Despite this being a sure sign that the market is picking up pace in the wake of the Truss-Kwarteng debacle, this renewed momentum came at the cost of a price correction, effectively writing off all the gains of 2022 and a little more. However, with the froth of the COVID boom cleared from the market, UK home prices look set to consolidate over the coming months as demand and supply find a new equilibrium.
Fears of a flood of panic sales prove to be unfounded as supply remains restrained. In fact, the monthly rate of new instructions is slightly down on February 2022. Meanwhile, the total stock of unsold property on the market is still below pre-COVID levels despite having recovered significantly following the unprecedented buyer frenzy of 2020/21.
Rents are up significantly in all regions and most notably in Greater London and Scotland. The lettings market continues to be overwhelmed by demand and this has driven the mix-adjusted average rent up just over 17% overall. Since rental returns fundamentally underpin property values, this is clearly a very positive trend for the sales market.
The typical gross yield on a two-bedroom flat in London has risen to 7%.
Demand is supported by the mortgage market which currently offers many fixed-rate deals at 4% or less. Moreover, for those that can afford a deposit, real mortgage rates remain negative by quite a margin, irrespective of the measure of inflation (RPI or CPI) you prefer. Additionally, pay growth at 7.3% helps support lending based on earnings multiples.
The annualised mix-adjusted average asking price growth across England and Wales is now -0.5%; in March 2022, the annualised rate of increase of home prices was 7.4%.
