A New Year – A Return To Normal?
Ripple Effects From 2022
Welcome back to EO’s monthly market reports. 2022 was a turbulent year for the economy which had a significant impact on buyer demand and overall affordability in the property market. Data from January can now be used to evaluate how these on-running factors are set to impact Q1 of 2023.
The house price growth average across the UK currently sits at +6.5%. This is a significant reduction from the +8.3% it was in January 2022; however, it is nowhere near the +3% region it was forecasted by the end of 2022. The market, and buyer demand, especially have been far more resilient than anticipated, even when faced with a budget crisis.
However, the market is changing in response to the cost-of-living crisis. There has been a rebalancing of demand, whereas 1 or 2-bed flats have seen an increase in buyer demand, with 27% of new buyers now looking for these types of properties, 3-bed houses (while still the most popular) have fallen from 44% to 39% in demand.
Back To a Pre-Pandemic Market
Demand overall is down 23% compared to a five-year average. But the pandemic years are exceptional circumstances and 2017 to 2019 levels are more indicative of normal market conditions. This -23% demand is in line with the -28% average for 2017-2019, so Q1 2023 seems to be a return to normal.
The number of sales agreed, and the flow of new supply is also in line with pre-pandemic levels. Stock however is significantly different, with pre-pandemic markets having been at an average of +2% in stock levels while we are currently at -6%. This of course can be explained by the sustained and extraordinary buyer demand during the pandemic, which diminished stock on the market.
Stock levels are now seeing a resurgence though, with the average of available homes per estate agent resting at 23, up from 14 in early 2022.
It’s All About Balance
These market conditions are a result of changes in affordability. The increase in stock and the price sensitivity of buyers means it is expected that we will continue to see modest price reductions in Q1 of 2023 but buyers expecting drastic price decreases will not find them and will likely choose to capitalize on steadily lowering mortgage rates as the year progresses.
‘Anyone serious about selling in 2023 needs to make sure their home is competitively priced and in line with what buyers are prepared to spend in the local market.’
In short, the pandemic-driven property boom seems to be over, and the market has returned to having a more balanced relationship between buyers and sellers.
Luiz De Souza