Stick, sell or buy
January 20, 2023
In what is arguably a very price-sensitive market right now there is much debate around property prices with many jumping on the circa 10% reduction bandwagon. So far, we have seen little signs of any significant decline, maybe a stutter and loss of momentum, but not yet a fall.
In fact, values continued to rise for the last quarter of 2022, albeit at a far lower trajectory than in previous quarters.
The core drivers of the price drop thinking revolve around market confidence perceived to be at an all-time low because of ever-increasing interest rates, energy prices skyrocketing, and overall costs of living increasing across almost every aspect. Add to this the headline-grabbing grey clouds of a recession looming across the economy.
Is it really that bad or is this simply the voice of media and 'expert' naysayers who have been predicting a price crash for the last few years?
We know the war in Ukraine has directly impacted energy prices and this has driven up overall living costs. Higher energy means higher costs across all aspects of the supply chain for goods means prices have been pushed up. However, there is already talk of these peaking and with the focus very much on energy suppliers, we might see some movement to a tapering off and possibly even some reductions. The way people use energy, given the cost rises, has also changed massively as this becomes the new norm.
Rising interest rates, and in particular the turmoil caused by the infamous 'mini-budget', resulted in the property market all but stalling. At Vesta, we saw many deals slow down to almost a standstill as buyers rethought their strategies. For those that had secured competitive rates, the process continued at pace with a lot of pressure on hitting deadlines to ensure offers were not withdrawn. Many others simply wanted to re-think their strategy and adjust their plans based on what looked like skyrocketing interest rates.
After hitting levels at around 6.5% last year, the mortgage rates being offered by many lenders are now well below 6%. There is also talk of a price war as high street lenders try to get their quotas back on track after the slowdown. The current Bank of England rate is at 3.5% and it is still likely this might go up further, however, the longer-term outlook is more positive with rates potentially reducing within the next 24-36 months.
Without a doubt, higher living costs and higher interest rates will impact first-time buyers and movers looking to upgrade. This in turn will put more demand into the rental market as more people look to rent and this will result in inflated rents. We can see that this has already started and many areas, including London, have seen significant rent adjustments upwards.
After two weeks of 2023, we have seen no real change in user demand on our marketplace with overall user traffic slightly down by less than 1% versus 2022. New users are up by 1% which maybe is an indication of more fresh demand from cash-rich buyers seeking deals.