Several weeks of political and financial market turmoil have accelerated the housing market’s bump back down to earth. But while higher interest rates are stifling how much mortgaged households can afford to pay for their next home, the market remains resilient with activity sitting around 2019 levels. As such, it’s the more affordable end of the market that has weakened the most. Meanwhile, cash buyers are supporting the prime end, many of whom are inclined to take a long-term view and downsize as energy costs rise.
To put these effects into context, we’ve analysed some of the key indicators which reflect buyer and seller sentiment to see how they’ve changed.
The lack of stock continues to underpin house prices in the short-term, however buyers are becoming a little more cautious about what they’re prepared to pay than they were a few months ago. So far this month, the average seller in England & Wales achieved 99.7% of their asking price – the first time this figure has dipped below the 100% mark since last December.
September marked the first time this year that more sellers accepted an offer below their asking price than above and this has carried on into October. This month the proportion of homes sold below asking-price grew to 47%, up from last month’s 40%. However, compared to a more normal market like in 2019, vendors are still winning out.
Days to sell
After a volatile few weeks, many buyers and sellers have decided to wait it out to see what happens. As such, the time it takes to sell a home has crept up. The average home in Great Britain sold in 45 days so far this month, taking 17 days longer than in 2021. However, it remains quicker to sell a home than before the pandemic in October 2019 when it took 49 days on average for a seller to accept an offer.
Demand and supply
Demand from new applicants has weakened in recent weeks, but arguably not as much as might have been expected. Over the last 3 weeks, we saw 20% fewer applicants looking to buy than in the same period in 2021, but registrations are only 5% down on 2019 times.
Applicants with a budget below £250k have weakened the most, down 29% on 2019 levels, although some of this will be due to house price growth pushing buyers up a price bracket.
With many sellers also becoming a little cautious in the wake of all the recent news or perhaps unable to find their next home, fewer homes have come onto the market to sell too. Overall, there were 6% fewer new homes coming onto the market during the first 3 weeks of October than the same time last year. However, instruction numbers for £750k+ homes rose year-on-year, particularly in the countryside which will likely to keep a lid on price growth in these markets.
What does this mean for the outlook?
Looking ahead, our new prime minister and his commitment to follow the new fiscal plan will be welcome news for the housing market. Already we’re seeing lenders reduce mortgage rates on the back of lower swap rates. And this is likely to continue in the coming weeks despite the fact that the Bank of England are widely expected to hike the base rate of interest in November.
Undoubtedly though, there’s still work to be done to protect the UK economy meaning there are still risks ahead for the housing market. While the threat of house price falls has receded, it hasn’t disappeared entirely, and it's mortgage rates that will remain key in determining the direction of the market in the months ahead.