Property Market Update | September 2023
As we enter the autumn season, the market is showing a mixed picture of price falls, subdued activity, rental growth, and regional variation.
House prices: Down but not out
House prices have fallen by -5.3% over the year to August, according to Savills, as higher mortgage interest rates have reduced buyer affordability and confidence. However, prices are still 20% higher than five years ago, reflecting the long-term strength of the market. Some areas have seen bigger price falls than others, especially high-priced London boroughs that have lost demand from foreign buyers and investors.
Market activity: Subdued but stable
Market activity has also been low, with fewer sales and mortgage approvals than the 2017-19 average levels, according to HMRC and Bank of England. Both sellers and buyers are holding back from making decisions due to low confidence and uncertainty. However, there are also some signs of stability and resilience in the market, such as low levels of unsold stock, high levels of buyer enquiries, and strong cash buyer activity.
Rental growth: Accelerating but uneven
Rental growth has been high across all regions except Scotland, reaching 10.5% in July according to Zoopla. This is due to high competition for limited stock, as many renters are unable or unwilling to buy in the current market conditions. Some renters may also be waiting for house prices to fall further before making a move. However, rental growth has also been uneven across different locations and property types, with rural areas and houses seeing faster growth than urban areas and flats.
Future outlook: Uncertain but optimistic
Most experts predict that house prices will drop further in 2023, ending the 13-year housing market boom that started in 2010. According to Rightmove, average asking prices will fall by 2% in 2023, while surveyors expect house prices to fall by an average of 4% next year, according to The Guardian. The main reasons for the expected price falls are the continued impact of higher interest rates, the end of the stamp duty holiday, and the potential negative effects of Brexit.
However, there are also some positive signs for the market, such as rising wages, lower mortgage rates, longer mortgage terms, and improving affordability for first-time buyers. These factors may help to support demand and limit the extent of price falls in some areas. The market may also benefit from a recovery in consumer confidence and economic growth once the pandemic and inflation pressures ease.
In summary, the UK property market is facing a mixed picture in September 2023, with challenges and opportunities for both buyers and sellers. The market is likely to remain volatile and uncertain for some time, as it adjusts to the changing economic and political environment. However, there are also reasons to be optimistic about the long-term prospects of the market, as it has proven to be resilient and adaptable over time.
