From a seller’s perspective, what matters is that their property is worth more than they bought it for.
Secondly, they want to know they can sell in a decent timeframe. In January 2023, it took 94 days on average to sell a home according to Home.co.uk, which is two days more than it took in January 2022. By February “The Typical Time on Market for unsold property in England and Wales rose again, adding six days to make the median 100 days” which is around the same time it took in 2021. Although it’s important to note that this differs quite dramatically from one area to another, with Greater London taking less time while the East Midlands is taking a lot longer.
Where to and how much?
Finally, they need to be able to find another property to move to – that they can afford. Of course, the affordability side for those with a mortgage is likely to be tougher, but for the one in two buyers who buy with cash and require a mortgage that’s less than 50% of the property’s value, 2023 could be a good year to sell and buy. This is especially the case if demand is lower and supply higher, as it means more choice and a less frenetic market.
From a buyer’s perspective it is a bit more tricky. The critical question for buyers is: can they still afford to buy the property they need? And as mentioned, for the 30% of buyers with cash and the 20% of buyers with 50% or less LTVs, properties are still affordable. In addition, Zoopla points out, “While overall sales volumes are lower yearon- year, they are ahead of the pre-pandemic years in more affordable housing markets such as the North East and Scotland.”
Just because mortgage affordability is tougher, it doesn’t mean that people can’t afford to buy, especially in areas where there is still room for property price growth. Add to this that flats haven’t typically seen double digit growth over the last few years so they could still be good value for money. This could explain why demand for flats has grown so far this year versus houses, and why the number of first-time buyers hasn’t dropped as much as expected.
Secondly, we have seen mortgage rates fall quite quickly since Rishi Sunak and Jeremy Hunt have taken over and despite bank base rates rising in February again, fixed rates actually fell off the back of the expectation that if inflation falls as predicted, rates will fall in the future.
Finally, as with sellers, if there are more properties available, then this is likely to drive more buyers, especially when stocks have been so low over the last few years and people have had to compete heavily to secure a deal.
And it’s not just everyday buyers and sellers that can still afford to move this year. From an investor’s perspective, selling now may be a good move if the returns hoped for have already been made or they may have to sell if the 4%+ mortgage rates mean they could be operating at a loss. Alternatively, with rents rising due to the shortage of stock and with property price growth stagnating, now may be a good year to purchase a new investment property and if they buy well, they may even secure the property at a bargain, mitigating the increased mortgage costs.
Whatever happens in the short term, property investment typically delivers over the long term, so when you add in growth from rents, if an investor buys a property at the right price, it could still deliver a great return.
So, overall, looking at buying and selling from the consumers’ perspective, it still makes a lot of sense for many people and it’s this that may well mean the market performs better than predicted – as long as we don’t get any more nasty shocks!