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Ben Stephens BSc (Hones) MRICS, partner and Truro office and sales manager provides an insight into the current property market.
After several months of downbeat forecasts and quite frankly an extremely challenging market, is there now a mood of cautious optimism as we approach the final quarter of 2023 and look ahead to 2024?
Inflation has started to fall from a peak of 11% in October last year to the current level of 6.7%, with expectations of 5% by the end of 2023. The Bank of England then anticipate it will keep on falling and potentially reach 2% in the first half of 2025. The blunt instrument of raising the base rate therefore seems to have had the desired effect and after 14 consecutive months of increases, the decision on 21st September was to keep the rate at 5.25%.
The falling inflation figures have bolstered confidence and finally we seem to be entering a more competitive phase within the mortgage market. A number of mainstream lenders have moderated their offerings over the past few weeks with the average five-year fixed rate now standing at 5.69% (15% deposit or equity) and possibly even lower by the time this article is printed. Compare this with the average mortgage interest rate over the last 25 years of 5.62% and it is evident we are not that different. The Bank of England has indicated that they will not be reducing the base rate any time soon and therefore, it is likely that buyers will have to accept the return to the historic norm.
A direct result of interest rate rises has been depressed confidence and strangled affordability. It is little wonder therefore that the average house price fell by 1.9% in August and between 4.6% and 5.3% year-on-year (Halifax and Nationwide), the most significant decrease since 2009. Other data collectors show an even more pronounced decrease, including Bricks and Logic who report up to 8% decrease in the South West based upon asking prices, not completions. However, it is important to remember that we remain some way ahead of pre-pandemic levels and that, courtesy of income growth, the ratio of house price to income has started to inch back.
Whilst it is very early, anecdotal evidence from across our network of offices seems to indicate improving activity and just maybe the signs of market recovery. It is almost impossible to time the top or bottom of a market but with interest rates and inflation now falling, savvy home movers appear to be re-entering the market with a clear intention to close deals. Having dipped through the second quarter, the number of new buyers registered by Stags in September is on par with last year with agreed sales following suit and viewings increasing week on week.
That said, the stock of available property is now almost double that of previous years, providing buyers with more choice. A correct pricing strategy and proactive agent therefore remain of paramount importance when considering a sale. Rightmove data shows that homes which are priced right from the outset take less than half as long to find a buyer than those which require a subsequent asking price reduction. Put very simply, a correctly priced home marketed through an agent with experience and a broad marketing reach, is more likely to find a buyer as we enter the ‘green shoot’ period of an improving market.
If you are considering buying or selling in the West Country, your local Stags team would be delighted to hear from you and guide you through the next steps.
