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December 2022 Market Comment

December 2022 Market Comment

Date Posted: 21/12/22

As the dust settles on the Chancellor’s plans and the myriad of views from analysts and so called “experts” across all sectors start becoming more composed and less speculative, what is going to happen in the residential property market?

We have already seen a slight decline in activity in recent weeks , a little earlier than the usual trend at this time of year, with less potential buyers willing to commit largely due to affordability concerns. Mortgage rates that rose sharply during the brief Truss administration, with the withdrawal of many products reducing choice, are now easing back slightly and look as though they will settle in the 4-5% range dependent upon lengths of terms and personal scenarios. This is obviously much higher than we have seen in recent years but well below some historic highs.

House prices are edging back and the Office for Budget Responsibility believes that house prices will fall by around 9% over the next two years. This seems realistic and sellers will have to be prepared to be equally realistic to ensure a sale. Of course, for those selling and buying it is the differential between the sale and purchase price that is key.

We expect transactional volumes to reduce from the highs of the last two years where Government intervention on stamp duty boosted activity.

The affordability issues around buying a property mean that an increasing number of people are choosing to either stay in the rental sector or look to find a property to rent until they feel comfortable with a move into home ownership. This is seeing demand continue to outstrip supply with correspondingly high rental values being achieved which can make it even harder to save deposit monies.

Demand for rental property continues to soar, but estate agents say that, while the number of tenants house hunting keeps climbing, the number of available properties to rent has flat-lined. With data from Propertymark showing an average of 13 prospective tenants lining up for every rental property, letting agents are stuck between a rock and a hard place in keeping rents balanced and affordable for tenants whilst trying to negate increases in Landlords' mortgage rates.

Whenever there are challenges in the market, there is also opportunity and innovation. We expect to see more innovation in the mortgage market with longer terms, family mortgages involving multi-generational borrowers and rent to buy financing being developed.

There is no doubt that many will choose to “sit on their hands” and stick with their current positions but for others the tougher conditions will not get in the way of life plans.

All of the forecasts show an improving economic position over the next two years but recognise the need to survive during this challenging period.

World events could see dramatic changes in confidence, market sentiment and inflationary pressures, as the months progress – an end to the war in Ukraine being amongst the most significant. England winning the World Cup not so much but nevertheless would help create a “feel good factor” – for the English anyway!

Our highly experienced teams have seen many changes in the market over many years and will be happy to talk with you, in confidence, and to help you formulate and action your plans.