A conversation we have from time to time in the office is whether it’s a good idea in our social media and newsletters to share/publish news which might risk supressing both the desire to sell and the demand to buy? Should we not always look to accentuate only the positives and to ignore or play down the negatives? It is of course a short conversation as we strongly believe that to have credibility, to be trusted and to be seen as market experts one has to report prevailing conditions warts and all. No area exists in a bubble nor is sheltered from ill economic winds. To pretend otherwise is to insult the intelligence of our clients and to undermine our own reputation.
In any event the picture is always far more nuanced than headlines like that above paint. The local picture can be very different from the national one and even within one town or village there can be hot spots and not-so-hot spots within just a few streets of each other.
Zoopla’s report records price growth as having “plummeted” to just 0.6% in the 12 months to June. For a nation obsessed with the value of our homes such reports can cause (unnecessary) panic. In June 2022 the house price growth figure was an unsustainable 9.6%. Headline grabbing statistics mask the real picture and give a warped view of what is going on locally. House prices in more affordable areas such as Scotland actually continue to register growth of over 1% – peaking here at 1.9%. Our own sales for the first seven months of this year would suggest this to be a pretty accurate summation of the situation given that from January to end July our average sale price when expressed as a percentage of home report value was 104% although that has been falling a little in the last month or so now sitting at around 103% for July.
The unsustainable increases in average house prices we saw post-pandemic were unrealistic and unsustainable. Higher house prices tend to mean larger mortgages, bigger deposits and the requirement for higher household income to secure the higher mortgage. With thirteen months of consecutive rises in the base rate, many would-be buyers have decided to delay their moves and like the rest of the UK, cost of living challenges and higher mortgage rates have slowed the market here. We are seeing slightly fewer properties come to market and viewers are a little thinner on the ground. Closing dates whilst not unknown, are less prevalent than was the case a year ago.
So, what can we expect for the rest of this year and into the start of next? Well as everyone knows predicting future trends and events is a fool’s game so here goes!
According to Zoopla’s report house prices are predicted to be 5% lower by the end of the year albeit still 15% higher than pre-pandemic levels. We wouldn’t argue with this figure but would stress that we are referring to price paid as opposed to house value. To clarify, we do expect the premium being paid over and above asking price and/or home report valuation to moderate a little further. We predict that in the coming months achieving home report value or one or two percent above will be a good result although of course there will always be some properties which buck that trend. As a reference point last year, the average sale price we agreed was 11% over home report value. We do not expect to see actual values fall.
Sale times which last year were measured in days are now a couple of weeks and that may lengthen slightly in the coming months but historically both prices achieved and time to sell will remain well ahead of historic norms. We expect the slight lull in activity that we’re seeing currently to be relatively short lived with activity picking up again in the spring of 2024. Fixed rate mortgage deals, a good indicator of market sentiment and the view of the money markets, have been improving slightly in recent weeks indicating that those in the know think the worst may be behind us. We expect inflation to be at or below 5% come next spring and interest rates to start to fall slowly as of April/May 2024. If this happens confidence will begin to return to the market and housing supply and buyer demand to improve.
If you have any questions on the state of the market in your area please email michael@maloco.co.uk
