Property Market Insights

Property Market Update

Summary

• Property prices in UK fall 1.3% over the last 6 months

• Activity level is recovering stopping the speed of decrease

• Stronger growth in new sales brings more sellers into the market

• Biggest activity in London, Scotland and north east

• Weaker demand but sales hold up in Midlands and southern England

• Mortgage regulations have tempered the impact of higher mortgage rates on house prices.

• 11% proportion of homes on market were previously rentals

• 1.9% UK house price increase YOY

Drop in price over the last six months

Zoopla price index indicates a drop of 1.3% in the last six months, mainly due to the increased mortgage rates. However demand has recovered recently stalling the decline.

The annual rate of price inflation is 1.9%, down from 9.6% a year ago.

I would expect prices to remain relatively similar for the rest of the year, with mortgage rates stabilising and demand showing promise. However with the higher-than expected inflation rise, it is likely interest rates may rise, if they do this will of course have a knock on effect to mortgages, then onto property prices.

More sellers

Although demand is weaker, we are seeing nationally an increased in sellers due to confidence in the market. Over the last few weeks we have seen it 11% higher than the average for this period over the past 5 years. As many buyers are also selling, more sales boost the flow of new homes for sale which is 16% up on the 5-year average

Around 18% of homes on the market with Zoopla have had the pricing drop by 5%, or higher, compared to 28% in February. Typically sellers amend pricing 8 weeks after the initial listing, in my opinion this tends to be through bad advice from the agents valuing. Alternatively you could say sellers being more realistic in line with buyer demand.

Landlords parting ways

As some landlords are looking to balance their portfolios, with the increased in mortgage rates we have seen an influx of properties marketed that were previously rented, around 11% of the available proportion.

This does of course put increased pressure on the rental crisis in many parts of the UK, with not enough homes to rent.

Regional market conditions differ

Buyer demand continues to perform best in the north east of England, along with increased performance in London. Demand is above the national average in these regions and sales are more than 10% higher.

Where you will see in the South and Midlands, where we saw some of the highest price increases over the last 3 years, have seen a decline. This is mainly due to affordability reasons with the previously stated high values. This doesn’t mean there is no active buyers, as there is still above average sales being agreed, just at a slower rate.

Things are still selling

Although demand is weaker year-on-year and supply rising, there is no sign of a back-log of unsold properties building up. The number of homes listed for more than 90 days in most areas is in line with the 5- year average. This would suggest as long as sellers are realistic with pricing there is no need for a large price drop between now and the end of year.

Will we see a big price drop?

With the increased mortgage rates, historically would have meant house prices falling. However due to mortgage regulations in the way people are lent money, this has protected the housing market, meaning we are seeing less impact than we may have historically.

Anyone using a mortgage since 2015 has had to demonstrate they can afford 6.5-7% mortgage rates, even though people were only paying 1 or 2%. Therefore in theory the market was already running at higher rates before it happened, meaning less impact on those borrowing.

I would suggest this is one of the biggest reasons we have not seen as big an impact as predicted by main stream media, along with prolonged desire for house movers still wanting to find their new home since COVID-19 lock-downs.

Will mortgage rates increase?

Mortgage rates have moved back towards 4%. However the latest inflation numbers have increased the likelihood that we will see further increased rates by the Bank of England, which will likely mean an increase in mortgage rates.

With the increased housing activity over the last two months, it has proven that the 4% region of rates are generally affordable for new homebuyers. This is despite them being more than double 2021 rates, however as previously mentioned, this is due to mortgage standards already stress testing at the 6.5%-7% rate since 2015.

The more mortgage rates move above 5%, the greater the impact on buying power and the more house prices will come under downward pressure. Banks increasing their affordability tests further than the current levels for new borrowers will compound this pressure.

Property Market Update – May 2023

11 March 2023•5 min read Highlights • Annual house price inflation at 5.3% down from 8.6% last year • Buyer demand and sales volumes are 20-50% lower than a year ago but slightly ahead of the pre-pandemic years. At +8% in February • Sellers having to accept an average 4.5% discount to the asking price […]

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Does property investment depreciate?

