Overview with David Phillip of the Rightmove and Zoopla UK Houseprice Index
The spike in mortgage rates after the mini-budget in late September has led to a reduction in housing market activity, more pronounced in new buyer demand than sales agreed.
New buyers are currently sitting a little on the side-lines, as they watch the outlook for mortgage rates and what the economic headwinds means for jobs and incomes, demand has fallen although only to levels normally associated with pre-Christmas
New sales are still being agreed by those with offers and the motivation to move e.g. would-be first-time buyers facing steep rent rise and older households less reliant on mortgage finance to fund a move. Second stepper demand according to Rightmove is down by 15%.
Sales volumes are down 28% from a year ago, but this is on-par with the pre-pandemic period. We are transitioning from an unsustainably strong market to a more balanced one, albeit with demand-side headwinds for households most sensitive to higher mortgage rates.
The fallout from the mini-budget has clearly delivered a shock to many sellers and buyers. New sales have been more resilient though than some may have expected.
Committed buyers and sellers continue to bring homes to the market and agree on deals, although these are fewer in number and harder to negotiate and hold together over the buying cycle. Zoopla’s data shows that one in 15 homes formerly sold is returning to the market after the original sale has fallen through.
All leading supply and demand indicators Zoopla measure continue to point to a slowdown from very strong market conditions – they also do not see any evidence from their analysis of any evidence of forced sales or the need for a large double-digit reset in UK house-prices in 2023
One in four homes for sale since September has experienced a price reduction of any size. Over one in ten (11%) has recorded a reduction of over 5%. Price reduction has been the greatest in Southern England, where sales activity has fallen back the most – over the last few weeks, Zoopla claim, that there is clear evidence that buyers are starting to get bigger discounts from sellers as sales are agreed. This measure has seen an increase over the Autumn period but the most important factor shows that this is still below the 2018 levels.
Leeds continues to be in the top ten of the Zoopla City Summary at 6th place with a year-on- year increase in October of 8.6% year on year. Nottingham (10.5%), Manchester (9.3%), Bournemouth (9%), Birmingham (8.9%) and Liverpool (8.7%) are the only cities outperforming Leeds.
In October, 8% of unsold properties on Rightmove were reduced in the month, this is broadly in-line with the 7.5% of properties that were reduced in October 2019, however it is double the 4% on the more normal market of 2019. Price reductions are usual in November with sellers pricing more competitively to try to find a buyer in the last months of the year. There are signs that more existing sellers, whose properties were already on the market and remain unsold, are willing to take their agents’ recommendations and reduce their prices to ensure they achieve a quicker sale.
Data from the Zoopla Valuation and property risk business Hometrack, shows that the gap between the first asking price and the agreed sales price has started to weaken in recent weeks by on average 3%. Historic data shows that discounts to asking price in the region circa 5-7% are consistent with annual price falls. The positive is that strong house price growth has given sellers more room to negotiate on the asking price. The prospects for 2023 really depends on how willing sellers are to adjust asking prices in line with what buyers are prepared to pay – a rapid broad repricing of homes for sale in quarter 4 will support sales volumes going into 2023.
David Phillip commented” there is still uncertainty in the property market, but what we do know is that the exceptional price growth of the last two years is unsustainable against the growing affordability constraints and the general market uncertainty.
The drivers and motivators to move home have, and will continue to shift. As a result of the pandemic, greater labour market flexibility and the rise in retirement, these factors are now being compounded by rising living costs.
Mortgage rates exceeding 6% have been the primary factor behind the recent drop in market activity, however the era of historically low interest rates is over, but there are signs that mortgage rates and availability are now settling.
David Phillip commented “there is still uncertainty in the property market, but what we do know is that the exceptional price growth of the last two years is unsustainable in the current economic headwinds and the growing affordability constraints. I see many Agents who have ripped up the rule book on valuing properties during the market frenzy, we are now back in more familiar territory, and pricing correctly at the outset is even more critical to securing a quick sale”
“We are hearing from many potential sellers that they are turning their attention to Christmas this year especially after the Covid restraints of previous years – but they are, ready to jump into the home-moving activity of the New Year. We have already taken photos and filmed the video for a property in Bramhope that we are launching in January”
If you are considering selling your home and looking to market in January 2023, call David Phillip FRICS for an accurate valuation. David Phillip has been selling homes for over 30 years in all market conditions. Having a 100% sales valuation accuracy score (the highest in the area) on the All Agents portal, you can be sure you are pricing your property realistically but competitively.
David Phillip Estate Agents, 01134 676 400, 86, Leeds Road, Bramhope, Leeds LS16 9AN, w:www.davidphillip.co.uk
Covering Bramhope, Adel, Cookridge, Otley, Pool-in-Wharfedale and Huby