You can forget the champagne and even the prosecco ought to be kept on ice for now, but the property market at the start of 2023 seems in far better shape than we'd have believed in the dark days of last October. Annabel Dixon reports.
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Better than expected market
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More buyers getting in touch with agents
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Softer landing ‘than many expected’
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But true test awaits in spring
With spring in the air, fresh data suggests that the housing market could be showing green shoots. This week, Rightmove released a snapshot of the housing market in February with the topline: ‘Better than expected market surprises many as buyers return’.
So what are the figures behind it?
Average asking prices in February are effectively static, climbing by just £14 — not £140, or £1,400, but actually £14, which is the smallest increase from January to February that Rightmove has ever recorded, and not even enough to buy the traditional champagne you pop open in a new house. Still, as the property portal points out, prices remaining flat is a positive sign, given the wider expectations. Lloyds Banking Group — one of the nation’s biggest mortgage lenders — revealed its latest house price predictions in its annual report, saying that it expects prices to drop 7% this year — though it also added bad- and worst-case scenarios that forecast an overall peak-to-trough drop of over 25%. Against that sort of gloom, a fourteen quid uplift is positively rosy.
Rightmove also reported other positive signs, not least that people are increasingly getting in touch with estate agents again. In the last fortnight, prospective buyer enquiries were is up by 11% compared with the same two weeks in 2019 (arguably the last year that we saw a ‘normal’ housing market — although uncertainty over Brexit and the government’s stability were still very much in the picture back then). The number of sales agreed has also rebounded, compared to four years ago: it was 30% down in the wake of the mini-Budget, but now is down by just 11% on the same time spell in 2019. It’s a significant shift.
The portal’s figures also show that when it comes to the sales agreed, ‘surprisingly, it is the first-time buyer sector that is recovering better than the discretionary upper-end sector’. Rightmove says that ‘whilst it’s early days, the combination of sellers being more realistic on price and an improving picture on the number of sales being agreed suggests a softer landing for the market than many expected’.
True test to come in the spring
This more optimistic tone chimes with the estate agent Hamptons, which says its key leading indicators for January ‘showed green shoots of recovery for the second month running, painting a less gloomy picture than some seem to believe’.
Tom Bill, head of UK residential research at Knight Frank, says: ‘The six weeks since Christmas have been markedly different from the chaotic final three months of last year for the UK property market.
‘Buyers and sellers switched off early for the holidays due to the volatility caused by the mini-Budget but have come back surprisingly strongly in 2023. The crucial difference is stability in the mortgage market, which means plans have been reactivated.’
Of course Rightmove is talking about asking prices, buyer demand, sales agreed, not sale completions. As Bill says, the true strength of the market will be put to the test in spring.
Confidence ‘slowly growing’
Fresh HMRC data suggests that 96,650 homes were sold in January, 11% down on the same month last year and 3% down on December 2022. Transactions are now similar to pre-Covid levels. The fall in this key bellwether for the market seemed almost inevitable, says Jeremy Leaf, north London estate agent and former RICS residential chairman.
He explains: ‘Confidence takes a long time to build and can disappear very quickly but it is slowly growing in response to reductions in those mortgage rates and inflation, as well as continuing employment stability.’
Yes, mortgage rates have been gradually edging down, with a number of lenders unveiling sub-4% five-year fixed-rate mortgages recently.
But we’re not necessarily out of the woods just yet, warns Mark Harris, chief executive of mortgage broker SPF Private Clients. He adds: ‘We expect to see pricing go up and down over the next few months with no visible trend.’
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