Property market ‘recalibration’ is underway - claim

The property market is ‘recalibrating’ but should be seen in context of economic events, agents are being urged.

Kris Mclean, managing director of The Guild of Property Professionals, has predicted that price moderation and a sales slowdown are likely over the coming months.

But he added that this should be considered in the context of economic history, the frenzied post-pandemic market and the longer-term outlook. 

While this year’s Autumn Statement provided a sobering assessment of the UK economy, Mclean highlights that forecasts for the housing market are less dramatic than during 1989-1993 and the financial crisis of 2008.

Mclean said: “It is expected that inflation will peak during the final quarter of 2022 before falling back over the course of 2023, and unemployment looks likely to remain lower than the 10-year average of 5.3%.

“The global financial crisis, caused by banks lending more than borrowers could afford to pay, led to the more stringent mortgage lending criteria imposed since 2014. Today, only an estimated 4.2% of homeowners have less than 10% equity in their home.”

He notes that annual house price growth in the UK has moderated back from the double-digit price growth that has epitomised the market in recent months, with all major indices placing growth firmly in single digits as the year draws to a close.

Mclean added:  “At 7.2% in the year to October, annual price growth remains considerably stronger than the 3.3% average between 2010 and 2019. Since June 2020, average property prices have risen by close to £50,000, the equivalent of 24%, with lockdown and lifestyle changes spurring the market.

“A single-digit price correction is predicted for 2023/2024 before price growth is anticipated to return in 2025.

“Buyers will continue to benefit from the 0% rate of stamp duty up to £250,000 until March 2025. With almost one in three movers ‘needs-based’, such buyers will present sales opportunities. However, realistic pricing for market conditions will be paramount to achieving a sale as the market recalibrates.”
 

According to Mclean, except for 2021, this year is set to be the busiest market since 2017. 

Zoopla estimates there are around 293,000 sales currently in the pipeline to be completed before the end of 2022, he said, adding: “Sales volumes are predicted to be around one million in 2023, a level more on par with the pre-pandemic norm. October saw a 13% uptick in new supply to the market compared to a year ago, although stock levels remain low by historic standards.”

“Expectations for interest rates, gilts and swap rates are up to 1% better than in the immediate aftermath of the Treasury’s ‘Growth Plan’, although mortgage rates of 5% to 6% will be usual for those seeking to purchase or remortgage.

“There is no doubt that 2023 will inevitably prove a very different housing market to 2022, but there will still be buyers who need to buy, and sellers who need to sell. Over the longer term, forecasts for growth remain positive.”