Property sales fall by 50%

Why do falling house prices matter?

House prices aren't falling as fast as sales volume. However, it is estimated 50,000 UK homeowners have fallen into negative equity in the last year, according to The National Institute of Economic and Social Research. Whilst negative equity isn't a challenge if you don't need to sell or remortgage, most of those will face challenges if their mortgage fixed term expires and they are forced to pay the mortgage lender's variable rate.

Will the BOE base rate go any higher?

The base rate will increase to 5.5% on Thursday 21st September, says Andrew Boast FMAAT

Whilst the Bank of England have indicated rates may not increase, it is likely the fuel blip will cause inflation to remain higher than needed for the base rate to stay at 5.25%. I predict that base rate will increase to 5.5% on the 21st September and then remain at this level over the Christmas period.

Sales volume lowest ever in London

London

London has the lowest volume of sales for the month of April since records began. April is often one of the strongest months for completions because it is linked to the Easter holidays offering a longer weekend to get unpacked and moved in. Back in April 2004 sales reached an all time high of 14,873 with an average sale price of £225,863. 19 years on, sale volumes have slumped to 3,194 with an average sale price of £527,979 - only £16,000 off the all time record high for any month.

England & Wales

England and Wales echoes London with a 50% fall year on year for April. The lack of affordable mortgage products, followed by a fall in available properties and the overall uncertainty in the housing market is going to cause the market to slow down. Buyers will be thinking why get a 6%+ mortgage rate this year when you can get a 4-5% deal in the Spring.

Are house prices actually falling?

The Halifax house price index shows that house prices are falling at their fastest rate since the financial crisis in 2007-8 and have hit their lowest level in real terms since 2016. They write further stating annual prices in August dropped 4.6 per cent with higher interest rates weighing on the property market; prices have fallen for five consecutive months (Financial Times).

The reason for this fall could be linked to prospective buyers delaying purchasing in the hope of greater stability and clarity on the direction of rates in the coming months of September to November.

I prefer the overall data provided by the Land Registry and the latest data for June 2023 shows house prices in England and Wales are up 2% year on year and only down 1% in London. The housing market isn't waiting for house prices to drop, it is waiting for stability with mortgage rates and more housing stock.

The solution to the stagnating housing market is more properties for sale, NOT cheap mortgages

It could take years for the market to re-start with homeowners confident to sell and upsize/downsize. The UK’s biggest housebuilder, Barratt Developments, has warned it will take two years for the country’s property market to recover. Until then I expect to see low sales volumes, where those who can afford to will sit tight and wait out the the high interest rates. For those who can't afford to wait, distressed sales for under market value will creep in and cause slight decreases in the average house prices.

Mortgage approvals rally

Bank of England data shows that mortgage lending for purchases has fallen YOY by 22% for July 2023. This is unsurprising considering the base rate increases and the volatility of the housing market. Purchasers are looking for better deals; falling house prices or lower mortgage rates.

At SAM Conveyancing we have clients telling us that they can only afford to buy on the mortgage rate they secured in April, they'd not be able to buy their property based on the current rates with the same lender. This is why it is so important that you never let your mortgage offer expire and lose your rate. If this is happening to you read our article - What happens if my mortgage offer expires?

What about the remortgage market?

The number of remortgages has remained the same, month on month, for July 2023, however they have fallen 20% year on year. Are home owners waiting for better rates, or are they trapped in properties they can't afford to remortgage?

Housing supply never meets demand

The government have stated, for the last 10 years, that we need 300,000 new homes to meet with the demand. However, as you can see below, the target has been continually unmet by developers and local authorities. The shortage of housing inflates house prices because without enough fresh housing stock and with not enough home owners selling, the competition for available properties keeps the average house price higher; especially for new builds where you pay a premium (just like buying a new car).