"The frantic market of recent years was unsustainable in the long term, and our key indicators now point to a market which is transitioning towards a more normal level of activity after the market turbulence at the end of last year."
The latest market analysis from Rightmove this morning also revealed that whilst it’s early days, the combination of sellers being more realistic on price and an improving picture on the number of sales being agreed suggests a softer landing for the market than many expected.
Tim Bannister, Rightmove’s Director of Property Science, explains: “The big question this month was whether we would see new sellers increasing their asking prices as has been the yearly norm as we approach the spring selling season. This month’s flat average asking price indicates that many sellers are breaking with tradition and showing unseasonal initial pricing restraint.
"In addition to market conditions demanding greater realism on price, we are transitioning into a slower-paced market, where buyers will take longer to find the right property at the right price due to the higher cost of servicing a mortgage.
"There are other indicators that this will be a softer rather than a hard transition despite the turbulence at the end of 2022. Homeowners who are coming to market in the upcoming spring season should use their agent’s expertise and get the price right the first time, which can really help to find the right buyer more quickly.”
Though it is still very early in the year, this month’s key metrics suggest that many buyers are seeing reasons to get on with their moves, and have the confidence to return to a market which, so far, is stronger than many expected. The number of potential buyers contacting agents is up by 11% in the last two weeks compared with the same period in 2019.
This demand is beginning to translate into sales, as the number of sales agreed is now just 11% down on the same period in 2019’s more normal market, picking up from 15% down at the start of the year and vastly improved from 30% down in the aftermath of September’s mini-Budget. This is quite a remarkable turnaround given the rapid increase in mortgage rates less than six months ago. Perhaps even more surprisingly, it is sales in the first-time buyer sector which are holding up most strongly and are down only 7% on 2019.
This suggests that though the first-time buyer sector has been hardest hit in terms of the number of buyers enquiring, those who are in the market and able to move are motivated to agree on a purchase, likely driven in part by high and increasing rents, and a continued desire to own their own home. Conversely and an indication of hyper-local and sector differences, sales in the top-of-the-ladder sector are down by 16% in the first two weeks of February compared with the same time in 2019.
Meanwhile, average mortgage rates have edged downwards after the turbulent months immediately following the mini-budget. The latest data shows that someone looking to take out a five-year fixed mortgage with a 15% deposit would now be looking at an average rate of 4.82%, compared with 5.90% in October.
While there is still an overall shortage of property for sale, with available properties to buy down by 24% compared to 2019, more choice is giving prospective movers confidence that they will be able to find the right home for them. The number of available homes for sale is up by 48% on the record low levels of last year, and this slower-paced, greater-choice market appears to be suiting the mass of buyers who need to organise a mortgage and who often lost out to cash buyers in the frenzied best bid scenarios of recent years.
Tim Bannister, Rightmove’s Director of Property Science, comments: “The frantic market of recent years was unsustainable in the long term, and our key indicators now point to a market which is transitioning towards a more normal level of activity after the market turbulence at the end of last year. Agents are reporting that they are now increasingly seeing buyers who have more confidence and more choice albeit with revised budgets to accommodate higher mortgage rates.
"It’s a positive sign for the market to see many in the first-time buyer sector getting on with their moves, though despite average mortgage rates having edged down, some first-time buyers will still be priced out of their original plans and may need to look for a cheaper property, save a bigger deposit, or factor higher monthly mortgage repayments into their budgets.”
