August market snapshot

The national headlines tell us that the UK property market has seen its first price fall of the year. But, did you know prices do traditionally fall in August? And this drop is on a par with the average over the last ten years? Let's take a look at what the latest news really means.

The headlines:

• Price of property coming to the market sees the first fall this year, down 1.3% in the month to £365,173 (-£4,795)

• Prices usually drop in August, and this 1.3% drop is on par with the average August drop over the past ten years

• Summer holidays are taking priority and some new sellers are pricing more competitively to secure a buyer quickly to beat the lengthy average time to completion and move home before Christmas

• Demand continues to soften and supply constraints are improving, but there is still a massive imbalance

• Buyer enquiries to agents are down 4% on the hot market of 2021 but remain 20% higher than in 2019

• New listings are up by 12% on the same period last year, but are still 6% down on 2019, while available stock is down 39% on 2019

• The latest interest rate rise of 0.5% is putting further pressure on buyer affordability

• Year on Year is now +11% for the South West, with Bristol far exceeding to circa +18% pre-pandemic (3 year) prices

As the school holidays arrive, distracted home-movers, especially those in higher-priced homes, appear to be putting their plans on hold until the autumn moving season. Some of the more urgent sellers who are coming to market are pricing more competitively in order to capture the attention of a suitable buyer quickly and attempt to beat the average time of 136 days to complete a sale and move before Christmas. 

“A drop in asking prices is to be expected this month, as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays. Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic. Sellers who want or need to move quickly at this time of year tend to price competitively in order to find a suitable buyer fast, with some hoping to complete their move in time to enjoy Christmas in a new home. To achieve that this year, they’d need to beat the current average time between accepting an offer and completing the sale of four and a half months. Nevertheless, we’re still expecting price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end the year at around 7% annual growth, even with the wider economic uncertainty.”
Tim Bannister Rightmove’s Director of Property Science

Economy

The Bank of England has raised the base rate of interest to 1.75%, its sixth consecutive rise as it has warned inflation will hit 13% in October.

Between March and May pay in the private sector was 7.2% higher year-on-year, for the public sector the rise was just 1.5%. However, adjusting for inflation, regular pay (excluding bonuses) fell by 2.8%. Job vacancy rates remain high.

Both domestic issues and the effects of the Ukraine war are pushing inflation higher. The high number of job vacancies means employers are needing to increase pay to maintain staff and recruit

Prices

At £283,496 the average price of property in the UK is 12.8% higher than a year ago. In monetary terms, this is equivalent to a rise of over £32,000 (UKHPI).

At 0.1% month-on-month property price growth across the UK fell to just 0.1% in May, the lowest rate since December 2019 according to Zoopla. With mortgage rates rising buyers are likely to become more price sensitive as the year progresses.

12 month price expectations are moderating. In June a net balance of +37% of surveyors anticipates prices continuing to rise over the next 12 months. This compares to +78% in February (RICS)

Bristol

Over the last 12 months, the average sales price in Bristol was £335,763. The total value of sales was £1,543,685,812.

34% of sales in the past 12 months were flats, achieving an average sales price of £257,715. Houses achieved an average price of £385,342.

Transactions 

HMRC reported 95,420 sales were completed in June, the first time monthly sales volumes have dipped beneath 100,000 in 2022. Volumes are over 50% lower than in 2021, the market then fuelled by the Stamp Duty Holiday.

Over 340,000 property sales were agreed in the first quarter of 2022 according to new data released by TwentyCi, volumes on track for 1.2 million transactions over the course of the year.

Properties are currently selling 20 days quicker than the long-term average (Rightmove), with a significant proportion selling above the initial asking price (Dataloft poll of subscribers). Needs-based buyers are the most active in the marketplace at the current time.

Demand

Mortgage approvals in June fell to their lowest level since the COVID-19 market shutdown in the spring of 2020. 63,726 mortgages were approved, 4% lower than the pre-pandemic June average (Bank of England).

There are signs demand pressures are starting to ease. A net balance of agents reported a fall in new buyer enquiries across many regions of the UK in June (RICS).

While demand levels for available property remain higher than last year, buyer demand per property available fell 8% compared to May according to Rightmove. However, they assert there are more than 500,000 homes currently SSTC, 44% higher than in 2019.

"Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years. It’s likely that the impact of interest rate rises will gradually filter through during the rest of the year, but right now the data shows that they are not having a significant impact on the number of people wanting to move. Demand has eased a degree and there is now more choice for buyers, but the two remain at odds and the size of this imbalance will prevent major price falls this year. For those looking to move who are concerned about interest rate rises, it’s important that they get a mortgage in principle early on in their moving journey to understand what they could afford to borrow, and find out about the rates available to them to assess what they are able to repay each month.” Tim Bannister Rightmove’s Director of Property Science

Lettings

Average rents across Great Britain rose by 3% in the year to May, their highest rate of annual growth since records began in 2012. Rightmove has revised their rental price forecast upwards. Average rents are likely to rise 8% over 2022, up from the previous forecast of 5%. Asking rents increased by 3.5% in Q2, as demand continues to outstrip supply.

Over the last 12 months, the average rent achieved for properties let in Bristol was £1,158 per month. This is a +12% change from the previous 12-month period. 67% of properties let in the past 12 months were flats, achieving an average rental value of £1,122 per month. Houses achieved an average rent of £1,258 per month. 68% of tenants are aged between 18 and 29.

The common tenancy length is now over 2 years, with 18% of landlords saying their average length of tenancy has increased over the past year according to new research by Rightmove. Many renters are choosing to stay to avoid facing significant rent rises when moving.

Fri 12 Aug 2022