Welcome to our penultimate market update of 2023
Welcome to our penultimate market update of 2023. Since our last report in September the property market on the whole has been holding up quite well, particularly in respect of the number of new sales agreed. This is very encouraging, but we have to temper that with the fact that there are still numerous properties on the market for sale, some of which are getting viewings and some of which are not. In this respect, the market can be very confusing and of course frustrating, and whilst too high an asking price can often be the reason, it is not always the case. Sometimes it is simply a matter of the right buyer at the right time, and they can come along in the second week of marketing or the twelfth.
Current research from Zoopla indicates that transactions in 2023 have been 23% lower than in 2022 nationwide. In contrast to this here at Sparks Ellison, we have agreed 248 sales, versus 249 for the same period last year. (January to October)
As you will know from previous market updates, we report on the number of sales that we have agreed here at Sparks Ellison and our market share. Last month however, we also looked at something that is arguably more important. That is the percentage of sales that we agree in comparison to the number of properties we are asked to market. The results this year are quite staggering.
As of the end of October and based on statistics from rightmove.co.uk for Chandlers Ford the results are as follows: – (the table below is in order of the volume of sales agreed)
Sparks Ellison – 82% conversion rate
Agent 2 – 59%
Agent 3 – 59%
Agent 4 – 71%
Agent 5 – 44%
Agent 6 – 21%
Ultimately, the above statistic equates to a seller’s percentage chance of selling their property with any given agent in Chandlers Ford. At Sparks Ellison it is 82% versus our nearest competitor in the market at 59%
The good news on November 2nd was that the Bank of England decided to keep interest rates on hold which represented two consecutive months of no further increases. It is perhaps too early to get excited about whether rates have peaked, but there is a hope and expectation that rates may fall in the latter half of 2024, although not to the very low levels we have seen in recent years.
There are already mortgage rates available for 5-year fixed deals under 5% subject to a borrower’s personal position, so we are hopefully heading in the right direction. Higher mortgage rates have undoubtedly hit the number of moves by mortgage reliant borrowers, but the number of cash sales is holding steady with first time buyers looking to be the largest buyer group in 2023 nationally, closely followed by cash buyers. In context and over the last five years, cash buyers have accounted for 1 in 5 sales, rising to 1 in 3 sales in 2023. It is clear from our own set of results and reports from national institutions that there are undoubtedly buyers that remain keen to move. However, in certain price ranges affordability has been an issue and there are also those buyers waiting for the economic outlook to become clearer, with particular reference to mortgage rates and property values.
Over the last few months, the market has adjusted to higher borrowing costs, offset by a decline in property values. Assuming mortgage rates remain at the current level, we see property values perhaps continuing to fall marginally into 2024, with a rebound in activity in the spring. This should provide more stability and see values plateauing in the foreseeable future.
The correction in property values supported by increased incomes is required to reset affordability and the appetite to move. Households also need to feel more confident in the economic outlook. Thankfully we have seen a very low number of people looking to move due to affordability issues and thank goodness we have not seen a single repossession. This is probably a result of tougher mortgage affordability testing since 2015, which has built resilience into the market and stopped households using ultra cheap mortgage rates to take on unsustainable levels of debt. Whilst previous lending rates in the region of 2% were available, applicants still needed to prove to their bank that they could afford a 7% rate. This means that most mortgage buyers can afford higher rates as they re-mortgage, albeit a bitter pill to swallow. At the present time, banks are currently stress testing new borrowers at rates in region of 8 to 9 percent. Whilst this is sensible, it does affect a buyer’s ability to increase their mortgage and purchase a new property.
As you will have seen from the property websites this year, there has been a continuous stream of price reductions for the properties that have been available. A recent report from Zoopla shows that Southern England has been at the forefront of price reductions. However, as we have conveyed on numerous occasions, if you are buying and selling in the same market, and as long as the gap between buying and selling remains the same, there is no financial loss or gain.
In summary, the property market has held up far better that expected in 2023 and at the end of December we will round up all the statistics for you and provide a full report.
As always, please feel free to get in touch with any questions you may have about your own property, the moving process or the market in general.
Adam & Mark