Property Market Update: August 2023

Welcome to the latest edition of the GetAgent Property Market Update! We’ve gathered insights from top experts across the UK to give you a well-rounded view of current market trends.

High mortgage rates are continuing to make a big impact across the market, with average house prices still 19% higher than the pre-pandemic market of August 2019, and the number of completed housing transactions nearly 20% below 2019 levels.

House prices are proving to have a huge impact on sales as a two speed market emerges; houses needing a price reduction are taking twice as long to attract buyers than those correctly priced from the get-go.

However, it’s not all doom and gloom, and there are some promising trends coming to light over the past few months. Mortgage rates are showing a slow downward trend, and combined with a steady increase in wages, there are strong hopes for improved affordability in 2024.

Slow trend in falling mortgage rates means little impact for house price growth

Rightmove’s figures show signs of an improving, if slow, trend as the five-year mortgage rate fell to 5.81% in August, compared to the 6.08% average in July. Despite this, higher mortgage rates and cost-of-living pressures are continuing to cause strain to the property market, resulting in weaker buyer demand, fewer sales and very little house price growth.

According to Zoopla’s figures, mortgage rates are expected to fall below 5% later this year, but it’ll heavily depend on keeping inflation under control. The somewhat sluggish decrease means any changes to mortgage rates are unlikely to impact the market until early next year. As a result, house price growth looks set to stay within the +2% to -2% for the rest of 2023.

At £364,895, the average new seller asking price fell by 1.9% in August, the biggest fall in August since 2018 and 5.3% below the August 2022 peak. Although UK house prices have risen 0.1% in the last year, they’re seeing the slowest annual growth rate since 2012.

Mortgaged house sales decline in a tough market

House sales are braving a big hit as demand from buyers is revealed to be 34% lower than average (in the same period between 2018-2022) and the number of agreed property sales fell by 20%.

Mortgaged buyers are the biggest reason for this decline, as mortgaged sales are expected to drop 28% compared to last year. Many homeowners with a mortgage will wait for rates to improve before they consider a move, while new borrowers are struggling to afford the mortgage stress rates of 8.5%.

A two-speed market

Agents are commenting on a two-speed market; Vicki Foreman, Associate Partner at Brown & Co. in Norfolk, noted:

“It really is a two-speed market right now. In the current price-sensitive market, homes which are overpriced compared to local trends really stand out from the crowd for the wrong reasons and have the real risk of going stale or may have already done so.”

Data from both Rightmove and Zoopla shows that homes priced right from the outset took less than half the time to find a buyer than those who reduced their asking price. On average, the former found a buyer in 27 days, while the latter took 66 days.

Tim Bannister, Rightmove’s Director of Property Science, commented, “Our analysis shows that homes that are priced right the first time, rather than priced too high only to be reduced later, are not only more likely to find a buyer, but more likely to find a buyer quickly.”

Knowing the value of your home is really important if you want to sell it in this type of market. For a quick valuation, use our free and instant Online Valuation Tool here.

Faster wage growth is improving affordability

Though the number of property sales this year is down 21% against 2022, faster wage growth is boosting housing affordability, as well as lower asking prices and a slow decline in mortgage rates.

Average wages have risen 7% over the last year, taking small steps towards improving housing affordability, despite higher mortgage rates. Wages are also expected to rise faster than house prices in 2024.

House prices are falling, albeit slowly, and coupled with this increase in wages, affordability is set to improve by 9-10% over 2023. House price to earnings ratio will be 6.3x by the end of the year, matching the affordability average for the last 20 years.

A promising future market

Although the current market is proving to be tough, trends are showing promising signs for the future market, with the number of property sales expected to recover in the next two to three years.

With flexible and hybrid working, first time buyers can seek homes from areas with higher affordability. Along with increasing wages and high immigration, the number of house moves are likely to increase.

Lower mortgage rates are the key to boosting market activity next year. If wages increase in the way experts predict, alongside estimated mortgage rates of 4-5%, the number of sales should increase in the coming months.

Nationwide’s Chief Economist Robert Gardner commented: “While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once Bank Rate peaks.”

Hope for the future!

Though we’re by no means over the worst of a tough market, there’s definitely a lot of potential for an improved market in 2024. Lower asking prices, higher average earnings, and a downward trend in mortgage rates show a promising combination heading towards the future.

If you have concerns about selling your home, August’s trends have made it very clear: the right asking price is key to a quick sale. You can use our Estate Agent Comparison Tool to compare agents by percentage of asking price achieved.

Thanks for reading, and we’ll see you next month for the September update!