Asking prices usually drop at this time of year as serious sellers price more competitively to attract distracted buyers in the lead up to Christmas, however, this year indicates new sellers are also adopting more realistic price expectations from the outset of marketing to tempt potential buyers to act, this has resulted in one of the largest drops in the last five years. 

As we approach the end of 2023 though, the key indicators point to a market that while challenging, has been more positive than many predicted state Rightmove. 

Tim Bannister, Rightmove’s Director of Property Science said “we’d expect to see a drop in new seller asking prices in the last couple of months of the year  as serious sellers start to separate themselves from discretionary sellers and cut through the Christmas noise with an attractive price to secure a buyer. However, the larger than usual drop this month signals that among the usual pricing seasonality, we are starting to see more new sellers heed their agents advice and come to market with more enticing prices to stand out from their over-optimistic competition. Buyers are still out there, but for many, their affordability is much reduced due to higher mortgage rates. It now looks like more sellers are understanding Rightmove’s research; that the chances of securing a buyer are much greater if they price right the first time”  

Zoopla stated that their forecasts at the beginning of the year appeared more optimistic than many others, but with 1 million transactions and a house price fall of up to 5% in 2023, it looks as if they called it right. Currently all house price falls are in the very low single digits and no markets are seeing more than a 5% reduction which is positive. 

Many people thought house prices would fall further in 2023, but several factors have prevented this. 

The economy continues to grow slowly, unemployment is low and incomes are increasing. Mortgage lenders are helping customers refinance, which is limiting the number of forced sellers. 

On top of this, tougher affordability testing since 2015 has built resilience into the market. It has stopped households using ultra-cheap finance to take on unsustainable levels of debt. In the past, more relaxed lending pushed property prices up quickly leading to larger price falls once demand dropped. This time around, new mortgage buyers have had to prove they could afford a 7% mortgage rate – even if they are only paying 2%. This means they can afford current rates when they remortgage. Banks are now stress testing at 8-9% for actual rates of 5%. This is compounding the reduction in buying power and hitting sale numbers. 

Because of the reasons above, there are currently fewer moves from mortgaged buyers while the number of cash sales is holding steady- cash buyers now look set to be the second largest buyer group in 2023, behind only first-time buyers. 

Over the last five years, cash buyers have only accounted for 1 in 5 sales. This year they are making up 1 in 3 sales. 

First time buyers’ share of sales is down compared to recent years, although still holding up due to rapid rent growth. In markets with cheaper property prices, first-time buyers’ mortgage repayments are lower than rental costs – even with 5.5% mortgage rates.  

According to Zoopla, it is clear that parts of the population are still keen to move house, however they’ve been biding their time and perhaps waiting for the outlook to become clearer. They are looking at the likely trajectory for mortgage rates and house prices – the good news is though that the risk of a major collapse in house prices is becoming less of a concern. Instead, home buying decisions hinge on the financial ability and willingness of people to take on a 4-5% mortgage rates. 

Real income growth is at last starting to appear and this will sipport people’s desire to move home. Higher living costs and inflation have eroded income growth so far this year. 

Higher mortgage rates tend to impact upsizers the most – they buy bigger homes and need larger mortgages. More upsizers in the market in 2024 will be a key supporter of sales volumes, but they may need to be more flexible about what and where they buy to handle the higher rates – they may need to be more flexible about what and where they buy to handle the higher rates. 

So in conclusion while we aren’t returning to the years of very cheap borrowing, income growth outpacing house prices could help reset the housing market needs. 

If you are considering selling your home in North Leeds at the beginning of 2024, then now is the time to start getting your property market ready (before the Christmas decorations go up). Call David Phillip FRICS for a free market appraisal on 01134 676 400. 

David Phillip Estate Agents, 86, Leeds Road, Bramhope, Leeds, w:davidphillip.co.uk  

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