The headlines
Rightmove
Subdued August as market looks for autumn pick-up.
“As expected, the annual price change drops further to -0.4%, the biggest drop since March 2019.”
Home.co.uk
Prices wilt but marketing times remain below pre-Covid figures.
“Asking prices across England and Wales have slipped a further 0.4% since last month, although the year-on-year fall remains just -1.8%.”
RICS
Sales activity and prices remain under pressure due to elevated mortgage rates.
“Ongoing fall in national house prices gains momentum over the month.”
Nationwide
House price growth remained weak in September.
“Annual house price growth was unchanged at -5.3% in September. Prices were also flat over the month, after taking account of seasonal effects, following the 0.8% decline seen in August.”
Halifax
UK house prices fell again in September, but pace of monthly decline slows.
“Average house price fell by -0.4% in September, compared to -1.8% in August.”
Zoopla
Are buyers now ready to compromise?
“Annual UK house price inflation moves negative to -0.5%.”
Summary of key points from the indices
Rightmove
- The number of sales being agreed in August across all property types drops to 18% down versus August 2019
- The first-time buyer sector (two-bedrooms or fewer) is once again the best performing sector, with sales agreed down by 13% versus 2019.
- August was quieter than usual for new sellers, with the number of new properties coming up for sale being 6% lower than the ten-year average
- The five-year pre-pandemic average for the proportion of properties that have had at least one price reduction is 31.2%. That number has risen to 36.3%, which is the highest recorded since January 2011.
Nationwide
- Despite signs of demand for flats holding up a little better more recently, the price underperformance has continued in the most recent quarterly data, with flats seeing the largest year-on-year fall (-5.7%), compared to -3.6% for detached, -4.6% for semi-detached and -5.3% for terraced properties.
Halifax
- Property prices still up by +1.0% since initial Base Rate rise in December 2021.
Home.co.uk
- The typical time on market for unsold property in England and Wales increased by four days during August
- The current median is 84 days; in September 2019 the same measure was 96 days
- Stock levels of unsold property have risen overall but remain within the normal range for the seven years prior to the lockdowns.
Zoopla
- Profile of regional house price inflation linked to first-time buyer affordability and the relative cost of renting and buying
- Housing transactions still on track for 1 million completions in 2023
- Market activity continues to track in line with 2019 levels but remains well below levels of activity recorded over the more recent pandemic years
- Mortgage rates are starting to drift lower but remain over 5%. We expect them to fall below 5% later this year. Any further improvement in affordability from lower mortgage rates is unlikely to impact on the market until 2024 H1.
Regional house prices
Kate says: Some super-duper commentary on regional performance from several of the indices now – the big market stories today are the enormous regional differences, but Zoopla has produced the most amazing insight this month, showing why each region is so different.
Zoopla
“We believe that the variation in house price growth across the UK is partly explained by the ability of first-time buyers (FTBs) to buy at higher mortgage rates. FTBs account for 1 in 3 sales a year, most of whom originate from the private rental market. This means the dynamics of renting and buying will impact on demand and prices.”
“The experience for would-be FTB buyers varies across the UK. A renter buying the home they rent would find it cheaper to buy than rent in the six regions and countries with the lowest house prices.
“In Scotland and the North East average mortgage repayments are up to 18% lower than rental costs. This supports access to the housing market and the demand for homes.
“In contrast, it is more expensive to buy a home than to rent across all areas of southern England and Midlands. In London, the average monthly payment is 24% higher than the monthly rent. Higher mortgage rates are pricing more FTBs out of the sales market across southern England,.”
Nationwide
All regions saw annual price falls in Q3 “Our regional house price indices are produced quarterly with data for Q3 (three months to September) showing annual price declines in all regions.
“The South West was the weakest performing region, with prices down 6.3% year on year. Across northern England (which comprises North, North West, Yorkshire & The Humber, East Midlands and West Midlands), prices were down 3.9% compared with Q3 2022. The North was the strongest performing northern region, with the annual rate of change improving from -3.3% to -2.0%, while the East Midlands was the weakest, with a 5.5% decline. Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 4.8% year-on-year fall. London was the best performing southern region, although still saw a 3.8% annual decline.”
Halifax
“All UK nations and the nine English regions registered a decline in house prices on an annual basis. Prices are under the greatest downward pressure in the South East of England, falling by -5.7% over the last year (average house price of £376,450).”
House prices in towns and cities
Kate says: Overall, out of 30 cities, since 2005, property prices have risen above the average 3.8% inflation in 11 cities/towns, including Edinburgh and Leicester. All the remaining towns and cities, price growth has remained below inflation. Even with the price growth seen during the pandemic, what this shows is that, in real terms, especially for those that own a property outright, it isn’t necessarily delivering, from an investment perspective.
Demand and supply
Despite much of the media focusing on property prices, from a buyer’s/seller’s perspective, for the industry and indeed for the economy, what’s more important is the data we receive on transactions.
