10, October, 2020

Inheriting a property Guide

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After a year full of ups and downs, uncertainty and economic turmoil as well as rising inflation, it would be an understatement to say that the housing market has been turbulent. The pandemic has really changed and massively impacted the market in many ways, however, we are now starting to see signs of it going back to its pre-pandemic normal.  

In order to make forecasts for the future, we must first review the key trends and insights from the previous year. The beginning of it started strong, supported by low interest rates and high demand from buyers, however the second half of the year saw an inevitable slowdown, record high house prices and interest rates, soaring inflation and cost of living crisis. According to Property Today, everytime after such rapid growth in prices, a slump in the market is expected so it’s understandable why both buyers and sellers have become incredibly cautious in their decisions.

Market Trends

  • First Half 2022

The UK housing market has been described as ‘a tale of two halves’ by the director of Halifax. Looking back at the year in review, between January and August there’s been a record growth of 6% in house prices and the average asking house on homes soared to the record £371,158. Zoopla reported that the typical UK house price has increased by 71% over the last decade (£166,627 in November 2012), a rise of £118,953. By this point it was obvious that it was a seller’s market, they were the ones holding the power and navigating the prices because of the overwhelming demand for properties and the imbalance between supply and demand. The buyers were, however, taking advantage of the low interest rates at the time which allowed them to secure their mortgage loan much easier.

  • Second Half 2022

Towards the end of the year things started shifting drastically and economic headwinds were shaking the housing market heavily. With the Bank of England introducing changes in the base interest rates nine times in a year and reaching record highs, it has started becoming increasingly difficult to afford not only mortgages but also everyday essentials like heating and petrol. The impact that the war in Ukraine has had on energy and gas prices has only contributed to the rising cost of living and intensified the fears people had.

Buyer Demand

After such rapid growth in house prices, it was only normal for them to start declining towards the end of the year, making a shift towards a buyer’s market. They now held the power over home sellers who were facing challenges selling their properties. The feeling of less urgency in the housing market was obvious as potential buyers were now taking longer to choose the homes they wished to purchase, negotiate and essentially navigate the whole market. According to a report from Rightmove, the national average time to secure a buyer in the UK last year was between 35-45 days and still progressively increasing with many experts now suggesting this will rise up to 60 days in 2023. It’s important to note that homes taking this long to sell is a return to a pre-pandemic normal and 30 days to find a buyer was the exception, not the norm. Moreover, Zoopla has reported a 50% decrease in buyer demand since last year, which also supports the prediction that we are headed towards those poor pre-pandemic levels of activity.

On the bright side though, the number of views of homes for sale on Rightmove was up 11% in December 2022 compared to December time last year. This shows that even though there’s been a decline in buyer demand, there are still many potential buyers who are monitoring the market and weighing up their options despite everything.

Move To Rural Areas Trend Fading

Speaking of pre-pandemic levels, another trend which emerged during that difficult period is starting to fade away. Ever since the pandemic, remote and coastal areas had gained a rather significant popularity across buyers due to the fact most people were working from home and were consciously seeking that connection with nature they had lost during the isolation. However, with most aspects of life going back to the way they used to be, this flight to rural and coastal areas has seen a decline in interest as well. It’s been recorded that the places with the biggest price gains were those that are near the coastline and in more rural areas such as Wales, South West and Kent. However, in those same areas in the UK, experts are now starting to see a decrease in numbers and a general decline in buyer demand.

Market Insights

People are more eager to believe something when there is data and proof to back it up. That is why experts from the estate agent Hamptons have shared numbers indicating that the average seller in England and Wales who bought a property in the UK in the last decades has made a gross profit of £108,000. They are suggesting that home sellers, despite economic uncertainties, are still highly likely to make a profit from their house sale. They are confident that ‘even if prices do fall this year, it’s likely that 90% of sellers will still sell at a profit’, says the Head of Research at Hamptons.

2023 Forecast

As we enter the new year, many experts believe that the housing market will continue being affected by the wider economic environment. The cost of living is expected to be the main issue with other trends emerging due to that. The focus will therefore shift towards more affordable housing and better value for money. Considering the risen interest rates on mortgages, buying a house may not be attainable for most people in the UK which will consequently bring more attention to apartments and urban areas. Not only are they going to be better value for money, but they will also be located where there are more jobs and services available. Thus, great commuter areas are gaining popularity rapidly and are likely to be a very attractive housing choice for many working adults.

Overall supply and demand will continue to decrease as there is less urgency in the market now with both buyers and sellers being extra cautious. This could lead to a forecasted fall of 8% in house prices, according to the director of Halifax.

Conclusion

After the economic turmoil and incredible uncertainty brought by interest rate increases and soaring inflation, there are signs that some buyers are ready to get started with their home moves as we enter into the New Year. It’s a common prediction that the housing market will settle into a more normal pre-pandemic level of activity as 2023 progresses. However, it may be better to sell sooner rather than later because if mortgage rates spike much higher, the chances of more prospective buyers retreating from home shopping are rather high.

For more property news, head to Property Today.

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