House sales increase as green shoots emerge in property

Posted on Thursday, March 14, 2024

Buyer interest is on the rise once more, signalling the emergence of green shoots in the UK’s housing market.

Residential property sales in the first six weeks of 2024 were up 16% year-on-year, 3% higher than pre-pandemic, according to Rightmove, with signs that demand will grow further, owing in part to falling mortgage rates, wage growth outstripping inflation, and a strong labour market.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “With the Bank of England holding the interest rate at 5.25%, the consensus is that we are at the top of the rate rise cycle. Interest rate expectations in the monthly consensus forecasts have been improving over recent months as the economic outlook brightens. Rates are predicted to start falling in the second half of the year, reaching 4.4% by the end of 2024. With inflation under control and forecast to fall to 2.2% by the end of the year, confidence in the housing market is improving.”

He notes that first-time buyers were biding their time during 2023, however, it is expected that more first-time buyers will enter the market throughout the year, encouraged by the dual drivers of earnings growth and reduced mortgage rates improving affordability.

“According to Moneyfacts, the average two-year and five-year fixed-rate deals have now been falling for six consecutive months. The availability of deals at the 95% loan-to-value tier has increased to 274 deals, its highest level since 2022, demonstrating that lenders are still keen to support borrowers with smaller deposits,” McKenzie commented.

McKenzie notes that greater demand from buyers is starting to push up house prices.

He points to the latest reading from Rightmove, which revealed that asking prices rose by 0.9% in February to £362,000.

Separate house price data from Nationwide revealed 0.7% growth in February, as market momentum grows.

“On an annual basis, house prices saw a 1.2% increase in February, the first positive year-on-year growth since January 2023 according to Nationwide. This contributes to the emerging indications of recovery in the housing market. According to the HM Treasury Average of Independent Forecasts, prices are forecast to soften slightly, by -1.0% this year, but recover by 0.8% in 2025,” he added.

McKenzie continued: “Early signs for the market in 2024 are increasingly positive, with metrics for buyer demand, sales and new instructions all turning positive. Choice for buyers is on the rise, with Zoopla reporting that available homes for sale are 20% higher than a year ago.

“Improved market conditions are boosting the chances of a sale, although sellers must continue to present their property well and at a reasonable price if they are serious about moving in 2024. Half of agents in the Dataloft Inform Poll of Subscribers say offers are currently being accepted up to 5% below initial asking price; however, 15% report this level or higher.

“Looking at housebuilding figures, just shy of 240,000 new builds were completed in 2023, the numbers holding up relatively well in a slower sales market, but still short of the government’s 300,000-per-year target. In most UK regions there were fewer completions in 2023 than 2022, overall, down by -8.6%. This may be underpinning house prices in many areas of the UK.”

Via @PropertyIndustryEye