HMRC
“August is the third consecutive month to show a month-on-month increase in seasonally adjusted residential transactions. Seasonally adjusted transactions rose by 1% in August relative to July.”
Propertymark
“The supply of new homes placed for sale per member branch showed another positive uplift in August 2023 – now at an average of 13 per member branch. The average number of sales agreed per member branch remained static however, when compared to the month previous. The average number of properties available per member branch showed a positive climb to an average of 45 in August 2023 compared to 38 in July 2023. This represents the highest figure since pre COVID.”
Kate says: This data is becoming absolutely essential for any analyst and everyone working in the market that has to forecast their revenue and transactions moving forward.
As you can see from the charts, listings are pretty ‘average’ with listings for week 39 averaging over seven years at 34,000 and actually a bit lower for this year, but not far off at 32,649. So listings wise, we are ‘good’ but the market isn’t being flooded.
What is happening to sold properties is critical and the same analysis doesn’t look so good: the average over seven years is 25,420 sales in week 39, but drops to 21,535 this year – a fall of 15%. And, although mortgages are looking better, this is likely to last until the end of the year, even versus poor sales last year. We might see a bit of a boost for October (as last year we had the Truss catastrophe) but I’d be bracing myself for a poor November and December.
TwentyCI
“At the time of publishing, there were 640,016 residential properties for sale. This is 5,162 more properties than reported in August.
“There were 4,657 fewer properties Sold Subject to Contract than in August (422,370 compared to 427,027). However, exchanges increased with 11,233 more properties exchanged in June, July and August (203,588) compared to May, June and July (192,355).
“In September we traditionally see a post-vacation uplift. This is evidenced by the 1% increase in new listings compared to August. This month, the South East took the lion’s share, with 104,319 properties currently for sale. This was followed by the East of England with 71,198 for sale. The North West secured the third spot with 67,669 followed by the South West at 65,950 and Inner London closely behind at 65,896.” Zoopla Demand ticks higher off a low base “The decline in buyer demand over the summer has started to reverse. Enquiries to estate agents are up 12% since the August bank-holiday weekend. This improvement is off a low base – demand remains 33% lower than a year ago and in line with 2019. This uptick in enquiries is partly seasonal but also reflects improved consumer confidence, which is at a 2-year high, amid expectations of lower mortgage rates.
The big ‘hope’ is that base rates have topped out – if this is the case, then we may be looking at a more rosy 2024.
“Demand has improved in all areas, noticeably in southern England where enquiries for homes have been weakest in 2023. Demand is up 19% in the South East over the last three weeks and 16% higher in London.
“The number of new sales agreed has also increased and is closely tracking 2019 levels, supported by homebuyers having a much greater choice as levels of inventory return to pre-pandemic levels.”
Buyers unwilling to compromise
“Mortgage rates remain over 5%, reducing household buying power by over 20% compared to early 2022. Despite this, data on buyer enquiries shows home hunters are unwilling to make compromises on the size of home they are looking for. Share of buyer demand by property type and size is virtually the same as a year ago. There is a similar pattern for demand split by price band.
“There are some small regional variations with more demand for flats in London, for example, but the overall trend is buyers holding out for what they want. It seems many buyers are waiting for either a fall in house prices or mortgage rates. This is why sales volumes are set to be 20% lower this year and 28% lower for those buying with a mortgage.
“An unwillingness to compromise is a rational approach as buying a home is a big and expensive life event. Younger buyers are taking longer mortgages, to boost buying power, so they want to buy a home they are going to be happy in for a decade or longer.”
Where is the market going?
Kate says: The big ‘hope’ is that base rates have topped out – if this is the case, then we may be looking at a more rosy 2024, but I don’t think the fall in mortgages or inflation will have an effect this side of Xmas.
Zoopla
“We expect our index to record small month-on-month declines over the Autumn and end the year 2-3% lower than 2022. This would leave average prices 17% higher than Q1 2020, just before the pandemic.
“The modest reduction in house prices is not sufficient to boost affordability and support a recovery in sales volumes, even if mortgage rates were to dip below 5%. We should expect further modest downward pressure on prices over Q4 2023 and into Q1 2024.
“The housing market continues to adjust to higher borrowing costs. The more than doubling in mortgage rates since last 2021 together with increases in the cost of living represents a big adjustment for home buyers and the wider market.
“The impact on pricing has been modest compared to the scale of the hit to buying power. Forbearance by lenders, tougher mortgage regulations over recent years and a strong labour market appear to have moderated the stress in the market compared to previous cycles that would have driven larger price reductions.
“Some buyers are returning to the market this autumn, having delayed home moving decisions as base rates moved higher. Many others continue to wait on the outlook for mortgage rates while also holding out on their property requirements for their next purchase.
“The quicker average mortgage rates (for 5-year 75% LTV fixed-rates) move towards 4.5% or lower, the sooner we will see buyers return to the market. This currently seems more likely in 2024 than later this year.”
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