The average price of property coming to the market for sale rises by 1.5% (+£5,279) this month to £368,118, as the market continues its recovery after a muted 2023.
The positive start to the year continues, with Rightmove recording an increase in buyer demand, measured by people sending enquiries to estate agents, and stronger sales numbers than a year ago.
This, alongside the usual Spring optimism, has put upwards pressure on prices.
This month’s 1.5% price growth is notably higher than the average historic March increase of 1.0%, and the biggest monthly increase in prices for 10 months. However, average asking prices are still £4,776 below the May 2023 peak and the increase in buyer activity suggests that more are seeing a window of opportunity to buy.
Higher activity at the start of this year compared to last year must also be looked at in the context of the more cautious start to 2023.
Rather than the start of another market surge, the signs are that overall activity levels have now returned to steadier pre-pandemic norms. However, the elevated level of mortgage interest rates mean that the increased activity is skewed towards those buyers who are less sensitive to higher mortgage costs.
“The stronger than usual price growth this March indicates that new sellers are feeling much more confident, with some perhaps being over-optimistic, that there is enough buyer activity and affordability in their local market to achieve a higher price. There are also more sellers who are aware of the need to be negotiable and realistic, with elevated interest rates compared to recent years still stretching affordability for many buyers” explains Tim Bannister, Rightmove’s Director of Property Science.
Since the beginning of March, the number of sales being agreed is 13% higher than at the same time last year, continuing to pave the way for a higher number of transactions this year than the one million in 2023.
Leading these higher sales agreed numbers is the less mortgage-rate-sensitive, top-of-the-ladder sector, where agreed sales are now 18% higher than last year. It is also this largest homes sector which is driving more people to get in touch with estate agents than at this time last year.
In March so far, buyer demand for top-of-the-ladder properties is 12% higher than the same period last year, compared with 8% higher overall for all property types.
London has seen the biggest increase in buyer demand, both overall and for top-of-the-ladder properties, compared to this time last year. The return to the office, wage increases, stable house prices and the slowing of inflation have all played their part in increasing buyer interest in living in the capital again.
However, agents report that despite this better-than-expected start to the year, the market is still sensitive to pricing and external events.
The average time to find a buyer is now 71 days, which is the longest at this time of year since 2019. Agents report that buyers are quickly cherry-picking attractively priced properties, whilst over-priced properties are taking much longer, pushing the average time to find a buyer up. Meanwhile after several weeks of creeping rate rises, the average 5-year mortgage rate is now 4.84% compared to 4.64% five weeks ago, continuing to test buyer affordability.
Bannister adds “it’s been a positive first three months of the year for the market and better than many anticipated. However, we know from last year how quickly the picture can change with some negative economic news or surprises, evidenced in Rightmove’s data which captured the immediate buyer reaction to the lack of major housing initiatives in the Spring Budget.”
Solid rise in homes being put on the market as buyer inquiries grow
February’s report indicates ‘some grounds for encouragement around the sales market’, the Royal Institution of Chartered Surveyors said.
A “solid rise” in sellers putting their homes on the market was seen in February, with the strongest upswing recorded since autumn 2020, according to surveyors. A net balance of 21% of property professionals reported new instructions to sell rising rather than falling, marking the strongest reading since October 2020, the Royal Institution of Chartered Surveyors (RICS) said.
This finding is in contrast to the continuously negative picture cited throughout 2023, RICS added.
On average, estate agents’ branches had 42 properties, the highest number recorded by RICS since February 2021, with those surveyed noting an increase in market appraisals during the month, compared with the same period last year. Across the UK, new buyer inquiries grew for the second month in a row, with a net balance of 6% of professionals reporting a rise rather than a fall.
Most areas of the UK have shown a recovery in buyer interest over the past two months, the report said. However, home sales were broadly flat in February, with a balance of 3% of professionals reporting a decline rather than an increase.
The report said the latest findings are consistent with a slightly more upbeat picture for sales market activity than was the case throughout much of last year. Nevertheless, the near-term outlook is still somewhat cautious reflecting, in part, the suspicion that the recent easing in mortgage rates is likely to stall on the back of ongoing uncertainty about the timing and speed of interest rate reductions.
Looking ahead, the sales expectations for the near term are positive and sales activity is expected to gain further momentum over the year ahead. The trend for house prices continued to point downwards, but there were signs this is stabilising, according to the report.
In the lettings market, tenant demand continues to rise but at a more modest pace than previously, according to RICS.
At the same time, however, landlord instructions are still dwindling. Professionals were expecting rents to move higher over the months ahead, albeit at a slower rate.
Simon Rubinsohn, RICS chief economist, said "the February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month, but also the uplift in new instructions to agents. Whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year, especially with new build likely to remain constrained. Significantly, the rise in the number of appraisals taking place points in the right direction. The Government will be hoping that this trend is given a boost by the change to CGT (capital gains tax) announced in the Budget.
Meanwhile, there are signs that the relentless upward trend in private rents is losing momentum but fresh demand is still comfortably outstripping supply in this area which suggests there is unlikely to any significant relief for tenants.”
Tom Bill, head of UK residential research at estate agent Knight Frank, said “the economic data has fluctuated since Christmas but the direction of travel for the housing market is up.”
Sarah Coles, head of personal finance, Hargreaves Lansdown, said “on the one hand, a well-stocked estate agent is one of the cornerstones of a healthy market. However, on the other, sellers could find it acts as a drag on prices. There’s also less positive news from the mortgage market in recent weeks. Many of those agreeing sales at the moment will have agreed their mortgages back when rates were slightly lower. Since then, the market has reassessed the chances of an imminent rate cut, and put mortgage rates up.”
The report also quoted the views of property professionals.
One, based in Newcastle upon Tyne, said “s continued lack of supply means demand for all property types is still strong. Vendors are more realistic with asking prices.”
Another, based in Newark in the East Midlands, reported “more positivity about in the residential sales market, with increased applicant activity and viewings slowly filtering through into increased sales activity.”