A challenging year for home-owners and the housing market

Image above: Terraced houses in Chiswick; Photograph Anna Kunst

Interest rates still on the rise

It has been a year since that mini-budget – the one which triggered higher mortgage costs for millions and led to the swift political demise of its architects Liz Truss and Kwasi Kwarteng.

Since then, interest rates have gone up and up. Before that budget the Bank of England’s official bank rate was 1.75%. Eight incremental rises since September 2022 have brought it to 5.25%, piling the pressure on anyone with borrowing.

The Centre for Economics and Business Research is forecasting two more rate rises in the current cycle, with Bank rate peaking at 5.75%.

It is not just the price of borrowing which is affecting buyers but the price of housing compared with incomes. Chiswick is in the Bank of England’s top 20 areas of the UK where mortgage loans are at least 4.5 times the borrower’s earnings (considered ‘risky’).

Julian Masson, Head of Sales at Chiswick’s office of John D Wood & Co looks back over what has been an unsettled year for the housing market and gives some useful advice to determined buyers and anxious sellers.

Image above: Terraced houses in Chiswick; Photograph Bridget Osborne

Guest blog by Julian Masson

The current UK property market is experiencing a rather volatile and turbulent time. The continual rise in interest rates, cost of living crises and general economic turmoil has created a high level of uncertainty, which has resulted in a very erratic year for the industry. When we start to see some momentum, another base rate rise is announced, forcing buyers and sellers to re-assess their finances and current situations, creating a lull in activity levels. Many homeowners who do not need to sell have decided to sit back in the hope that prices will recover in the near future.

Despite the uncertainty and issues around affordability, there are still signs of movement in Chiswick. Whilst the interest rates have affected the lower and upper ends of the market, the middle range of flats and houses have continued to perform well. For example, we recently launched a house on Rothschild Road, W4 for £1.M, which received a flurry of viewings in the first weekend, followed by multiple offers which led to a sealed bids situation and an offer agreed over the asking price. We have had a number of similar properties going to sealed bids this year.

Continual relocation of buyers moving from central London in addition to movement internally in Chiswick has remained fairly buoyant. There are certain properties in certain locations, which are rare to come to the market and will always do well, even in an uncertain time. Chiswick is often considered an anomaly in comparison to most of London, with its numerous attractions and overall tranquil feel and so there is hope the local market will continue to prove reasonably resilient.

Following the mini-budget in September 2022, we witnessed a slow start to 2023, succeeded by a run of positive activity levels over the months of March, April and May. With a continued shortage of quality properties launching to the market, those that were renovated to an exceptional standard or considered a rare opportunity were snapped up and performed exceedingly well. Additionally, we have seen many a standoff between sellers who are in no rush to drop their prices, and those affordability-strapped buyers who are reluctant to increase their offers. The market over the summer months has naturally slowed but we expect a busier period to return as we enter the autumn.

Zoopla recently reported that their figures showed overall demand on properties for sale was down by 18%. Although this figure may make sellers nervous about a move, the pool of buyers searching are far more motivated than we have ever seen in the past. To support this statement, we have witnessed a significant improvement in our viewing to offer ratio and so as a vendor, you should not expect to receive floods of viewings if you are on the market, however, offers received from buyers should be taken seriously and well-considered.

Supply is and will continue to be very tight. According to the National Housing Federation, 340,000 homes are required to be built every year, but only 233,000 were completed in 2021/22. As for demand, net immigration to the UK was over 600,000 last year. With much negativity, confusion and contradictions in the media, it may not seem an ideal time to buy, however it is certainly not a terrible time, especially if you are purchasing a property for the long-term. As more people come off their fixed-rate terms, more properties will launch to the market, which certainly increases the odds of finding something that ticks all the boxes.

In July, inflation reduced to 6.8% from 7.9% in June, leading to many lenders reducing their rates. This news has come at an optimal time, as we enter what is generally a busy autumn period. Whilst a drop in inflation is certainly a step in the right direction, many are predicting the Bank of England will likely increase the base rate to 5.5% at the next review, and with a general election expected next year, this is another reason why now may be the right time to make the move.

Recently, the National Residential Landlords Association stated that 60% of Landlords in the UK have Buy to Let (BTL) mortgages. With BTL rates about  3.5% higher than they were in July 21, many landlords face decisions this year at point of renewal and according to The Financial Times, many have considering selling as a result. With this in mind, coupled with many facing financial pressures, more property will come to the market, which will inevitably result in further price drops.

For sellers, understandably, correct pricing is key. As a seller, if you receive a sensible offer from a motivated buyer it is important to make a decision swiftly and not lose time deliberating, as you may lose the buyer and find yourself accepting a lower price. Correct pricing, the right marketing strategy, and helpful guidance from your agent will determine the success or failure of your property’s performance. For buyers, with rents continuing to rise, buying a home may be the much better option. Yes, prices may fall further, but money paid in rent is lost forever and property has and always will be a real asset in inflationary times.

Julian Masson is Head of Sales at Chiswick’s office of John D Wood & Co.

John D Wood & Co are members of The Chiswick Calendar’s Club Card scheme, offering a 35% discount on John D Wood and Co’s standard sole agency fees.