Property Market Update: November 2023

Welcome to the November edition of the Property Market Update! We've collated information from experts from across the UK to provide you with a comprehensive view of the current market.

Despite facing some downward pressure, house prices have demonstrated resilience in the past few months. Similar to last month, there's no clear indication that this points to a resurgence in buyer demand. In fact, nearly one in four home sales are witnessing reductions in their asking prices to encourage interest.

In other news, Chancellor Jeremy Hunt has renewed the Mortgage Guarantee Scheme. We delve into the details of this scheme and also take a glimpse into what the future holds for the market.

Prices show resolve amid downward trajectory

In the most recent updates from both Halifax and Nationwide, November has shown a notable resilience in house prices, reporting monthly growths of +0.5% and +0.2%, respectively. However, this apparent stability is more likely attributed to a persistent shortage of properties nationwide rather than a surge in buyer demand.

While the two banks highlight this resilience, Zoopla paints a different picture, indicating an overall trajectory of decline with a -1.2% fall in the average UK property value over the past 12 months. This downturn is observed across all price brackets and geographic locations in England and Wales, with the most significant impacts felt in the South and South East regions.

The market experienced a significant shift during the pandemic, marked by a 'race for space,' primarily driven by second and third-steppers. Regions such as Cornwall, Devon, and Norfolk benefited from this, but are now facing a decline in demand and value.

In contrast, Northern Ireland and Scotland are proving to be more resilient in the face of current market conditions.

One in four home sales experience 10% discount

Zoopla reports that the majority of homes are being sold at a considerable discount - an average of £18,000 below asking price. This discount, amounting to -5.5% below the average asking price, is a significant fall from the +3.4% observed in the first half of the year.

Rightmove echoes this view, reporting a similar decline in average new seller asking prices. According to the property portal, prices dropped by -1.7% or -£6,088, to settle at an average of £362,143.The most significant reductions in prices are concentrated in South England, underscoring the regional variations in the market.

Homesellers appear to be adjusting to the economy, adopting a more realistic approach. Nevertheless, there’s still room for further adjustment, with one in four sales experiencing discounts of 10% off the original asking price.

Mortgage Guarantee Scheme extended

Over the past year, the market has been adjusting to higher mortgage rates, leading to a decline in sales. But there's a silver lining — many potential buyers, sensing that rates might have hit their peak, are finally making their moves after putting things on hold last year.

On a positive note, the Bank of England's recent decision to maintain the base interest rate paints an optimistic picture. If this trend continues with sustained rate holds or potential reductions, it could significantly boost housing market activity. This would be a welcome relief from the affordability challenges that have been holding back the sector.

Notably, mortgage approvals for house purchases have lagged, remaining approximately 30% below the levels seen before the pandemic in recent quarters.

In other news, the Mortgage Guarantee Scheme, designed to assist individuals with limited deposits (5% of the property's price) in purchasing a home, has been extended. Originally set to end in December 2023, the scheme will now run until the 30th June, 2025, following an announcement by Jeremy Hunt in the Autumn Statement on November 22nd.

Key features of the Mortgage Guarantee Scheme

• Launched in April 2021, the scheme aims to support homebuyers with limited deposits (5% of the property's price).
• It offers a government-backed guarantee on new mortgages with a 95% loan-to-value ratio (LTV) until June 30, 2025.
• The aim is to enhance the availability of mortgages with low deposits (5%) for individuals deemed creditworthy.

The initiative is a successor to the 2013 Help to Buy: Mortgage Guarantee Scheme, which played a crucial role in revitalising the market for low-deposit mortgages after the financial crisis. Help to Buy assisted individuals who could manage mortgage payments but faced challenges with larger deposits, enabling them to purchase new or larger homes.

If you’re interested in the Mortgage Guarantee Scheme, you can begin the application process by reaching out to mortgage brokers or lenders participating in the program.

Looking ahead

Looking ahead to the future market, most experts seem to agree that, all things considered, this year could have been worse…

Buyer demand is currently 10% higher compared to the same period last year, though it remains relatively low when measured against normal market conditions, standing at 13% lower than in 2019.

Agreed sales, on the other hand, have seen a 15% increase from a year ago and are 5% higher than in 2019, according to Zoopla.

If the Bank of England's base rate continues to hold or even falls in the New Year, there's a likelihood that mortgage rates could start to ease more quickly. Given the current inflation rate at 4.6%, there'some hope that the overall cost of living might begin to ease as well.

These factors combined could potentially boost buyer confidence in 2024, leading to an uptick in sales. However, recent political events have taught us to be prepared for the unexpected. Since the fate of the economy is closely intertwined with political developments, it may be better to approach these expectations with cautious optimism.