Experts discuss whether current conditions favour buyers or sellers.
The mortgage market is enduring a turbulent period, with the current predicament being low demand and rising stock. Despite challenging conditions, the outlook is presents opportunities for certain areas of the market.
Well-priced properties are selling without a doubt, and there is plenty of competition from buyers around, according to Kundan Bhaduri, property developer and portfolio landlord at The Kushman Group says, "the current economic landscape also offers a brilliant opportunity for portfolio buyers to rapidly acquire distressed stock in a housing market that is particularly driven by high inflation, real-term wage stagnation, coupled with the usual anti-landlord rhetoric and policies. The average house price in Wales increased by 13.9% in 2022. He added that in England, on average, house prices had risen by 0.9% since May 2022, and the annual price rise of 7.3% took average property values to £304,8673. Make no mistake, house prices are not falling in real terms, it is the rate at which they were increasing that has fallen.”
As such, Bhaduri said a pragmatic seller would still be able to sell, but the current market was likely to treat distressed sellers more harshly.
Chris Barry, director at conveyancing firm Thomas Legal, acknowledged that the UK property market has seen dramatic change since last summer. “It went from low levels of housing stock with high demand, to a sharp drop in demand, and more recently a gradual rise in stock, the average time from marketing to offer being accepted had increased from less than 30 days in the south to circa two months. We think this is partly because a lot of stock marketed during the quiet demand period is still languishing on the market, and partly because buyers are negotiating far harder with sellers on price.”
However, high quality new builds, which were highly energy-efficient, Barry said, were selling fast and in some cases, he believed, would attract multiple buyers, therefore achieving higher than asking prices. Barry believed the next three months would see more balance, and create a stability in the property market not seen for some years.
Location, location, location
Zaid Patel, director at independent estate agent Highcastle Estates, believed the terms buyers' and sellers' markets were overused and simply generalised the housing market, which was misleading. Patel said, "whether a buyer or a seller had the upper hand could differ from location to location, property type, the types of buyers the property attracted, construction costs and quality, buy-to-let legislations, the reasons people were selling and much more. There are currently more first-time buyers on the market who have adapted to the new interest rate era, however some second-home buyers had put a hold on moving as they currently had more favourable interest rates. We have also noticed buy-to-let investors are still pushing the buyers' market narrative, first-time buyers are offering closer to asking prices than expected, larger homes are selling at the asking price, although taking slightly longer to sell than usual, and sellers still want the price they feel they would have sold for a year ago, give or take a couple of percent."
Nick Harris, co-founder at Quarters Residential Estate Agents, said traditionally, "the buyers’ or sellers’ market may have been broadly relevant, but as property markets were increasingly hyper-local, and differed from one price point to another, this could be misleading. There is no doubt that until last Autumn’s mini-budget, low-interest rates, and before that the pandemic stamp duty stimulus, strongly tipped the market in favour of sellers. However, since then, as mortgage rates settled into a new normal, Harris said, we were now in a shifting market where one dynamic counterbalanced the other. Locally, he said, the market was balanced, offering buyers a choice of homes to view and sellers who were strategically priced were often receiving multiple offers."
Confused market
Mike Staton, director at mortgage and protection brokerage Staton Mortgages said, "there was currently a lot of confusion as to whose market it was. Sellers still think we are in the pandemic and are being fed a load of bull about their home being worth more than £10,000 its true value; on the flip side, buyers think it is 2008 and that we have seen house prices slashed by up to 30%. Neither of these was true, which he believed showed a complete lack of understanding in the housing market. This largely stems from unregulated and poorly qualified estate agents, but we have also seen a massive increase of new brokers join the mortgage industry over the past two years,” Staton said, adding that he believed a lot of them would drop out of the market now they had become challenged."
Sales market supply set to rise as more landlords quit - prediction
More property is likely to come onto the sales market in the weeks and months ahead as rising numbers of landlords quit the sector, an expert has predicted. Jonathan Rolande, from the National Association of Property Buyers, says, “right now mortgage rates are stabilising for longer-term borrowing and in conjunction with reduced selling prices, affordability is returning, especially for buyers comparing the alternative cost of renting which is at an all-time high. More property is likely to come to market as landlords quit the sector in increasing numbers. This will create more temptation for buyers and will also prompt many would-be tenants to purchase rather than rent. A slowdown in construction is generally bad news but it will result in more sales of second-hand homes which will be welcomed by local estate agents. The memory of our sky-high fuel bills will recede over the summer and the higher level of interest rates will be seen as more ‘normal’ which will help but there should be no doubt, the market is in a very precarious position."
Rolande’s comments come days after Propertymark, the agents’ trade body , said that the market was returning to a “new normal”.
Its report found the average number of homes for sale per estate agency branch last month was 35, this is the highest since January 2021 when the figure sat at 38. Propertymark believes that as well as motivated sellers, buyer confidence has not swayed, with the number of sales agreed also robust, in line with the average for the pre-pandemic period between 2017 and 2019.
Property viewings rose by 21% in March, which is, traditionally, when more would-be buyers start home hunting. Rolande adds, “there are still buyers out there, the recent report by Propertymark found an increase of 21% viewing property although we should remember that this may because buyers are looking at more before deciding. Those buyers can still get mortgages albeit at higher rates than say a year ago, but at least there's still lending, unlike in previous downturns when it all but dried up.”