- Selling prices flat or down in January
- Sellers react to issue of affordability
- Big housebuilders reporting in March
It appears the slowdown in the housing market has continued into 2023, with major surveys showing asking and selling prices flat or down on a monthly basis in January.
Although mortgage rates have come down from their October highs, affordability is still a big issue given the ratio of house prices to earnings and the end of the Help To Buy scheme in March will make life even tougher for first-time buyers.
SLOWER SALES AND LOWER PRICES
The Halifax building society, the UK’s biggest mortgage lender and part of Lloyds Banking Group (LLOY), said house prices were flat in January at just under £282,000 after falling 1.5% between November and December and 2.3% the previous month.
‘We expected the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years’, said the society’s director of mortgages Kim Kinnaird.
‘As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.’
The Halifax also flagged a slowdown in housing activity and mortgage approvals in the last few months of 2022, citing data from the Bank of England and the Royal Institution of Chartered Surveyors.
Nationwide building society reported a 0.6% monthly fall in prices in January after a 0.3% fall in December, with the average house valued at just over £258,000 or more than 3% below their August 2022 peak.
‘The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget’, observed the society’s chief economist Robert Gardner.
‘It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks’.
Although the surveys show different prices, this is due to the calculations that go into their models - what matters more is the direction and the trend in prices, which is quite clearly downward for now.
SELLERS FACING UP TO REALITY
Housing web portal Rightmove (RMV) reported a 0.9% increase in new seller average asking prices between December and January but no increase this month for the first time.
The latest average asking price of just over £362,000 is just 3.9% higher than a year ago as prices cool across the board.
The firm suggested sellers are heeding agents’ advice to price their properties right first time as there is more choice in the market than a year ago.
As a result, buyer enquiries are up and sales are down just 11% on 2019’s level compared with a 30% decline in the aftermath of the ‘mini-budget’ last September which crashed buyer confidence.
WHAT DOES IT MEAN FOR HOUSEBUILDERS?
In theory, a pick-up in enquiries, particularly by first-time buyers, should be good news for the new-build market.
Earlier this month, leading housebuilder Barratt Developments (BDEV) said it had seen a recovery in enquiries and reservations and nudged up its estimate for full-year completions, but its rebased dividend hinted at a double-digit fall in underlying earnings for the coming year.
Analysts at Deutsche Bank recently cut their recommendations on four of the housebuilders arguing the rebound in share prices from the lows in October was premature given falling consumer confidence and affordability issues.
Persimmon (PSN), which reports full-year earnings on 1 March, said in November it had seen cancellation rates spike as high as 28%, putting its full year completions target in question.
The firm also confirmed it had ended its capital return programme and would reveal its new dividend policy to shareholders with its results.
Rival Taylor Wimpey (TW.), which reports the following day, said recently cancellation rates had spiked to 23% in the second half of last year while net private reservations were down nearly 45% on 2021, but made no comment on its final dividend.