One of the most searched topics on google this week, is does property investment depreciate. The real answer here is…completely depends on what you are doing in the property world. There are so many routes in property, however simply put property value in the UK has taken at its longest 14 years to double in equity value.

Meaning if you are investing in property over the medium to long term it is extremely likely you will lose money (if invested correctly up front).

Why invest in property?

Stable investment – There is far less volatility in the UK property market compared to any other type of investment
Passive income – Rental income through buy-to-lets, holiday lets, SA or HMO generate consistent monthly income
Capital growth – In the last ten years property values have grown by 71%. This is on top of rental income
Diversify – Diversification of your investment portfolio is important irrelevant of net worth
Sexy asset – It’s a physical asset that is relatively easy to understand. Property is tangible

Property Market Update February 2023

• Annual house price inflation at 5.3% down from 8.6% last year

• Buyer demand and sales volumes are 20-50% lower than a year ago but slightly ahead of the pre-pandemic years. At +8% in February

• Sellers having to accept an average 4.5% discount to the asking price to achieve a sale, this is the highest for 5 years

• Average discount to asking price is £14,000 meaning sellers are having to forgo a third of their pandemic house price gains

• UK house price inflation likely to move into low negative year-on-year by summer

• Market is still on track for a soft landing with modest price falls of up to 5% and 1m sales in 2023. This is better than predicted last year (10%)

Half-full or half-empty?

You could look at the property sales market in two ways this month, when comparing to year-on-year. The glass-half-empty view would be to compare this year to the super-hot market conditions a year ago. The glass-half-full view would compare the current sales market to the pre-pandemic years (2017-2019) when activity levels and house price growth were more stagnant and trading conditions were tougher.

5 Rules to Making or Breaking Habits

They say on average it takes 21 days to create a habit, I believe that’s a myth. There’s enough science out there to suggest it completely depends on the person themselves! There are so many variables within personalities it’s not logical that everyone can create a habit in 21 days.

It’s important to remember, habits never leave you. They are never forgotten and can return as easily as they are to form good ones!

Here I break down my 5 rules to making or breaking habits:

Step 1 – Stress

Stress is one of the biggest keys in making good habits. It should be common knowledge that stress doesn’t help in any forms of life – Happiness, relaxation, focus AND creating good habits.

Why doesn’t stress help? Well, there a various reasons for this however when creating habits for me it’s that stress makes us look for INSTANT happiness. All of us have a self-gratification calling inside our heads, we all want that instant fix…why wait and hold out where we could just take the easy option now. Stress is scientifically proven to increase our desires for instant gratification as we want out of this stressful place. Therefore, being under more stress makes it harder for us to keep on track creating these good habits, especially at the early stages of creating new habits.

You want to teach yourself to control your mindset and look for delayed-gratification, check out the Stanford Marshmallow Method here – https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment#Original_Stanford_experiment

This goes into details on beliefs I share on how having controlled delayed-gratification can help you achieve more success in life, whether that be personal or in work.

My top tips on lowering stress levels are:

Sleep more: You probably hear this a lot, however its fundamental to being successful in anything in life. Everyone needs different amounts of sleep to others, however those bosses that tell you they don’t need sleep and just work harder are lying to themselves… if you do not get the correct amount of sleep your focus shifts, you start to look for instant-gratifications and its scientifically shown that you are more ‘miserable’. There is such a thing as too much sleep of course also. There are so many factors in sleep that help the body and mind, in deep sleep you hit moments of zen to enable you to store whatever the valuable information you learnt that day… or if you are looking to lose weight then it releases leptin… Leptin effects the way your calorie intake works.

Exercise regularly: You should all know by now that exercise is a great format to release stress, when exercising you releases feel-good neurotransmitters called endorphins. These endorphins instantly ease stress levels. This isn’t about becoming a pro athlete, six 0 model or extremely muscular. It’s about releasing feel-good endorphins. I have friends in my group that are against any form of exercise, to me this is naïve, and they do not understand the key benefits, something as small as a 30 minute fast paced walk a day would give you what you need. Make the effort and create good habits now! There are other forms of exercise of course… sex included!

