The property market looks to have avoided ‘heading over a cliff,’ Knight Frank suggests.
Analysis by the agency brand suggests the further it gets from the mini-Budget, the more things improve in the UK housing market.
Tom Bill, head of UK residential research for Knight Frank, said property prices and transaction volumes are not about to surge, but he suggested it’s increasingly clear the market is not heading over a cliff.
He suggested that last week’s unexpected rise in house prices in the Halifax House Price Index and less negative RICS reports suggests economic data is defying expectations.
He said the true test for the market will come over the next few months and based on the current figures, Bill believes it is likely to pass.
The number of new prospective property buyers that registered in February was 10% above the five-year average in the UK, Knight Frank data shows.
Offers made were down by 7% in the same month but he said that gap will close as post-Christmas transactions progress.
In another example of the mini-Budget’s legacy, Bill said, exchanges were down by a quarter in February despite being up by 5% in October.
Nigel Mitchell, head of the south-east region at Knight Frank, said most buyers have quickly accepted where mortgage rates are settling.
He added: “In a strong market, houses with drawbacks will get competitive bidding but I would describe this as a normal market, so some asking prices will come under pressure as budgets get revised down. However, properties that tick all the boxes are still going for above the asking price.”
The analysis even suggests that the poor start to the year could maintain downwards pressure on mortgage rates despite swap rates currently rising in response to stronger economic data.
Simon Gammon, head of Knight Frank Finance, said: “The big lenders have more flexibility when it comes to pricing mortgage products because they can use their own balance sheet, as opposed to the smaller players that are more reliant on market pricing.
“Given how weak the past two months have been for mortgage approvals, I would expect the larger lenders who have this flexibility to focus on increasing market share and vying to be top of the leader board for the lowest rates.”
He suggested smaller lenders are more likely to compete through product innovation and making changes to their underwriting criteria, adding: “It will be tougher for them, but they can do things like relaxing their lending rules or going into new markets. Overall, I expect things will improve for borrowers but not by much, we are in a new normal and lenders of all sizes will essentially be tinkering around the edges.”