Sellers increasing properties on the market
Although demand is weaker, there is a huge increase in sellers due to popular demand and confidence on the market. There has been an 11% increase in the last few weeks, this is higher than the 5-year average. Buyers are also selling which is boosting sales and the flow of new homes for sale which is 16% up on the 5-year average.
Around 18% of homes on the market with Zoopla have had the pricing drop by 5%, or higher, compared to 28% in February. Realistically sellers amend pricing 8 weeks after the initial listing, we believe this tends to be through bad advice from the agents valuing. On the other hand, you could say sellers being more realistic in line with buyer demand.
Landlords parting ways
As some landlords are looking to balance their portfolios, seeing an increase in mortgage rates we have also seen an influx of properties marketed that were previously rented, around 11% of the available proportion.
This is causing a major crisis of not enough homes to rent in the UK.
Regional market conditions differ
We have seen there has been an increase in buyers demand which performs best in the north east of England and in London. Demand is above the national average in these regions and sales are more than 10% higher.
Where you will see in the South and Midlands, where we saw some of the highest price increases over the last 3 years, have seen a major decline. This is mainly due to affordability reasons with the previously stated high values. This doesn’t mean there is no active buyers, as there is still above average sales being agreed, just at a slower rate.
Are things are still selling?
Supply is rising significantly however the buyer demand does continue to get weaker year on year, however there is no sign of a back-log of unsold properties building up. The number of homes listed for more than 90 days in most areas is in line with the 5- year average. This suggests that if sellers are realistic with pricing there is no need for a large price drop between now and the end of year.
Will we see a big price drop?
With the increased mortgage rates, in the past this would have meant house prices decreasing. However due to mortgage regulations in the way people are lent money, this has protected the housing market, meaning we are seeing less impact than we may have historically.
Anyone using a mortgage since 2015 has had to demonstrate they can afford 6.5-7% mortgage rates, even though people were only paying 1 or 2%. Therefore, in theory the market was already running at higher rates before it happened, meaning those who were borrowing would have a much less impact on them.
We believe this is one of the biggest reasons we have not seen as big an impact as predicted by mainstream media, along with prolonged desire for house movers still wanting to find their new homes since COVID-19 lock-down.
Will mortgage rates increase?
Mortgage rates have moved back towards 4%. However, we have seen that the latest inflation numbers have increased the likelihood that we will see further increased rates by the Bank of England, which will likely mean an increase in mortgage rates.
Housing activity has risen in the past 2 months, it has proven that the 4% region of rates are generally affordable for new homebuyers. This is despite them being more than double 2021 rates, however as previously mentioned, this is due to mortgage standards already stress testing at the 6.5%-7% rate since 2015.
The more mortgage rates move above 5%, the greater the impact on buying power and the more house prices will come under downward pressure. Banks increasing their affordability tests further than the current levels for new borrowers will compound this pressure.