These two things alone will help cement lowering stress, meaning its easier to form good habits! It’s simple if you feel good, you’ll do more and be more.

Step 2 – Know what triggers are

Knowing what your trigger points are, for me, the biggest make or break in creating good habits. I’ll give you a couple of examples from my own life to help explain this:

Going to the gym: I don’t have an inner drive to go to the gym without persuasion, I only go because it makes me feel good. Therefore, I know if I don’t have set procedures in place I simply will not go. To make sure I get to the gym I create a routine to ensure I don’t find any excuses to not go. I put my son Otis to bed most evenings, therefore before I start his bedtime routine, I get myself into my gym clothes and put my gym bag at the bottom my stairs obstructing me getting past it when I come down after doing Otis’s bedtime routine. By doing this I am ready to go instantly after I finish, my keys are on top of the bag, and I walk straight out the house and go to the gym! If I go sit down or get distracted by something else and simply will not go, I know this as this is how my brain works. So, I create this routine to ensure I go. I also plan when I will go, so no variables get in the way or again excuses.

Another example is my personal bedtime routine, I know that if I don’t have my book/journal next to me in bed, I won’t read or write before I go to sleep or wake. Instead, I will look at my phone or find something else to distract myself with, therefore by doing this I know I can avoid my triggers of boredom to them look for that instant gratification on social medias.

Step 3 – You can’t stop bad habits, just replace them

Don’t try to stop bad habits, its proven that a habit never goes away! Use smokers for example, the amount I know that have quit, replace it with chewing gum/vaping then something goes wrong, they get stressed, then back to smoking.

What you want to focus on is replacing bad habits with good habits. I used the smoking example already, so let’s stick with that. If people try to simply get rid of smoking (it is a habit!), it makes it nearly impossible for many (so they feel). Therefore why not replace with a better habit, for example cutting down to a certain amount a day – gradually removing it completely. Or if you cannot control your trigger points that well then replacing with a healthier option like the chewing gum or vaping.

Another example is those that snack a lot, a way to stop this is to drink more water, it makes you feel more full and less likely to snack.

There are so many examples of this, so relay it to your day-to-day and figure out what bad habits you could replace with slightly better ones, as the time goes on you can continue to improve on them. Treat it as being 1% better every day, those that try to change 10 things instantly simply will fail. 1% everyday improves you by 362% over the course of a year – REMEMBER THAT and remind yourself!

This is exactly why I hate crash diets, the list of people I know who say there on a diet every month is longer than my arm. It just simply doesn’t work, understand your reason why and then replace those bad habits with good habits over time.

We all work on external and internal rewards. Some of us are better at internal rewards and other external, it comes back to your trigger points and understanding what the ques are on this and being honest with yourself to why type of person you are.

Step 4 – Know your reason why

Before you just decide ad-hoc what habits you want to improve on. Know why you want to improve on them. If you want to make long term changes this is imperative, I’ll give you examples:

I want to get a six pack for my summer holiday: This will only provide a short-term fix; you will get into a routine you hate that is only set to achieve a short term outcome. Obviously, there is instances this type of routines come into place in work & life, however maybe a better way to work is to understand why you ‘want a six pack’ maybe you could create a better long term plan you enjoy, making it easier to commit to.

When I lost my little sister Zoe in May 2020 who was only 26 and left behind two young boys, it really made me reflect on my life choices and health, establishing what’s important to me. From there I completely improved on my day-to-day habits and routine…how, because I had a good reason why.

I wanted to be healthier, to be healthier I needed to look after my body better, with healthier eating habits and exercise routines. Since then, I can genuinely say I feel the best health and fitness wise that I have since being a teen!

Step 5 – Willpower is not enough

Science shows that willpower drains throughout the course of your day, when you wake to when you go to bed that willpower will be incredibly lower.

An easy way to look at this is, when there is a task to do that you enjoy your willpower lasts longer and stronger. Compared to when you are doing something you really don’t like, your willpower will drain much faster.

