market sectors, it appears that first-time buyers have been the hardest hit, as higher rates may prove to be a step too far for those who were already stretching their finances, however the Government have introduced further savings on stamp duty which may go some way to help this sector.

The vast majority of buyers who had already agreed their purchase are still going ahead and they are keen to see them through and complete their sale quickly with rates secured.

The outlook for transactions and pricing in 2023 is sensitive to the economic climate. It will also be impacted by how much buying power – due to higher borrowing costs – feeds into achieved prices.

The most important part of the equation is how quickly mortgage rates fall back to 5%, a level that Zoopla see as a tipping point for house prices. Events are moving fast in the world of politics and financial markets. On balance, Zoopla believe that mortgage rates will start to decline before the start of 2023 and this will continue into next year. Should mortgage rates fall back quickly in the next quarter, the outlook for next year will be completely different.

If you are considering selling your home and would like a free, market appraisal and discussion about the current property market call David Phillip FRICS – David has over 30 years selling properties in North and West Yorkshire in a variety of market conditions, combined with his local knowledge and accurate valuations you will feel much more confident when selling your home.

Call 01134 676 400, David Phillip Estate Agents, 86, Leeds Road, Bramhope, Leeds LS16 9AN

Covering Leeds, North Leeds, Bramhope, Cookridge, Adel, Huby Pool-in-Wharfedale and Otley

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