The estate agent’s view: Market resilient in face of economic backdrop

CEO of The Guild of Property Professionals, Iain McKenzie delivers his thoughts what we learnt from the property market in 2023, and what the year ahead might look like for property professionals.

Describing the market as “resilient” McKenzie says

“The economic winds are changing, bringing optimism to the market. Mortgage rates are normalising; however, buyer and sellers remain cautious. Added to that, inflation, after experiencing the sharpest decline in three decades, has fallen to 4.6% in October, marking its lowest point since November 2021.”

With the economy growing and incomes on the rise, wage growth reached 7.7% in Q3 and with that the GfK Consumer Confidence Tracker shows a notable increase of six points in November, reaching -24, indicating a “renewed sense of trust in the market” suggests McKenzie.

“The pace of house price moderation also appears to be steadying, with RICS revealing that a net balance of 63% of property professionals reported house prices falls in October, down from 67% in September. The sentiment is that mortgage rates may have peaked, drawing in those who delayed moving over the past year.

While prices have softened slightly, the average house price in September 2023 was 25% higher than in September 2019, the September prior to the pandemic. According to the UK HPI, this equates to an average rise over that period of £57,849. Understanding local dynamics and pricing realistically are now crucial for successful sales during periods of price sensitivity,”

McKenzie suggests that while 2023 has been a slow recovery from the political shocks of 2022, the closing months bring positive signs with falling inflation, interest rates being maintained (with the Bank of England anticipated to hold them again in December), and Leasehold reform. Consensus forecasts by HM Treasury suggest that interest rates are at their peak and will fall to 4.7% by the end of 2024, which should improve affordability and increase demand.

And commenting on demand McKenzie says

“According to Bank of England data, mortgage approvals, a leading indicator of demand, are 18.5% higher than in January. The 8% uptick between September and October reflects growing confidence in the market. Encouraging news about inflation and the growing confidence in the market is reflected in more competitive mortgage rates.

“While significant rate cuts are unlikely until inflation falls more sharply, rates are edging down, with lenders in strong competition loosening criteria to encourage borrowing. According to MoneyFacts, the average mortgage rate is 5.68% for a five-year fix and 6.08% for a two-year. These have fallen from 6.17% and 6.67% respectively since the start of September.”

Across Guild members McKenzie says sales volumes are steady with an encouraging 15% increase in agreed sales compared to a year ago, suggesting improved realism from sellers. According to Rightmove, stock levels are returning to normal after pandemic shortages. While the supply of lower-priced properties has reduced, all other price brackets have risen. Sellers looking to move may benefit from slightly reduced prices on their next property. McKenzie concludes:

“The landscape is evolving, presenting opportunities for both buyers and sellers. With interest rates expected to start easing back in 2024, combined with pent-up demand and the usual seasonal uplift, activity is expected improve in spring,”

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