December Market snapshot
Let's cut to the chase and start our property market snapshot with prices this month. As always we'll skip the hyperbole and attempt to provide context to help our Bristol home movers make their property-related decisions.
The average price of property coming to market drops by 2.1% (-£7,862) this month, a bigger dip than usual at this time of year as some determined sellers price aggressively to tempt hesitant buyers. 2022 ends with new seller asking prices 5.6% higher than a year ago, versus 6.3% annual growth in 2021
Zoopla's latest house price index report City of Bristol's average price is £333,800 with an annual price change of +8.4% (£25,938). Rightmove stated £386,229 and a 9.2% average increase, this is including November asking prices.
With Ocean's combined research closer to 8.9%.
“Though we would always expect prices to drop in December, as motivated sellers try to capture the attention of a buyer before Christmas with a competitive price, this monthly dip is the largest we’ve seen for four years. It‘s an understandable short-term reaction to the economic turmoil and unexpectedly rapid mortgage rate rises and reduction in the availability of mortgage products that we saw in late September and October before things began to settle down. Despite this, we end the year with average asking price growth of 5.6%, which is only slightly lower than the 6.3% last year.” Tim Bannister Rightmove’s Director of Property Science
All of the national indices report annual property price growth is softening, with price readjustments expected over the course of 2023. In the 2 years since the re-opening of the market in June 2020, average prices rose by 23% (ONS).
Rightmove forecasts that prices will drop by an overall average of 2% next year as a multi-speed hyper-local market emerges, with some locations, property types, and sectors faring much better than others.
We have consistently seen, as with Bristol's economy, the property market fares remarkably well. Driven by local home movers of all types - a relatively strong first-time buyer sector, investment purchases, house buyers at all price points, and aspirational movers from outside of the area arriving. Ocean's website experienced a higher percentage of prospective buyers from London (32%) than Bristol-based buyers in November. They invariably arrive looking for quality apartments and family homes, thus providing a very healthy injection of highly motivated buyers to neighborhoods across the city.
The Chancellors' Autumn Statement announced widespread spending cuts and tax rises, many in the form of threshold cuts and freezes on current rates aimed to tackle inflation and escalating mortgage costs. The UK economy is expected to shrink by 1.4% in 2023 but is expected to grow from 2024-2027. Inflation is expected to peak at the end of 2022 before falling back over the course of 2023 (OBR). At 5.7% wage growth in the year to September was at its strongest since 2000 (excluding post-pandemic furlough), however, it lags behind inflation, which reached a 41-year high of 11.1% in October (ONS). The base rate of interest is 3.0%.
Economic headwinds including rapidly rising mortgage costs mean that some would-be buyers may have paused their plans for the foreseeable future. However, over the past two weeks, the number of people enquiring to estate agents is up 4% on the same period in 2019, and there are also signs that some discretionary buyers, who are still able to move, are using the space between now and the New Year to weigh up their options say Rightmove.
108,480 property sales took place in October (most recent official figures), as many of those with mortgage offers agreed sought to complete in the wake of rising mortgage rates. Sales volumes in 2022 are running 5% above the pre-pandemic average. Mortgage approvals fell dramatically in October in the wake of the now defunct Growth Plan while mortgage lending rose as those with deals agreed sought to complete (Bank of England). Moneyfacts reports the average 5-year fixed rate mortgage rate has fallen back below 6%. Gilt swap rates are now 1.5% lower than in the immediate aftermath of the defunct Growth Plan.
The number of views of homes for sale on Rightmove is up 11% from last year. This indicates that there are many ready-to-go buyers, monitoring and waiting for a calmer market in 2023 after an uncertain last few months of the year.
“It’s understandable that some buyers are distracted, not only by the festive season but also by the thought that they may get a better fixed-rate mortgage deal and a more stable outlook by waiting until the new year. Our data suggest that there are many ready-to-go movers out there waiting for what they feel to be the right time to enter the market in 2023. We’d usually see a jump in home-mover activity in January, but it takes a while at the start of the year for any significant price changes to feed through, so we’ll be waiting for a potential bounce back in prices in February, which will be a very important leading indicator for the spring moving season.”
Tim Bannister Rightmove’s Director of Property Science
“After two and a half years of frenetic activity it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer. We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales which would cause a glut of properties for sale and contribute to more significant price falls in 2023. This is reflected in our prediction of a relatively modest average fall of 2% next year.” Tim Bannister Rightmove’s Director of Property Science
Update, 20th December
Savills latest survey shows that buyer commitment has improved since their August survey. Undertaken this month, it points clearly to the buyer groups most likely to be active in 2023, needs-based buyers in the early part of the year, and increasingly the equity-rich lifestyle ‘right-size’ buyers as the year progresses.
Of those who gave a reason for moving, 41% were downsizing, 36% upsizing, and 23% were in the market because of a relationship breakdown or a bereavement, to reduce borrowing, or because a change in employment necessitated a move. Asked about their commitment to move, a net balance of +3% of all respondents said they were more committed to moving within the next three months and +12% over the next six months. This rises to +20% for those moving for work, +32% for those moving because of bereavement, and +39% for those looking to reduce levels of borrowing. The most committed group, with a net balance of +48%, is moving because of a relationship breakdown.
These needs-based buyers express the greatest urgency to move within the first half of 2023. By contrast, levels of commitment to moving amongst those looking to ‘right-size’ their homes, whether upsizers or downsizers rise significantly over the next year or two.
“A return to a more stable political and financial environment following the tumultuous ‘mini-budget’ has led to a more positive outlook among potential buyers and sellers, despite the expectation of further economic uncertainty. While there are very clear headwinds, this survey suggests that there is a strong seam of demand in the market, but that it will be clearly split between those who need to move quickly and more discretionary buyers equally committed to moving but happy to bide their time over the next 12-24 months, to ensure that they get the right home at the right price"
Frances McDonald, Savills residential research analyst
Close to 104,000 property sales took place in September, on par with August according to data released by the HMRC. Quarter-on-quarter sales volumes were down 0.6%.
Zoopla predicts that close to 1.3 million sales will take place in 2022, before sales volumes drop back to around 1 million, more in tune with the pre-pandemic norm.
As always, our teams are here to help in every way possible, get in touch with any questions or concerns.
Sources: Rightmove, Zoopla, Dataloft, Land Registry, National House Price Index, DLUHC
Mon 12 Dec 2022