The Guild Summer Property Market Report

Posted on Tuesday, June 20, 2023

Improved economic outlook is good for the housing market 

While conditions remain challenging, improved economic forecasts are good news for the housing market.

Mortgage approvals and sales volumes in April remained subdued as prospective buyers continue to adjust to today’s interest rate environment. However, Zoopla report the volume of sales agreed in May was up 11% on the 2018–2022 average. According to OnTheMarket, close to two thirds of sellers are confident they will sell their property within three months and 70% of prospective buyers expect to buy within that time frame. Surveyors remain cautious but are their most positive as to the state of play of the market since July 2022. Expectations over the next 12 months point to stable market conditions.

Growth is now predicted for the UK economy in 2023, a significant shift in rhetoric from just a few months ago. While still cautious, consumer confidence continues to rise, registering its strongest level for 15 months in May. An 11-point uptick in consumers’ willingness to make expensive purchases is a positive sign for the housing market in future months. The average price of a five-year fixed-rate mortgage is fluctuating just above 5%. Inflation fell to 8.7% in April and falling energy prices are set to lower consumer bills in the coming months.

Buyer demand for smaller and second-stepper properties is stronger than in 2019, with property choice perhaps influenced by tighter budgets. As rental prices continue to rise steeply, first-time buyers are returning to the market, helped by higher loan-to-value mortgage deals, and in some cases gifts or loans from family members. The volume of available properties for agents to sell has improved, boosting choice for potential buyers, but remaining low by historic standards. Well-presented homes in popular areas continue to sell quickly, with sensible and realistically priced properties continuing to be in demand.

Looking at property prices, annual price growth has moderated across all regions of the UK in recent months, but despite marginal month-on-month falls the market has begun to stabilise. Nationwide reported a month-on-month rise of 0.4% in April, followed by a softening of -0.1% in May. According to RICS, expectations for future property prices have improved lately. At -16, the net balance of agents anticipating price falls over the next 12 months is significantly lower than the -61 recorded in November, with Hometrack predicting prices will end the year 1% lower year-on-year.

At 270,000, sales volumes in the first four months of 2023 are significantly lower than the frenetic markets of 2021 and 2022. Given the economic challenges prospective homebuyers have faced, this is hardly surprising but, as it has time and time again, the housing market is proving resilient. Despite rises in the base rate of interest, mortgage rates remain lower than six months ago and Rightmove report the number of sales agreed in the first four months of this year is just 3% lower than for the same period during the last so-called normal market of 2019.

Looking specifically at London, the most active housing markets are currently those of Wandsworth and Lambeth, where close to one in every 27 properties has changed hands in the past year. According to Rightmove, the average price of a newly listed property in London is £696,477.

The demand/supply imbalance that epitomised the market in the immediate aftermath of the pandemic is realigning. Zoopla report the flow of new supply was up 16% in May and the stock of homes for sale up 10% compared to the same period between 2018 and 2022. With more choice for buyers, realistic pricing is crucial. At present, price reductions of up to 5% are common, while around one in five properties listed have had the asking price reduced by 5% or more.