Property Market Update: May 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.

According to Rightmove, the average price of properties coming to market has reached a new record high of £372,894. Despite low expectations, the market has witnessed some promising activity levels this year, with agreed sales numbers just 3% behind the pre-pandemic levels of 2019.

However, there have been some causes for concern. On the 1st of June, building society Nationwide released a report stating that UK house prices had fallen at their fastest pace for nearly 14 years. Prices saw an annual drop of 3.4%, their largest decline since July 2009.

But is this truly bad news for homesellers? Or are there silver linings? All this and more in the GetAgent Market Update.

Asking prices break records but house prices decline

The average price of properties coming to market have reached a new record on Rightmove. The average property on Rightmove is £374,894, a significant 1.8% increase from April, and the largest monthly increase this year. It’s also substantially higher than the historic rise expected in May, which is typically 1.0%.

While record-breaking asking prices are a positive sign of engagement within the market, there have been some less-than-positive reports regarding average UK house prices. Zoopla and Nationwide have both reported drops in national house prices, with the property portal reporting a 1.3% drop over the last six months, and the building society highlighting the largest annual decline since July 2009.

Why are house prices falling?

In recent years, the housing market has experienced an unprecedented surge in prices, surpassing what was traditionally considered normal. This surge was fuelled by various factors such as the Stamp Duty Holiday, the impact of the Covid-19 Pandemic, and historically low interest rates.

However, as the pandemic waned and the Stamp Duty Holiday ended, it was inevitable that prices would begin to stabilise - and even decline. The decline we're now seeing was in part caused by the sudden increase in interest rates following Liz Truss's October Budget last year, which had a significant impact on national house prices. The abrupt rate hike led to disruptions in property transactions as mortgage providers retracted their offers and homeowners reassessed their financial positions, causing many transactions to fall through, and as such, a fall in demand that reduces house prices.

Although the decline has now slowed to a more typical rate, experts are cautiously comparing current market conditions to the pre-pandemic years, which were characterised by stability. House prices however, still remain significantly high. The supply of housing stock is once again increasing, and with few signs of interest rates falling any time soon, there is still potential for further price falls.

Market recovery continues, with considerable regional disparity

The market is continuing to rebound from the damage sustained last October, and recovery appears to vary regionally. Agreed sales numbers are now just 3% behind the pre-pandemic market of 2019 according to Rightmove, indicating a return to calmer levels of activity.

While the latest report from Nationwide reveals improvements in market activity (supported by recent Bank of England data), the number of mortgages approved for house purchase in March still remains 20% below pre-pandemic years.

Zoopla reports that, while buyer demand remains below average in certain regions like the Midlands, South East, South West, and East of England, the number of new sales has increased compared to the five-year average. This suggests positive momentum in transaction volumes, albeit with some regional disparity. Regions such as Scotland, the North East, and London for example, have higher buyer demand and more sales than the national average, indicating relatively stronger market conditions in these areas.

Regions that experienced significant house price growth however, like the Midlands and the South of England, now face affordability challenges and below-average buyer demand, signalling a cooling effect in these previously buoyant markets.

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Mortgage rates and inflation - Keep calm and carry on

On the 10th of May, the Bank of England (BOE) made a notable move by increasing its interest rate to 4.5%, marking a 0.25% rise from the previous hike less than two months earlier on the 22nd of March. This swift increase, coming so soon after the last, raised some eyebrows. However, the BOE was quick to assure observers that this move was not unexpected and that it was necessary to address inflation.

Indeed, while consumer price inflation has slowed, it still remains higher than anticipated. By the BOE’s own admission, there is a possibility of a peak rate reaching around 5.5%, surpassing the previously anticipated 4.5%.

In the midst of all the sombre speculation, there’s room for some positivity. Rightmove reports that current mortgage rates have fostered increased confidence among prospective homebuyers. The availability of a five-year fixed mortgage with a 15% deposit at a rate of 4.56% (down from 5.89% in October) suggests that some borrowers, at least, can plan their mortgage costs with greater certainty.

If you’re looking to remortgage in the near future, it’s worth reassessing your finances and evaluating the long-term affordability of available packages - check out your equity with our handy valuation tool.

Are the dog days over?

With potential interest rate hikes on the horizon, it’s important to note that things often get worse before they improve.

If you’re a homeseller, one of the best things you can do is listen to the advice of your estate agent. Pricing your home right the first time is always a big factor in receiving offers, and with such considerable regional disparity in market conditions, choosing a reliable local agent is your best bet at achieving a successful sale.

Last but not least - if you want to stay on top of your largest financial asset, there’s more than one way to keep track of your home. Use our free tool to monitor the progress of your property’s value, equity and more.