A report has indicated that homeowners are downsizing due to the cost of living crisis, as homeowners reassess their housing needs.
The Property & Homemovers Report by TwentyCi, based on Q3 figures, suggests the housing stock squeeze is beginning to ease. This is despite being significantly lower than historical norms most regions now have between 2.5-3 months of supply as of September 2022, up from two months last quarter.
The report also suggests that this could be a sign that homeowners are beginning to reassess their housing needs as energy and food prices soar. TwentyCi also suggests this could affect the size of houses as they claim that during the pandemic, demand for rural four, or more, bedroom homes were at a premium, however, with rising costs homeowners could potentially be looking to scale back down to two-to-three bedroom properties.
Key indicators
Reported sales agreed have risen by 7.7% since Q3 2019 (the last “normal” period of performance within the residential property market, prior to the impact of Covid-19) and Exchanges have increased by 6.8% which the report claims to highlight the continued buoyancy in the homemoving market and the high level of transactions post pandemic.
The report also indicates that the market remains a sellers one with prices changes and withdrawals staying low as sellers find less of a need to discount or remain in their property when sales can be achieved more quickly.
In contrast, in a potential sign of market pressure, the report claims to show there has been a marked increase in fallen through transactions (20%) which could be due to rises in interest rates and the withdrawal of mortgage offers and products.
House prices
It is also reported that the continued short supply of stock and high demand has underpinned strong gains across all regions since Q3 2019. The average asking price is now £435,000 in comparison to £344,000 in Q3 2019, an increase of 23%. Wales and the West Midlands have realised the highest increase in asking prices, both experiencing 28% growth.
Sales by region
Reported sales agreed across the whole of the UK were 9% higher in Q3 2022 than in the same period in 2019. Inner London has seen a significant rebound realising a growth of 22.5% since Q3 2019.
However, another potential indicator of a softening market is the fact that the picture is not uniformly positive across all regions. Six major cities have experienced drops or stagnation in sales agreed including Edinburgh (-1.7%), Nottingham (-1%), Plymouth (-0.2%), Manchester (-0.1%), Norwich (0.3%) and Sheffield (0.9%).
Homemover wave
Figures suggest that at the beginning of October 2022 there were nearly 1.55 million households progressing through the home-mover, owner-occupied journey. Almost 401,000 homeowners are wanting to move soon suggesting that demand for relocation remains strong.
This, the report claims, might also support the change in market demographics, with an emerging trend for downsizing in the wake of the cost-of-living crisis.
Hybrid/Online agents
The reported market share of hybrid/online agents overall was 7.6% in Q3 2022, a modest increase since Q2, but still down from the peak of 8% experienced during the pandemic. The report shows Purplebricks, Yopa, and Strike are still the dominant brands.
The report shows the largest market for hybrid/online agents remains lower-value properties with market share rising to 9.4% in the less than £200,000 category, whilst market share in the £1m+ bracket has dropped to an all time low of 1.2%.
Lettings market
It is suggested the lettings market continues to face challenges, as in Q3 2022 new instructions were down by 25% and lets agreed decreased by 19%. There is a marked supply and availability issue as some landlords withdraw from the market due to tax changes.
The average asking price was shown to be £1,605 per month, 19% higher than in Q3 2019. Lack of stock, which now sits at an average of just 1.5 months across all regions, and continued demand are claimed to be the key drivers of higher rental prices.
Colin Bradshaw, Managing Director of TwentyCi, said:
“Whilst we still have not seen a recalibration of the housing market there are signs that we will start to see change. However, if homeowners do look to downsize in response to the cost-of-living crisis then the number of householders in the homemoving journey will remain high. For many sectors this could provide a significant lifeline as the value of this market is significant because of their propensity to spend.”
