Our key leading indicators for the housing market showed green shoots of recovery for the second month running, painting a less gloomy picture than some seem to believe. January tends to be a bellwether for the market, setting the tone for the year head. And last month is likely no different.
Falling mortgage rates support prices
Buyers, many of whom postponed moves in October and November when rates spiked, seemed more confident re-entering the market in the New Year. Falling mortgage rates have helped affordability, meaning that more sellers are achieving close to their asking price.
Last month, the average seller in England and Wales achieved 98.8% of their asking price up from a dip of 98.6% in November 2022 following the mini-Budget. This marked the second consecutive month of growth.
While fewer homes are selling above their asking price than this time last year (25% versus 38%), pricing remains robust compared to historic standards. January 2023 saw the second highest share of homes sell above asking price than in any January since our records began in 2009. To put this figure into context, back in January 2009, when prices were falling sharply, just 9% of homes sold above their asking price.
Since the rise of mortgage rates in the wake of September’s mini-budget, sellers have adjusted their pricing to reflect new economic realities. Homes sold in January 2023 that were listed for sale in September 2022 achieved on average 98.0% of their asking price. However, homes that came onto the market in December 2022 and sold in January 2023 achieved 99.9% of what the seller was asking for.
Price reductions have passed their peak
However, the fallout from the mini-Budget in September continues to weigh on the market today. In the face of rising interest rates and wider uncertainty towards the end of 2022, sellers were forced to revalue their homes. As a result, price reductions peaked in December. 46% of homes were sold following a +£1 price reduction given that many of these homes were priced pre-Budget.
Now that more homes have come onto the market since then priced to match today’s economic realities, price reductions are becoming less common. In January 2023, 45% of homes sold following a price reduction of at least £1 in Great Britain, up from 28% in January 2022. Of the homes sold in January following a price cut, 47% came onto the market before October.
We expect price reductions to become less common over the coming months given the slightly more optimistic economic backdrop and the fact that more of the homes on the market will have been priced more recently.
Time to sell reaches an 11-year high
The time it takes to sell is another metric that’s being impacted by the sluggish market at the end of 2022. While it often takes longer to sell a property in January than in any other month due to the festive period, at an average of 81 days it took 28 days longer to sell a home in January 2023 than it did during the same month last year.
However, January 2022 was a record-breaking month for the speed of selling a home, and compared to a more normal market in January 2019, homes are taking 7 days longer on average to find a buyer. And it’s the additional time taken to sell each home which is driving up the number of homes for sale, rather than more homes coming onto the market. £1m+ properties bucked the trend and saw a marginal decrease in time to sell compared to last year, dropping by a day to average 92 days.
Bidding wars start to rise
With sentiment improving, the proportion of homes sold with three or more offers jumped in January, up 8% on December 2022. This meant that 39% of homes sold across Great Britain were sold following a bidding war, bringing it back in line with the average over the past two years (38%).
London is holding strong
London recorded the biggest month-on-month increase in what buyers were prepared to pay. The average home sold in the capital last month achieved 98.2% of its asking price, up from 96.8% in December which marked the lowest figure since May 2020. Most of this uptick came from smaller homes at the lower end of the market.
Properties priced below £500k in London achieved 99.5% of their asking price on average in January up from 98.7% in December. Meanwhile £500k+ homes remain more price sensitive, partly because these properties typically take longer to sell and so a higher share came onto the market before the mini-budget.
Time to sell also rose more slowly in London than anywhere else. But even so, at an average of 90 days, a property in the capital still took 14 days longer to sell than this time last year.
