Green shoots are starting to appear in the property market
The Guild’s Iain McKenzie says green shoots are appearing in the property market with wage growth outstripping inflation.
Signs of green shoots are appearing in the property market with buyers returning, supported by falling mortgage rates, wage growth outstripping inflation and a strong labour market.
With the Bank of England holding the interest rate at 5.25%, the consensus is that we are at the top of the rate rise cycle. Interest rate expectations in the monthly consensus forecasts have been improving over recent months as the economic outlook brightens.
Rates are predicted to start falling in the second half of the year, reaching 4.4% by the end of 2024. With inflation under control and forecast to fall to 2.2% by the end of the year, confidence in the housing market is improving.
DUAL DRIVERS
First-time buyers were biding their time during 2023 but it’s now expected that more first-time buyers will enter the market throughout the year, encouraged by the dual drivers of earnings growth and reduced mortgage rates improving affordability. According to Moneyfacts, the average 2-year and 5-year fixed-rate deals have now been falling for six consecutive months.
The availability of deals at the 95% loan-to-value tier has increased to 274 deals, its highest level since 2022, demonstrating that lenders are still keen to support borrowers with smaller deposits.
The start of 2024 has seen an upswing of new buyers, with agreed sales in the first six weeks of 2024 16% higher than the same period last year and 3% higher than in 2019 according to Rightmove.
MARKET MOMENTUM
Average asking prices rose 0.1% year-on-year in February, the first annual increase since August 2023 and an indication of growing market momentum.
Bank of England data revealed that the number of mortgage approvals rose for the fourth consecutive month to 55,227 in January, the highest level since October 2022. Meanwhile, the Chancellor announced in the Spring Budget that property gains tax is to be reduced to 24%, which may encourage landlords to sell, boosting transactions.
The December UK House Price Index from the Office for National Statistics showed a mixed picture around the UK. However, the Nationwide House Price Index reported month-on-month house price growth in February, increasing by 0.7% as market momentum grows.
INDICATIONS OF RECOVERY
According to the building society on an annual basis house prices saw a 1.2% increase in February, the first positive year-on-year growth since January 2023. This contributes to the emerging indications of recovery in the housing market. And according to the HM Treasury Average of Independent Forecasts although prices are forecast to soften slightly by -1.0% this year they are expected to recover by 0.8% in 2025.
Early signs for the market in 2024 are increasingly positive, with metrics for buyer demand, sales and new instructions all turning positive.
Choice for buyers is also on the rise, with Zoopla reporting that available homes for sale are 20% higher than a year ago.
BOOSTING CHANCES
Improved market conditions are boosting the chances of a sale, although sellers must continue to present their property well and at a reasonable price if they are serious about moving in 2024.
Half of agents in the Dataloft Inform Poll of Subscribers say offers are currently being accepted up to 5% below initial asking price; however, 15% report this level or higher.
This may well be underpinning house prices in many areas of the UK.”
Looking at housebuilding figures, just shy of 240,000 new builds were completed in 2023, the numbers holding up relatively well in a slower sales market but still short of the government’s 300,000-per-year target. In most UK regions there were fewer completions in 2023 than 2022, overall, down by -8.6%. This may well be underpinning house prices in many areas of the UK.
The average time to sell in the UK has slowed compared to the same time last year. However, with brighter days beckoning, momentum is likely to be injected into the market.
Over the last five years, with the exception of the Covid year of 2020, properties have taken 10 days less to sell in spring than winter, meaning this could be an ideal time for vendors to put their home on the market.
Iain McKenzie (main picture) is Chief Executive of The Guild of Property Professionals