BLOG: CONSUMER VIEW: Moving home in 2023 is not for the faint hearted
Consumer champion Charlie Lamdin, founder of bestagent.co.uk and presenter of the Moving Home with Charlie broadcasts, outlines what he’s telling potential homebuyers, sellers and movers.
2023 will be the year of remorseful home-sellers chasing the market price down as it falls, wishing they had taken a smaller price hit sooner.
Instead, when the cold, hard reality of the 2023 property market metaphorically slaps them in the face, they’ll be forced to accept a much lower price, much later than they would have liked.
Mortgage lending is in turmoil, although it is stabilising. The conveyancing industry is going through a crisis of its own making with major firms going bust, threatening transaction chains around the country.
CRISIS
The crowning crisis is that many estate agents themselves, large and small, are facing an existential threat as their costs (staff, office and advertising) continue to rise while they face a likely 25% fall in sales transaction volumes, and therefore fee income.
All of this worsens the gauntlet of mover uncertainty, as if it wasn’t bad enough already.”
All of this worsens the gauntlet of mover uncertainty, as if it wasn’t bad enough already.
The, as yet, unnamed global economic / financial crisis of inflation, strikes, war and cost-of-living has a long way to go yet. Let’s not even mention ‘twindemics’ or a Taiwan conflict.
This is the backdrop facing movers in 2023.
Even less helpful is the six-month time lag in official (ONS) reporting of what is happening at the coal face of property transactions.
How much should buyers pay? What can sellers realistically expect to achieve?
LAND REGISTRY
The Land Registry house price data published monthly by the ONS is the most accurate data available on house prices.
Back in the day (before the pandemic) it would take an average of three months for an agreed house sale transaction to complete and be registered at the Land Registry.
Recently, according to Rightmove’s figures, this period has increased to an average of five months.
If you want to know what’s happening with house prices there is no reliable data.”
But if you want to know what’s happening with house prices in your area today, at the coalface, there is no reliable data.
With a five, or six, month time lag on official public data, you might be basing your pricing decision on information from a time when the market was doing something very different.
In a rising market, a slightly over-priced property will still sell as the market price rises to meet it.
But when a market has turned, as it has now, and prices are falling, a slightly overpriced property will soon become a very overpriced property as unwitting sellers wait in vain for their asking-price buyer to show up.
MEXICAN STANDOFF
First-time buyers face jittery lenders, reduced budgets and a Mexican standoff on price from sellers. But this can be overcome with some good negotiating.
If you find a home you’d love to live in, calculate your maximum comfortable price (taking into account finances, job security, running costs of the new home, how long you’re prepared to live there), then send your offer by email to the agent, leave it on the table and walk away.
If there are no other offers, you’ll be in with a good chance. If you want to hard-ball, set an expiry date for your offer, and possible reduction thereafter. This will speed up the outcome either way, which is in everyone’s interests.
UPSIZE
First-time sellers, looking to upsize, while insulated from falling prices, are facing increased uncertainty from moving industry turmoil as it adjusts to the new market reality. These movers may not even care about the financial side, they just need to move. But they’re exposed to two other parties’ conveyancers, even if their own is good.
Many downsizers are being unrealistic about their selling price.”
Many downsizers (often baby-boomers) are being unrealistic about their selling price, ‘waiting’ for the right buyer to come along while the market drops away from them like a freefall skydiver. Then they panic and drop the price, but not soon or far enough, and are forced to repeat the process all over again.
It’s going to be a great year for savvy cash buyers to snap up bargains from desperate sellers who need certainty above all else.
UNKONWN
The biggest unknown is how much impact, if any, the growing number of government help schemes is going to have on price falls. It’s impossible to predict.
The property market is made up of what I call “a million anecdotes”. It’s a swirling mass of constantly changing variables of geography, demography and emotionally charged negotiation (which is why we will never see accurate automated property market valuations).
Government schemes have the effect of inflating property values.”
While government schemes do help some people on to the housing ladder who otherwise might not be able to afford it, (also helping the companies selling the homes) they also have the effect of inflating property values.
When this is done at the taxpayers’ risk, as in the case of the 95% LTV mortgage guarantee, it grates with tax paying tenants who can’t afford to buy.
The UK economy (and jobs) have been inextricably linked to house prices ever since the UK moved away from being a manufacturing-based economy into a financial service one.
GAUNTLET
This doesn’t bode well for 2023 either, as falling house prices can drag the economy down with them. Unless moving home is a high-ranking life priority for you, it’s a gauntlet that may be worth waiting for until 2024. If you’re a first-time buyer or upsizer, you’ll be better off the longer you wait.
If you’re a forced seller or downsizer, I’m afraid you’re in for a rough ride.”
If you’re a forced seller or downsizer, I’m afraid you’re in for a rough ride. Choose your agent wisely, and never sign a sole-agency contract which locks you in for more than six to eight weeks.
If you’re borrowing a large proportion of the purchase price, resist the temptation to pay too much. It’s a buyers’ market for the next 18 months at least. Walk away, don’t overpay. Roll on 2024. It will be a better year for moving home – whatever the economy is doing.
Charlie Lamdin is founder of bestagent.co.uk and presenter of the Moving Home with Charlie broadcasts.
A version of this article first appeared in The Sunday Times on January 8, 2023.
Great article and advice if i had the choice i would put off the sale until mid 2024
There isn’t much that’s wrong with your analysis, Charlie. Well done. But for 10 out of 10, I’d have liked to have seen an acknowledgement that rental prices being mostly higher than mortgage payments could easily impact the eventual outcome for the market. Add to that the ability to fix mortgage payments but not rents and the options for those flying the nest are grim to the extent that buying a reasonably priced home sooner rather than later might easily be the better option for many. What happens now is very much in the hands of agents. The sensible ones will understand you can’t get blood from a stone. The bucket shops will continue to price high, sign clients up to 26 week sole agencies, then they’ll chip and chase the market down, hoping (but not guaranteeing) eventually to sell for considerably less than might have been possible had they possessed a brain cell. My best advice to the sensible agents, just say ‘no’ to vendors who want to test the market above the price you genuinely think you can achieve at that time. The alternative will be you having to service disgruntled vendors, you’ll spend your money on marketing and there will be only a remote chance that they will reduce their price to an actionable level, and they’ll lay the blame at your door when it doesn’t sell. Speaking as a past agent, now a supplier whose business benefits from volume, I’m trying to encourage you as agents to take be very cautious about adding to the supply of properties of overpriced homes. All you’ll achieve if you do is a deeper and longer market recession. To the bucket shops I’d say your chances of survival will dramatically decrease if you stuff your register with homes you can’t sell. But maybe if you lack the integrity to care for your clients’ interests over you winning an instruction from an agent who was honest with them, then the industry would be better off without you. If you’re going to overprice properties then at least have the courage of your convictions and sign clients up to no more than an 8-week sole agency. I dare you!