From the latest Bank of England base rate increase to the fallout from the September mini-budget, it’s undeniable that the housing market has had a turbulent first half of 2023.
Inflationary pressures have begun to shift from external to domestic which suggests that high levels of inflation will continue in the long term. This means that the financial buffer zone in most households is starting to slim and, those who can, are resisting making a move for now, creating a market of necessity.
What can we take away from Q2?
The market has changed - a lot. Here are some of our biggest findings from the last quarter:
- New listings have remained within a 1.2% proximity to last year's levels.
- Q2 saw a 16% increase in the number of reductions compared to Q1.
- However, reduction levels remained 81% above Q2 last year as sellers attempted to secure a buyer.
- 24% of reductions so far this year have had more than one price drop.
- Sales agreed figures surpassed the five-year average by 3%.
- The percentage of properties selling within 4 weeks reached a plateau, with 42.9% of sales occurring within the first 4 weeks.
- A listings’s average time on market was up 10% in Q2.
New listings were just above the 5-year average.
Despite April seeing the lowest level of new instructions since April 2020, the number of new listings stayed fairly in line with the 5-year average in Q2. The main takeaway from new listings last quarter is that they’re still within 1.2% proximity to the levels we saw in the same time last year, highlighting the strength of the market.
What can we expect from Q3?
Economic uncertainty has always been closely tied to the housing market, so there’s no surprise that people are cautious and are putting off buying a home until they can comfortably afford it.
The housing market is showing resilience; however, estate agents will need to continue to work hard to understand the market and relate to their clients to secure a healthy cash flow until inflation begins to subside.
Reductions were historically high.
Already this year, 24% of reductions have had more than one price drop as we see the knock-on effects of overpricing still impacting the ability to find a suitable buyer for a lot of UK homes. Unlike the last few years, the level of competition has begun to decline which means that properties are sitting on the market much longer. Alongside that, economic pressures mean that finding a bargain is becoming more common practice for a lot of buyers. Ultimately, sellers will need to lower their expectations in order to quickly and easily sell their property.
All in all, these shifts in price reductions further clarify that the market is returning to pre-pandemic levels and we can argue that the shifts show the market is continuing to normalise, not decline. Year-to-date reduction volumes are within 1% of 2019 figures, and as the rate of price drops is starting to slow, levels may remain within those previously seen.
Vendors were resisting withdrawing from the market.
Last quarter, withdrawals were sitting below the average with more than expected choosing to remain in the hope of finding a seller. Household disposable income has fallen by 2.6% when accounting for inflation which means that most are deferring high-cost purchases until a later date in the hopes of lower inflation and greater price stability.
This means the market is heading to one of necessity, where those remaining don’t have the choice to defer, and as a result, they’re more willing to face several price drops rather than withdrawing from the market entirely.
Fall through levels have stayed low.
Since there is a lot less competition compared to last year, there are more sales continuing to completion, and the number of fall-throughs stayed aligned with the 5-year average. The inflated prices and high demand of 21/22 often catalysed a high number of fall-throughs with a lot of buyers rushing into sales or people offering over-budget, leading to buyer regret and rejected mortgage applications. The slowing market this year is giving buyers the chance to fully consider their offers before applying which is drastically reducing the likelihood of a sale falling through.
Sales agreed figures surpassed the average.
Sales agreed figures surpassed the five-year average last quarter with levels 3% above the average. This suggests that there is an ongoing recovery, indicating that the market is gradually steering back to pre-pandemic trends.
What can we expect from Q3?
Over the coming months, it’s expected that the number of sales will remain fairly modest with seasonal effects maintaining the buoyancy of sales. The recent base rate rise is expected to have a negative impact for first time buyers, with a large proportion being priced out of higher mortgage rates. Despite this, it can be expected that homemovers will remain consistent as mortgage pressures will result in many needing to downsize. Ultimately, buyers may drop as we see fewer FTBs welcomed onto the market though which will put downward pressure on prices.
Properties sold within 4 weeks plateaued.
In recent months, the percentage of properties selling within 4 weeks has reached a plateau which could signal a potential stabilisation in the market. With the current economic state, it appears that people are choosing to ‘wait out’ the turbulence in the market to see if prices and mortgage rates stabilise which, in turn, is slowing sales and having an effect on demand. The lower level of competition is transforming the market into a more neutral environment rather than favouring sellers, reinforced by reduction levels being 81% above last year as sellers try to entice buyers.
Days on the market stayed consistent.
The length of time a property is on the market has been consistent in the last quarter which is primarily attributed to seasonal factors - due to the summer months typically slowing until things increase towards the end of the year.
Days on the market saw a 10% increase last quarter compared to the previous one, potentially leading to a backlog of properties for agents, both those currently on the market and those in the sold (STC) stage. However, the low fall through rate and the fact that withdrawals remain below the average indicate that these listings are likely to complete.
Want to find out more?
Get a full and comprehensive analysis of the market last quarter in our Q2 Market Report available free to download here <link>
