"The top-of-the-ladder sector continues to drive pricing activity at the start of the year, with movers in this sector typically less sensitive to higher mortgage rates, and more equity-rich, contributing to their ability to move"
- Tim Bannister - Rightmove
The average price of new homes entering the market has risen by a 'substantial' 1.1% this month (or £4,207) to £372,324, according to the latest figures released by Rightmove. However, this remains in line with the ten-year average for this time of year.
This figure is now just £570 short of May 2023’s record of £372,894, while the annual rate of price growth increases to 1.7%, the highest level for 12 months.
A key driving factor behind this growth towards a near-record average asking price is the largest homes, top-of-the-ladder sector, which is seeing its strongest start to a year for price growth since 2014.
Overall, it continues to be a much-improved first four months of the year compared to 2023, with the market seeing boosts in both buyer and seller activity this Spring.
However, agents report that despite the rise in prices and a general sense of greater optimism, high mortgage rates are continuing to stretch affordability for the typical buyer.
The market remains very price-sensitive and operates at different speeds across its many segments and areas, with prices and sales activity rising more slowly in the more mortgage-dependent, mass-market first-time buyer and second-stepper sectors.
Rightmove’s Tim Bannister said: “The top-of-the-ladder sector continues to drive pricing activity at the start of the year, with movers in this sector typically less sensitive to higher mortgage rates, and more equity rich, contributing to their ability to move.
"While some buyers, across all sectors, will feel that their affordability has improved compared to last year due to wage growth and stable house prices, others will be more impacted by cost-of-living challenges and stickier than expected high mortgage rates.
"Despite these factors, it has been a positive start to the year in comparison to the more muted start to 2023. However, agents report that the market remains very price-sensitive, and despite the current optimism, these are not the conditions to support substantial price growth.
"Sellers who are keen to secure their sale will still need to price realistically for their local market and avoid being overambitious at the start of marketing to give themselves the best chance of finding a buyer.”
The number of new sellers coming to the market is up by 12% compared to this time a year ago, while the number of sales being agreed is up by 13%, as the market rebounds from a much more subdued Spring last year.
Larger homes driving growth
Much of this activity is occurring in the top-of-the-ladder sector, which covers four-bed detached houses and all five-bed properties and higher, with the number of new sellers in this sector up by 18% compared to this time last year, and the number of sales agreed up by 20%.
Agents report that the increased choice in this sector after many months of very limited supply, is encouraging previously reticent home-owners to come to market, creating a cycle of more new listings leading to more sales activity.
By contrast, activity is rising more slowly in the mass-market, more mortgage-dependent first-time buyer and second-stepper sectors, which make up the majority of the market. The number of new sellers in both sectors is up by 10%, while the number of sales agreed is up by a more modest 9% and 13% respectively compared with last year. Mortgage rates remain high for longer than some expected at the start of this year, which is likely having a greater impact on movers in these sectors.
Overall, the number of sales being agreed is now level with 2019 despite buyer conditions being much more challenging, with the average five-year mortgage rate now at 4.84%, compared with 2.45% in April 2019, while average property prices are 22% higher. However, affordability has been assisted by an average wage growth of 27% over this time period, slightly ahead of house price growth.
Emphasising this year’s boost in Spring buyer and seller activity, Thursday 28th March saw the highest number of new sellers coming to the market in one day so far in 2024, and the third largest since August 2020 - only pipped by Boxing Day 2022 and 2023 - with many sellers keen to capture buyer attention over the Easter weekend.
Tim Bannister adds: “The summer holidays are typically a time of distraction for some home-hunters, as they temporarily pause their search and head abroad or to the British seaside. In addition, the Euro 2024 football tournament and the Olympics this summer, likely followed by a General Election during the second half of the year, will add more buyer distractions than usual.
"There appears to be a tempting window of opportunity for those who are considering a move to act now before these distractions arrive. While affordability is still very tight, property and mortgage market conditions remain stable, buyer choice is good, and many sellers will recognise that it is the right time to negotiate on price to agree a deal.
"The boost in activity suggests that many home movers are already springing into action to make their move.”
Tom Bill, head of UK residential research at Knight Frank, said: “Buyers and sellers have faced mixed messages in 2024 as interest rate predictions have fluctuated.
"While rising asking prices show seller expectations have improved, there is broader downward pressure on prices as mortgage rates edge higher, supply increases and a wave of people roll off sub-2% fixed-rate mortgages agreed in early 2022.
"The result is more friction around prices, particularly when a rate cut seems to move further into the distance with every release of economic data. That said, higher supply means there should be a recognisable spring bounce in the housing market.”
Nathan Emerson, CEO of Propertymark comments: “With many buyers and sellers keen to start buying their next dream home during a brighter period of the year, they can do so knowing that their homes are increasing in value yet again, and this is despite the fact that interest rates remain the same in order to stabilise the economy following surging inflation.
"People are demonstrating a pragmatic attitude towards current market conditions and our own Housing Insight Reports are a key indication of how positive the market is starting to look, with an 18 per cent increase in new properties coming to the market.
"Approvals for remortgaging also increased, from 30,900 to 37,700 since February, according to the Bank of England’s Money and Credit report. Therefore, if you want to buy your next house, now is the best time to do so.”
Matt Thompson, head of sales at Chestertons, says: “The uplift in market activity typically associated with spring was slightly delayed this year but is now starting to come through. Compared to last month, we have seen a clear increase in the number of house hunters. This has also led to sellers feeling more confident that now is the right time to put their property up for sale.
“Although the number of buyers and sellers has seen an increase in April so far, demand still outweighs supply which gives sellers the upper hand during price negotiations. Current speculation that interest rates might be cut over the coming months could see an additional increase in buyers which could result in sellers persisting on or increasing their asking prices.”
Tomer Aboody, director of property lender MT Finance, says: "With a pick up in sales providing further confidence in the market, we are seeing the fruits of a stable interest rate environment, combined with reduced inflation, all contributing to an increase in asking prices.
“With the announcement that the government may be looking to introduce another stamp duty restructure in the autumn ahead of the general election, this will provide a further boost for the housing market, saving buyers thousands of pounds.”
