Property transactions data - November 22

Across the UK as a whole, it's likely property transactions will fall due to the strength of the economic headwinds we're facing and people battening down the hatches. In prime Central London, supply will be an issue, as discretionary owners of best-in-class property don't want or need to sell during a recession, let alone convert weak Sterling into Dollar-linked currencies. Transactions levels could fall further as a result and off-market will continue to play an important role. Prices in prime central London may prove more resilient than family homes across Greater London during 2023.

While we have seen a drop in purchase transactions over the past month or two since the now infamous mini-Budget, we still have plenty of clients looking to buy. However, with all the uncertainty they are taking much more time to make their decision on a property, as oppose to the madness of the Summer, where buyers were sometimes forced into a bidding war. While transaction levels haven't dried up, the waters of the housing market feels calmer and this isn't necessarily a bad thing. Some of our first-time buyers who have been out viewing at the weekend have put offers in below asking, and haven't had pressure put on them from estate agents to make a decision quickly. Conversations around affordability are focused on realistic interest rates that we are currently seeing, so many buyers aren't going up to their maximum affordability and are instead leaving themselves in a more comfortable position. Leveraging yourself to the hilt with mortgage debt is no longer a thing. I believe buy-to-let will still be an area of concern going into next year. Investors already had the concerns around the changes to EPC quietly looming, along with tax changes and stress rate issues. We are likely to see smaller investors move away from buy-to-let until things have settled. Based on offers being accepted I don't believe the market will grind to a halt, realistically anyone putting their property up for sale at the moment, should be aware and educated by their estate agent on how the current market is looking. Properties are still selling, we just aren't seeing the boom from the summer in most areas.

While, overall, we have seen a slowing in the number of property transactions, first time buyers and movers looking to purchase a new property are still fairly active. However, the difference is most buyers are not in a hurry to buy given inflated house values and noticeably higher rates. Most conversations with clients currently end in them saying they are going to hold off until the New Year to see what's happening in the market. This is not unusual for this time of year, but is being heavily influenced by the hope that interest rates will start to come down again and mortgages will once again become more affordable. Ensuring clients are not stretching themselves to their absolute max at this current time is vital, and clients seem keen to make sensible decisions to ensure that the mortgage is affordable now and in the future, looking realistically at their finances against the cost of living. I am also seeing clients keen not to use all of their deposit for their purchase, as they are nervous to part with their hard earned savings by putting all their money into a new purchase, leaving them without an emergency fund for the future. Rather than take on a higher mortgage amount, they are looking for a lower value property, or holding off all together for the time being. In general l would consider most buyers have an all round tentative and careful approach to taking on further borrowing with higher interest rates being the key factor in this.

The market won't grind to a halt in 2023 as there are plenty of cash ready property investors out there who are poised to purchase any properties that drop 10%-15% in value. This is despite the fact that the recent Autumn Statement will have deterred a certain percentage of landlords. In Newham and Redbridge, the areas we focus on, my expectation is that house prices will drop slightly but not as significantly as other areas of London or the UK. These areas are likely to appeal to first-time buyers, purely because they are cheaper to live in when compared to areas such as Hackney or Islington, where the average terraced house is sold at £1,192,092 and £1,638,981 respectively compared to Newham and Redbridge at £437,621 and £624,951. First-time buyers who have saved up a substantial amount for a deposit, would now consider a cheaper alternative and then reconsider moving to their desired area within the next 5-10 years once the economy recovers. With demand for rental properties at such an unprecedented high level in these boroughs — we have had 50+ viewings booked within the first 24 hours — the rental yields along with the expected capital appreciation once house prices recover means Newham and Redbridge are still an ideal location for property investors.

Since the short-lived Trussonomics era, demand has been frankly decimated. A lot of people are sitting on their hands and waiting to see how things pan out. Naturally, the run-up to Christmas will temper demand even further, all the more so with the World Cup. Many buyers live in fear of previous recessions and are extremely wary that if they buy at the wrong time, they could be left with negative equity. That said, there are a large group of first-time buyers who are hoping for house prices to drop and are waiting for their moment to take a leap onto the property ladder.

So far in the fourth quarter, demand for new build property has fallen off a cliff. The only sub-sector that is likely to see a rise in property valuations is the rental market. As rents increase, which they are and will, the yield calculations will see the value of those properties increase. Unless sellers are really motivated or have to sell it is likely transactions will plummet as people stay put and look to ride out the storm. Property hotspots and the South East will likely fair the best, whilst super prime Central London will almost certainly fair the worst. Until a Government-backed, UK-wide support scheme for first-time buyers is reintroduced it is unlikely we will see any major increase in transactions, however, as interest rates stabilise and inflation is brought under control, we could see transactions recover as the great property cycle machine clicks back into gear.