Demand Falls But Growth Remains

Mini-budget Fallout

Hello there,

We hope you have been well since the last market update. The month of October saw multiple significant changes in the socioeconomic landscape of the UK, creating uncertainty over the short-term future of the property market. Now we are in November, market data from October can begin to demystify market conditions. 

This data of course does not take into account the most recent spike in the Base Rate, which is set to further limit affordability for buyers with large mortgages.

October Statistics

In summary, the key statistics for October are:

1) 8.1% average UK house price growth. Despite predictions that house price growth would slow down significantly by the end of 2022, it has only marginally fallen from a peak of around 8.4% in August. It has significantly raised from 6.9% growth at the end of last year.

2) -33% impact on new buyer demand since the mini-budget.

3) 48% of buyers are using cash or small mortgages. These buyers are propping up the market as demand from FTB and buyers with larger mortgages falls.

House Price Outlook

Despite the fall in demand, there is no evidence that prices will be significantly impacted in Q4. For 2023, price changes will depend on mortgage rates.

Zoopla predicts that if mortgage rates stay at around 6% going into 2023, double-digit price falls can be expected next year.
If rates fall towards 4%, a modest decline in value of up to 5% can be expected in 2023. This is what had been expected to be the most likely outcome on the final day of October. But since then, the Bank of England has increased the base rate to 3%. So, it looks like mortgage rates are likely to remain high at the beginning of 2023.

Other important statistics, compared to a 5-year average, are:

1) Stock is down 13%.

2) The number of sales agreed is down 4%.

3) Overall demand is down 16%.

Market conditions are fluctuating rapidly in response to changes in government. While the market seems to be entering a period of challenging downturn for now, with the rate of changes we have seen in the past few months, this may change. We will be back next month to update you if it does.

Kind regards,

Luiz De Souza | Administrator