I come back to crash diets etc, they may work in the short term. But once you come off of it, you will just revert back, as I see all the time.

Instead, why not focus on changing your lifestyle, diets don’t need to exist then! Creating a lifestyle choice based on points 1 to 4, will enable you to control sustaining better willpower.

Final Tip

Something I figured out a few years ago and was reminded recently by a podcast by Steven Bartlett, was ask yourself the right question, what do I mean, here is an example:

Instead of saying to myself, “you will go to the gym tonight at 7pm”, I ask myself if I’m going to the gym tonight “are you going to the gym tonight”. I can then only give a yes or no answer, rather than giving an opportunity for excuses as to why I won’t do something.

Try it, I promise you it works!

2022 UK Property Market Update

Key facts and figures:

Average UK house price is now £285,579 compared to £272,778 a year ago, a rise of £12,801.

2022 recorded the highest rate of annual growth since January 2005, peaking at 12.5%.

Average property prices are 19.4% higher than pre- pandemic (£239,176 in March 2020).

A new record high average property price was set in August 2022 of £293,992.

The typical UK house price has increased by 71% over the last decade (£166,627 in November 2012), a rise of £118,953.

Properties sold to first-time buyers recorded a lower rate of annual house price inflation (+3.6%) than home-movers (+5.3%) over the last year to the end of November.

The North East of England saw the highest rate of annual property price inflation of any UK region or nation in the year to the end of November 2022 at +10.5%.

The South East of England recorded the biggest price increase, up by £28,068 over the last year to the end of November.

London recorded the slowest rate of annual house price growth at +5.2% over the last year to the end of November, however at £549,160 still has by far the most expensive average UK property price.

House prices flattened off from mid-year, and fell near the end of the year, as the increasing cost of living put more pressure on household finances and rising interest rates pushed up mortgage costs.

This downward trend will continue into 2023, with house prices expected to fall next year by around 8%. However forecast uncertainty remains high given the current economic environment.

Charlie Panayi, Multi-Business owner and Managing Director of Red Squirrel property shop Ltd:

“2022 provided a year of two halves, the first six months was still seeing the house prices rising following the pandemic trend, with the average increase more than £17,000 to their values by June.

“Seeing such rapid price growth over the previous 18 months, along with the economic headwinds, a slowdown in pricing had to happen, it was inevitable. This played out seeing the average price decreased in November by -2.3%.

“We must remember that over the last 3 years we have seen some of the biggest increase in house prices ever! Between February 2020 and August 2022, the average house price grew by nearly £55,000, to £293,999, a staggering 23% increase, with was a new record high!

“With the increasing cost of living putting pressure on household finances and the rising interest rates impacting people, there will understandably be more caution amount both sellers & buyers. Most will likely look to review whether they ‘need’ to take that move or not now.

“Looking forward to next year, I believe it will evidently be a more challenging housing market, however its important this doesn’t mean doom-and-gloom, it will just be the marked rebalancing to reflect the current market conditions. There has always been an imbalance on supply & demand in the UK housing market, therefore the limited supply of properties available will continue to support the housing prices.

“Unemployment is expected to rise in 2023 to around 5.5%. Again, it’s important to remember this is relatively low compared to historic standards. While inflation may be close to its peak, household energy bills are likely to continue rising, putting further pressure on household budgets.

“I would expect realistically we will UK house prices to decrease around or up to the 10% mark by the end of 2023. I want to put some perspective on this so people don’t believe there is a massive crash, if they dropped by 10%, the market value is still around 10% higher than pre-pandemic, meaning there has still been fantastic gains over recent years. It is normal for a market to realise itself after the rise we have seen. It’s difficult to give a certain forecast of course, however it would make sense. Experts do not see it exceeding the 10% mark and many believe its likely to be more around the 5% range dependent on location. Another important factor is to consider what area you live in, these are generic for the UK.

Notes: Information gathered via Halifax, Homemark, Zoopla and Rightmove.

Tag: Property Market Insights