Market Realism Prevails: A Deep Dive into the Dynamics of the UK Property Market

Market Realism Prevails: A Deep Dive into the Dynamics of the UK Property Market



Summary

Market Realism Prevails: Average Seller Asking Prices Drop Amidst Transition to Normalcy. This month sees a significant dip of 1.7% (-£6,088) in average new seller asking prices, now standing at £362,143. As the holiday season approaches, sellers are embracing a more pragmatic pricing approach to attract buyers in a market transitioning from the heightened activity of the pandemic to a more normal state. Despite a slow shift from the pandemic-induced market frenzy, the overall performance in 2023 has surpassed expectations following the tumultuous end to 2022: Average asking prices are only 3% below the peak observed in May, emphasising the importance of accurate pricing from the outset to secure a buyer. Sales agreed are now 10% below the more normalised market level seen in 2019, indicating an improvement from the 15% decline observed last month. The stock shortage driven by the pandemic is resolved, with available properties for sale trailing just 1% behind the 2019 levels. Yet, certain regions and market segments are adapting differently to the demand for more attractive pricing: Sales agreements for studio, one-, and two-bed properties are only 7% lower than 2019 levels, contrasting with four-bed detached houses and larger properties (five-bed plus), where agreed sales are 14% below the 2019 figures.


 

Introduction

In the ever-evolving landscape of the UK property market, November marks a notable shift as average new seller asking prices experience a significant dip of 1.7%, amounting to £6,088, settling at £362,143. This decline, the largest in five years, comes as the holiday season approaches, prompting sellers to adopt a more pragmatic pricing approach. As the market transitions from the heightened activity of the pandemic to a more normal state, this shift reflects a broader trend of increased pricing realism among sellers.


 

Embracing Realism: A Pragmatic Approach to Pricing

The reasoning behind this decline is multifaceted. Traditionally, as Christmas approaches, sellers tend to adjust their asking prices to attract buyers amidst the distractions of the festive season. However, the magnitude of this year's November drop suggests a more fundamental change. Sellers are increasingly heeding their agents' advice and setting more realistic prices from the outset, recognizing the importance of standing out in a market filled with over-optimistic competition.

Tim Bannister, Rightmove’s Director of Property Science, notes, "Buyers are still out there, but for many, their affordability is much reduced due to higher mortgage rates. It now looks like more sellers are understanding Rightmove’s research; that the chances of securing a buyer are much greater if they price right the first time, rather than over-pricing and reducing their price later."


 

Navigating the Transition: A Year of Surprises

Despite a slow transition from the pandemic-induced market frenzy, the overall performance in 2023 has surpassed expectations following the tumultuous end to 2022. Average asking prices are only 3% below the peak observed in May, emphasising the crucial role of accurate pricing in securing a buyer. Sales agreed, while still 10% below the more normalised market level seen in 2019, show improvement from the 15% decline observed last month.

The pandemic-induced stock shortage, a significant challenge in recent times, has been resolved, with available properties for sale trailing just 1% behind 2019 levels. However, the market's response to these changes is not uniform across all regions and market segments.


 

Regional Disparities: A Tale of Varied Adaptations

In the realm of property sales, not all regions and market segments are adapting uniformly to the demand for more attractive pricing. Sales agreements for studio, one-, and two-bed properties are only 7% lower than 2019 levels, highlighting resilience in the smaller homes sector. In contrast, sales for four-bed detached houses and larger properties (five-bed plus) are 14% below the 2019 figures, indicating a more significant challenge in the higher-end property market.

Additionally, regional variations add complexity to the market landscape. While there are yearly price declines in the Midlands and all Southern regions, Wales, Scotland, and the North of England have experienced rises in the price of newly-marketed properties. These regional nuances underscore the dynamic nature of the market, with localised factors influencing pricing and sales trends.


 

The Impact of Policy and Economic Factors

Two consecutive Base Rate holds by the Bank of England have played a crucial role in maintaining buyer demand, keeping it in line with 2019 levels. Looking ahead, the forthcoming Autumn Statement holds the potential for significant policy announcements or market incentives. One such rumoured announcement is the renewal of the mortgage guarantee scheme, aimed at encouraging lenders to offer a 95% Loan-To-Value mortgage for those with smaller deposits.

However, the limitations of the scheme become apparent when considering that only around 5% of mortgages taken out fall under this category, as revealed by data from the Bank of England and the Financial Conduct Authority (FCA). The market eagerly awaits the Autumn Statement, anticipating measures that will provide support to a broad spectrum of movers, especially first-time buyers.


 

Agents' Perspectives: Resilience, Realism, and the Need for Incentives

As the market undergoes a period of transition, insights from industry experts shed light on the challenges and opportunities. Ian Preston, Managing Director at Preston Baker in Yorkshire, emphasises the importance of pricing right, considering the current buyer-friendly market. He notes, "Pricing right is the most important tool for potential sellers at the moment."

Preston also highlights the challenges faced by first-time buyers, with record rents making it difficult for them to save up for a deposit. The increased tax and legislative burdens on landlords have led some to exit the rental market, indicating a need for incentives to encourage more private landlords to contribute to the rental supply.


 

Conclusion: Navigating the Path Forward

In conclusion, the UK property market is undergoing a significant transition marked by a shift towards pricing realism. The decline in average new seller asking prices in November reflects not only the seasonal adjustments but a broader trend of sellers recognizing the importance of accurate pricing from the outset.

As the market continues to navigate challenges, regional variations, and economic factors, the upcoming Autumn Statement holds the key to shaping the market's trajectory in 2024. The resilience of the market, coupled with increased pricing realism, indicates a positive outlook for those navigating the dynamic landscape of property transactions in the UK. Whether it's first-time buyers, seasoned sellers, or industry professionals, the evolving market requires a strategic and informed approach to ensure success in the ever-changing real estate environment.