Property Market Update – November 2022

Posted on November 1, 2022

For anyone considering moving house, either within the UK, or internationally, it would have been difficult to avoid the recent news on house prices and interest rates here in the UK over the last couple of months. In our property market update we look at what’s going on in the London Lettings and Sales market as well as the country market.

As the Bank of England raises interest rates to combat inflation, the house price growth which the UK has seen over the last two years is now starting to slow. However, the ongoing lack of housing stock is continuing to underpin the housing market’s price momentum and rates of deceleration are defying expectations due to strong demand.

Following the “mini-budget” announcement on 23rd September 2022 which unsettled the financial markets, October saw a clear slowdown in the residential property market. The negative response to Liz Truss’s growth plans and unfunded tax cuts sent the cost of fixed rate mortgages surging and the uncertainty continued following the sacking of Kwasi Kwarteng.

With inflation at a 40-year high, higher borrowing costs and a rising risk of recession, it was a big gamble at the wrong time, and ultimately resulted in the prime minister resigning.

Since the announcement of Rishi Sunak as the new Prime Minister, some of the major lenders have reduced their fixed rates on mortgages which is good news for home buyers.

Both Halifax and Nationwide reported that monthly price growth had stalled in September and the annual rate of house price inflation had dropped to single digits in the month as a result.

Historically, when demand has dropped faster than supply, UK house prices have fallen. It is yet to be seen if this will happen as we head towards 2023. In contrast, the lettings market is set for further rental growth with demand continuing to outstrip supply.

 

London Lettings Market

Stock levels remain low in the lettings market, with demand still extremely high. Knight Frank reported a 68% increase on the 5-year average in the number of prospective tenants registering across all branches in London. This is causing rental values to remain high and overall rental values have grown just under 20% in the year to September 2022.

Potential renters are experiencing skyrocketing prices, packed out viewings, bidding wars and properties being let before they’ve even hit the market. If you’re lucky enough to secure a viewing the competition from other renters includes offering multiple month’s rent upfront and offering hundreds a month over the asking price.

The current average rental figure in London is £2,343 a 16.8% increase from last year. Tenant demand has increased 20% on last year and the number of available properties to rent in down 24% so competition among tenants to secure a property is at a record high. (Source: www.rightmove.co.uk)

Recent mortgage rate rises means that even with record rents, the cost of a monthly mortgage payment for a first-time buyer putting down a 10% deposit will be higher than renting an equivalent property.

This could mean that first time buyers who can no longer afford the property they wanted may extend their tenancy and remain in their current rental property for longer, further reducing the number of rental properties available and exacerbating demand.

 

london eye view

London Sales Market

Following a subdued sales market in 2020 and 2021 when demand for London property was at a low, 2022 has seen an increase in supply of property for sale in central and outer London.

Knight frank reported a 22% increase in new sales instructions and a 79% increase on offers accepted last month. It is expected that the interest rate rises will have an impact on demand and price growth over the coming months, but the market is proving resilient for now.

Rightmove announced that house prices actually increased again in October. House prices in London have grown by around 23% since the start of Covid, however it is thought that as borrowing becomes more expensive house prices in the Capital will come under pressure next year due to higher loan-to-income ratios.

Despite this, buyers and sellers in central London may be somewhat cushioned from rising rates due to higher levels of affluence, housing equity and the return of international buyers.

In times of economic change or uncertainty, it’s natural that people will reassess whether big purchases they’d planned on making still make sense for them.

A threat of a recession can also cause homeowners to panic sell, saturating the market. As stock levels increase and outweigh demand, prices start to fall – however, at the moment stock levels still remain relatively low which is keeping house price growth fairly stable.

 

cotswold home buying agent

Country Property Market

House prices in the rest of the UK edged higher in October and the number of offers accepted hit its highest level in 4 months in the week following the “mini-budget” as buyers and sellers became aware of the impact of rising mortgage rates.

With uncertainty over where interest rates will go, those who are proceedable and can still afford to move may decide that waiting could come at an even higher cost – especially if demand continues to outstrip supply which will keep house prices elevated.

First time buyers and buy to let landlords, who are most reliant on mortgage borrowing, are likely to be the most affected. Across the rest of the market, more affluent buyers with lower lending requirements will be able to ride things out a little more easily.

Over the longer term, prospects for the UK property market will be dependent on how long it takes for inflation to be tamed and for the interest rate environment to normalise.

Conclusion

With the level of unpredictability in the current market, now is as good a time as any to consider utilising the services of a relocation agent in London for your property search. Our representation to our clients gives them an edge in a competitive market and our network of local contacts gives acts as an advantage when finding out about new properties before they hit the market.

If you’d like to chat about your moving plans or understand more about our services and how we can help get in touch at We would love to help you find your dream home.

Naomi Gleeson – Managing Director

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