By James Farge, Managing Director of HIVE & Partners Estate Agency
Switching on the news late in 2022 can be exceptionally scary viewing. What with the horrific situation in Ukraine, rampant inflation, and a rather hysterical political system closer to home attempting its best impression of a Monty Python sketch, I wouldn’t blame you if you wanted close the curtains, switch out the lights, and hope the end of this year passes over without too much of an impact!
Is the housing market about to implode?
We are regularly asked this question… Is it all doom and gloom for the property market? Is your property value set to plummet? Is now the time to hunker down and forget about moving for a number of years? The short answer to these questions is …. No!
First up, mortgage availability – a dip, a blip and a steady return?
Inflation has risen sharply this year, largely due to the enormous amount of Government intervention during the Covid lockdowns, and latterly inflation has been turbo charged due to the war in Ukraine. To combat rising inflation levels, the Bank of England (BoE) set about raising their base rates from 0.1% in January 2022 to 3% today. These rapid increases have a knock-on effect with mortgage lenders, who have increased their interest rates and, in some instances, removed mortgage products altogether.
Several weeks ago, you may have noticed news headlines along the lines of: “1,000 mortgage products pulled” and “Sharp mortgage rate increases”. However, over the last few weeks have you noticed headlines stating, “Banks decrease their mortgage interest rates” or “More mortgages available again?” No? I am not surprised! The fact is that lenders moved quickly to get ahead of the impending Bank of England rate rises, taking a cautious approach to lending through September and October. Most lenders (short and longer term) look at financial forward curves and predict where rates will end up over a period of time. In November they started to take a more pragmatic view.
As I write today, we have an interest rate market which is returning to more stability and a Prime Minister who has a costed and considered plan with a cool head at the helm. As a result, lenders are reducing their rates! Confidence in lending is resuming and lenders want to do business. Sadly, this doesn’t make for ‘click bait’ headlines and we are unlikely to see equal ‘good news’ coverage in the press.
Secondly, buyer demand – are the movers and shakers still there?
The property market has always been built on public sentiment/demand, coupled with the availability of affordable debt. Whilst interest rates have increased, historically debt is still comparatively cheap. Typical rates now start from as low as 4.99% on a 5-year fixed mortgage. Whilst buyer demand has cooled, buyer registrations, according to data from Rightmove and Zoopla, is still tracking higher than in the years prior to 2019. So whilst demand is down compared to the past two years, the statistics tell that we are returning to a more “normal market”. Over the past 24 months the housing market was extremely buoyant, uncontrollably so, it is now correcting.
Thirdly, supply – does the inbuilt stabiliser still apply?
Whilst we understand demand is still there and finance is still available at lower than historical rates, why else do we believe property market will not implode? This is a simple answer… supply! We have a huge shortage in supply of property on the market to meet demand. The government have been consistently failing to hit their new build target of 300,000 homes per year, and whilst second hand stock levels are increasing, volumes are still 30% down on 2019 and 25% down on 2020 levels. When you have a market with a shortage in supply, demand still present (although lower) and finance to support the purchase of real estate, prices will remain high.
That being said, we do expect there to be a “cooling” in the market on prices but considering property prices have shot up by over 20% in some instances over the past two years alone, this will be more of a readjustment than a “crash”. A sensible prediction would be somewhere between a 5% to 10% adjustment, but any figures higher than this are largely reckless predictions which cannot be supported by any evidence.
In essence we have a robust and resilient property market that is in a good position to withstand the next 12-18 months of difficulty. Unlike 2008, the property market is supported by finance which has not been overleveraged (long gone are the days of 100%+ mortgages and subprime lending).
Is now a good time to move?
If you are looking to move, now could be a great time to do it! If you are a seller, as long as you have not bought your property in the past 24 months, it is likely to be worth more than when you purchased it. You can make your home moving dreams a reality.
If you are a buyer, demand is going to be moving away from the effervescent madness of the past 24 months. Vendors are now looking to do sensible deals without people overpaying due to the huge shortages in supply that existed previously.
Top tip to navigate this market #1: Be “deal focussed”
If you are looking to move, aim to be “deal focused”. Do not get hung up on the eventual sale price you agree, instead look at the overall deal. As an example, if you were looking to sell at £500k and buy at £600k but upon marketing receive an offer of £450k for your property, you can negotiate and make the deal work by buying your next property at £550k. In this example, you were looking at a £100k differential and that has been maintained, in essence the deal is the same regardless of the figures. At HIVE my team and I help our customers to be “Deal focussed”, we often negotiate their purchase on their behalf and help them structure the very best deal outcome for them.
Top tip to navigate this market #2: Get the best team to support you
Choosing your estate agent wisely is key. Here are some things to consider and ask your prospective agent:
- Experience
Has your agent worked in a declining property market? - Exposure
When marketing your home, what is your agent’s local, national and international strategy to attract the widest pool of prospective buyers? - Marketing
On what portals will your property be listed? Do you get professional photos as standard? Will your property be marketed on social media – if so what is the reach? - Team
Will your sale always be handled by the most experienced agent? Will the person listing your home be conducting all the viewings? - Going above and beyond
Ask your agent to run you through their full marketing plan. Talk to them about what they will do to best showcase your property. For example, at HIVE we regularly use drone photography to highlight the appeal of the property’s location. And ask them how they will help ensure your move will run as smoothly as possible.
Top tip to navigate this market #3: Talk to HIVE and Partners!
Obviously, we are going to make this suggestion! But seriously, if you are looking to move and would appreciate sound advice from an agency that has collectively agreed over £3 billion in real estate transactions, with many of us starting our agency careers in the last recession, please contact HIVE today and we can demonstrate the HIVE difference helping you get to get moved!
T. 01202 122 022
E. sales@hiveandpartners.co.uk
www.hiveandpartners.co.uk
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