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During Q3 the industry began to adjust to higher mortgage rates and reduced demand which meant that regional variations started to emerge. Last quarter, we saw sellers growing restless as demand continued to wane with a 13% increase in vendors switching agents which marks the highest level since 2019.
With vendors reacting to longer selling times and a regional divergence in sales activity, it’s becoming more vital for agents to understand local market dynamics to effectively navigate the market. In this blog, we’ll be taking a closer look at the ways these shifts have impacted the market to help agents gain a deeper understanding of the current state of the market.
What can we take away from Q3?
The market is always changing, here the top line statistics against the 5 year average:
- New listings dropped by -14.2%
- Reductions increased by +26.3%
- Fall-throughs dropped by -4.5%
- Withdrawals decreased by -29.7%
- Sales agreed dropped by -24.8%
New listings declined, but agents shouldn’t worry.
New listing volumes shifted in Q3 with a decline of over 12% in new properties coming to market. Although there has been a notable decrease in new listings (even compared to previous years), this shouldn’t be regarded as a cause for concern, particularly amidst the ever-changing landscape of the economy.
One major trend of interest to emerge last quarter is the outperformance of rural areas compared to urban areas. Rural areas experienced a bigger uptake in new listings which could be attributed to more households deciding to sell up and move back into urbanised areas. Greater London saw the most significant decline in new listings, with a drop of 16% while the East Midlands and Yorkshire both experienced a growth in new listings during August at 4.6% and 1%, respectively.
New listings are expected to be below average in Q4.
As we look ahead into this quarter, these shifts in new listing volumes are likely to continue shaping the market. Model predictions show new listings in Q4 being at least 8% below this quarter. While this is partly because of seasonality, it should be noted that Q3 performed below the same quarter of last year for new listing levels by some margin, and we can expect Q4 to be similar.
Agents are pricing realistically from the outset.
Compared to the 5-year average for last quarter, there was a 26% increase in the number of properties reducing their price in Q3. Although this number sounds high, it’s still a massive drop from the 50% increase noted in Q2.
Even when removing the influence of seasonality, there was still a gradual decline in the amount of properties dropping their price. Sellers seem to have adapted to the new market conditions and have taken their agent’s advice to price realistically from the outset.
Looking forward into this quarter, these trends in property price reductions provide valuable insights for where the market is heading in the future, and the decreasing gap between current and average reduction volumes could indicate a move to a more stable market.
Fall-throughs hit a peak in rural areas.
Sales falling through hit a peak in July of this year and agents should expect to see a gradual decline as we progress into autumn.
Looking regionally, Greater London had the fewest sales falling through while Wales experienced the highest. In fact, rural areas actually saw a 13% increase in fall-throughs.
There are a lot of different factors that could account for this rise in rural areas but the most likely explanation is a more active sales market. Since rural areas have encountered a 21% increase in sales granted, there will have been a higher volume of transactions this quarter and, consequently, a greater number of sales falling through.
Withdrawals spiked in July.
Over the last few months, there has been a decrease in new properties listing, fewer properties successfully selling, but a noticeable uptick in withdrawals. Despite remaining relatively stable throughout the year, withdrawals spiked by 9% in July.
The main driving force behind this can be linked to changes in mortgage rates. And, on top of these changes, a lot of homeowners were left with unfavourable mortgage deals, or difficulties selling due to reduced demand.
Another contributing factor could be that properties are also spending a lot longer on the market and the time it takes to sell has been increasing steadily over the last 2 months. This extended time on the market could also be prompting more sellers to withdraw their properties, perhaps out of impatience or a desire to reassess their selling strategy.
Sales took another hit.
Sales also took a hit last quarter with a decline of 15%. Unsurprisingly, Greater London hasn’t been immune to these shifts and in August alone, the region saw a 6% decline in sales and an astonishing 16% drop in listings.
Things like the size of properties could have played a role in this shift, with a more modest decline in sales agreed observed for one and two-bedroom properties compared to larger residences with four or five bedrooms.
That being said, the recent decision to maintain the base rate at 5.25% should provide some added comfort as we move through the final quarter for agents and homemovers alike. In Q4, It's expected lenders will further reduce their rates in light of this news in an effort to remain competitive.
By the end of this quarter, we’re predicting that sales will still be about 15% below the 5 year average, likely ending the year similar to the performance we’ve seen right throughout 2023 - slow but stable.
Time taken for properties to sell hit a slowdown.
The property market has experienced a noticeable slowdown, with the percentage of properties selling in under four weeks in September reaching its lowest level since January.
This month-on-month decline can mostly be attributed to seasonality and the likelihood of properties selling within a month is expected to decrease even more as the year progresses.
Recent years have seen a faster-paced market that puts buyers at a disadvantage. With the market now favouring buyers, sales agreed can be expected to occur at a more relaxed pace, allowing them to shop around more than in previous years.
There were major regional disparities.
Regionally, the decline in property sales across the country is not evenly distributed and affected the South of England disproportionally compared to other areas in Q3. Regions like the South that have been experiencing the biggest drops in sold properties are also the regions with the highest average house prices.
This correlation reaffirms the trend that areas with higher average house prices aren’t performing as well as those with lower-priced properties. In fact, we could even go as far to say that buyers are potentially turning to lower-value properties as a response to rising mortgage rates and tighter budgets.
Vendors took longer to sell their home.
Properties are taking an average of 19 days longer to sell compared to the same period this time last year. This increase suggests a big shift in the pace of property transactions, with sellers facing longer waiting times for successful sales.
The increase in average days on market has had a knock-on effect to the rest of the market and has created a buildup of available properties for sale. Currently, the market has 18% more properties for sale than at the beginning of the year which, coupled with prolonged selling times, could indicate growing challenges in matching supply with buyer demand.
Want to find out more?
Get a full and comprehensive analysis of the market last quarter in our Q3 Market Report available to download for free.
