As we move further into 2023, the housing market is experiencing a notable shift in demand. Higher mortgage rates have led to a growing preference for smaller homes amongst first-time buyers and early downsizers. Affordability is stretched, and many are opting to buy smaller properties rather than not buy at all.Early downsizers are also seizing the opportunity to move with the aim of paying off what’s left of their existing mortgage.
Consequently, we're seeing an improvement in most metrics for one and two-bedroom homes, while the larger family home market has cooled due to the increasing cost of trading up.
Most of our metrics are now back to tracking 2019 levels, showing continuous improvement throughout the year. This progress can be attributed to falling mortgage rates, which have boosted the confidence of both buyers and sellers. However, recent upward pressure on mortgage rates could potentially freeze some buyers out of the market. That said, we don't expect a significant change in the market given that rates are unlikely to return to their Q4 2022 peak in the months ahead.
DAYS TO SELL
In May, the average home in Great Britain took 49 days to sell, marking the longest time to sell in any May since 2013.This increase in the time it’s taking to sell is the main reason why there were 21% more homes available to buy last month than during the same month of 2019.
Smaller homes fared better, with two-bed homes selling faster than three-bed homes for the first time since 2010. The average two-bed home went under offer within 43 days, three days faster than the average three-bed. This trend highlights the strengthening demand for smaller properties in the current market.
ACHIEVED PRICES
The average seller in England & Wales achieved 99.1% of their asking price in May, the highest share since October 2022. This represents the third strongest May for asking versus achieved prices since our records began in 2009. Sellers are now more likely to achieve their full asking price than they were pre-Covid which indicates that despite the changing dynamics of the market, prices are holding firm.
One and two-bed homes have seen the smallest year-on-year falls in asking to achieved pricing. Larger homes, on the other hand, have experienced greater affordability pressures.
Sellers of smaller homes are now accepting offers closer to their asking price than they were pre-Covid (May 2019). For example, the average one bed sold in May for 98.9% of its asking price compared to 97.6% in May 2019. This is an encouraging sign for those looking to buy or sell smaller properties in the current market, many of whom have held back in recent years.
Despite a weaker market than 2022, five regions in England & Wales saw the average seller achieve more than 100% of their asking price on average in May. These are all located in the Midlands and North of England. However, the South West and North East have recorded the biggest annual decline in achieved pricing, with the Midlands holding up strongest.
BIDDING WARS
Overall, the share of homes sold following a bidding war fell year-on-year, but remains more common than pre-Covid. Last month 34% of homes sold across Great Britain had at least three competing offers. This figure is down from 38% in May 2022, but up from 29% in May 2019.
This suggests that despite a cooler market, the imbalance between supply and demand continues to underpin competition. Compared to the same time in 2019, there were 4% more applicants registering to buy a home in Great Britain. However, 8% fewer homes new homes came onto the market.
While bidding wars have become less common for most homes compared to last year, competition amongst buyers has increased for studio and one-bedroom properties. In May, 27% of studio and one-bedroom homes sold in England and Wales had three or more competing offers, a 1% increase compared to May 2022.
