21 February 2023 – New data shows that house prices have remained stable, with the smallest monthly asking price increase from January to February ever recorded.
Rightmove has released its newest House Price Index this Monday, which suggests that the property market is starting this year better than anticipated.
Rather than falling, as many commentators expected, house prices have stayed more or less the same, with a 0.0% increase. This equates to a monthly asking price increase of only £14 compared to January 2023.
The average asking price in the UK now stands at £362,452. Annual price growth has fallen from 6.3% in January to 3.9% in February, according to Rightmove.
New Sellers Refrain From Increasing Prices
Acknowledging the slower property market, new sellers are realistic when deciding what price to put their home on the market for. As a result, February has seen the smallest monthly price rise from January to February on record.
With a market that is slowing down, realistic property pricing is key if a seller wants to sell their home quickly. Especially with higher mortgage rates which will limit what potential buyers can buy.
This month’s flat average asking price indicates that many sellers are breaking with tradition and showing unseasonal initial pricing restraint. In addition to market conditions demanding greater realism on price, we are transitioning into a slower paced market, where buyers will take longer to find the right property at the right price due to the higher cost of servicing a mortgage.
Tim Bannister, Director of Property Science at Rightmove
At the same time buyers have returned to the market, with demand up by 11% in the last two weeks compared to the same time in 2019.
This is also evident in the number of sales agreed, which has increased by 4% compared to the start of the year and by 19% compared to the sharp drop after the announcement of the mini-budget in September.
The level of sales agreed is now only 11% below pre-pandemic levels in 2019. Given that mortgage rates are now considerably higher this is a surprise.
Probably even more surprising is the strong presence of first-time buyers. The number of sales agreed by this type of buyer is only 7% below 2019 levels.
This shows that although first-time buyers were initially hardest hit by the market circumstances, there is a strong desire to get onto the property ladder in this buyer group. Probably driven by sky-high rents that are still rising.
On the other hand, buyers in the top-of-the-ladder group are less active, with sales agreed in this sector down by 16% in the first two weeks of February compared to the same period in 2019.
This explains why prices for this type of properties have fallen by 0.8% compared to first-time buyer homes, whose prices have risen by 0.3%.
While it is still early days, all this suggests that the property market might have a soft landing after this turbulent and chaotic period.
Stock Levels Still Low But Recovering
Although stock levels are still 24% below what they were in 2019 before the pandemic, they have recovered from the records low levels in 2022.
Compared to last year, there are now 48% more properties on the sales market. This will be music to buyers ears, as this gives them more choice as well as more time to decide.
It also improves the situation for buyers who need a mortgage, who often lost out to cash-buyers in bidding wars in the past year.
Even so, affordability can still be a challenge for some buyers. But the activity levels indicated in Rightmove’s data suggest that many have revised their wish lists according to their reduced budgets.
Agents are reporting that they are now increasingly seeing buyers who have more confidence and more choice albeit with revised budgets to accommodate higher mortgage rates.
Tim Bannister, Director of Property Science at Rightmove
The Worst Could Be Over
Strutt & Parker meanwhile anticipates that the property market is over the worst. According to the property consultancy firm, the last quarter of 2022 has seen the peak of declines.
As result, they predict a house price growth of between -5% to 0% across the UK (except central London) in 2023. For central London, they predict house prices to grow by between -3% to 3% this year.
It is widely believed that inflation has peaked now. The Bank of England predicts that it will fall to between 5% and 6% by the end of the year.
No more base rate rises are anticipated. And by the end of the year the Bank is expected to start lowering interest rates again.
Mortgage rates are likely to stay stable or fall further, which will give buyers more stability and certainty.
All this should also stabilise the market, hence the more positive outlook for the immediate future of the housing market.
