Six months ago, the fiasco of the government’s economic policy rocked the real estate market—both confidence and expectations plummeted. But things definitely look better today, Annabelle Dixon says, as she identifies key trends in the housing market today.
Think back to the end of last year (if you dare). The housing market has faced quite serious economic and political obstacles. It actually closed three months early on Christmas Day, notes Tom Bill, head of UK housing research at Knight Frank.
But it’s now a few months into the new year, and while different ways of measuring property prices don’t always match up, there’s one clear message: the housing market is in much better shape than many expected. Things may not be very good, but at least now they are more stable and predictable: “The most important thing is that people now know where they are, which was not the case at the end of last year,” one of our specialists told us .
This does not mean that there are no problems. The partial reversal of the “race for space” caused by the pandemic is causing some anomalies, and relative to wages, house prices are higher than at any time since the 19th century.
With the first four months of 2023 behind us, it’s time to take stock and take a look at five trends shaping the housing market right now.
1. The gap between buyers and sellers is widening
One of the results of real estate market indices contradicting each other is that people tend to select evidence that supports what they would like to believe. So there is a gap between the expectations of buyers and sellers, and according to Savills, it is widening in key areas. Not surprisingly, buyers’ budgets have been slashed amid market uncertainty, higher mortgage rates and rising costs of living. However, sellers are “somewhat less likely” to cut prices, the real estate agent said.
This echoes buying agency Recoco Property Search, which says many homeowners are still setting prices based on the growing buying demand seen during the Covid-19 pandemic.
Founder Nigel Bishop explains, “Where there were interested sellers, we were able to negotiate a lower asking price and we expect more sellers to be open to price negotiation in the next few months.”
Zoopla research shows that across the broader market, sellers understate an average of 4%, or £14,000, of the asking price to secure a sale.
2. The balance of supply and demand in the real estate market is declining
The discrepancy between buyers’ demand and supply of homes for sale is shrinking. Yes, according to Zoopla, there are 65% more objects on the market now than a year ago. The average real estate agent now has 25 homes on his account, up from 14 this time last year.
In prime locations, the number of homes worth more than £1 million for sale this year is up 8.9% from the first nine months of 2022, according to TwentyCi data cited by Savills.
Meanwhile, buyer interest remains, with demand in the broader mainstream market now 16% higher than this time around in 2019, according to Zoopla.
“The housing market may be more balanced than it has been in the last three plus years,” explains Richard Donnell, CEO of Zoopla. “Supply levels have rebounded and buyers and sellers are in agreement on where they see prices, meaning deals are being made more often.”
3. New buyers “become the dominant force” in the market
Startup homeowners are becoming the dominant force, with a record 27.1% of properties snapped up by new buyers this year, according to the Hamptons. This is the largest share since the real estate agent started collecting data in 2009.
Why? Well, the exorbitant cost of rent is one of the problems. country life Rosie Paterson recently discovered while looking for an apartment, but there is also the additional specter of “stagflation”: very high inflation coupled with weak economic growth in the UK.
“Soaring rents and broader inflation are undermining the ability of many renters to save money, meaning those with funds are choosing to buy now rather than wait to accumulate a larger deposit to afford the home they could potentially have.” would have bought last year,” explains the Hamptons. .
Faced with higher costs, budding homeowners are cutting their clothing accordingly. The average first-time buyer has cut their budget by almost £12,000 compared to last year. And they bought a house with an average of 2.4 bedrooms, the smallest house since 2010.
4. The number of older salespeople is on the rise
On the other hand, the Hamptons found that for the first time in decades, there has been an increase in the number of older homeowners selling properties. Nearly a third of sellers who put up a “For Sale” sign in 2023 bought their home at least 20 years ago. This figure has grown from 27% in 2022.
The shift is especially interesting because those numbers don’t change quickly, the Hamptons added.
5. Buyers Focus on Value
According to Zoopla, buyers are eyeing homes in areas with the best value for money. The share of sales at the bottom of the housing market rose by 5% last month, while those at the top fell by 4%.
There are a number of reasons why lower cost areas are doing better than expected, Knight Frank says.
James Cleland, Head of Local Businesses, explains: “The bottom line is that buyers seem to be very good at rates. All the usual drivers like employment and schools are still relevant, but the most important thing is that people now know where they are, which was not the case at the end of last year.”
Credit: Knight Frank
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