5 updates on housing prices, transactions, affordability, and more

10 July 2023

Costas Frangeskou, Goodlord's Director of Growth, delves into the latest pricing, transaction, and affordability data - which outlines a mixed view of the housing market.

Although the rental market is seeing a lot of change, the sales market is also moving through a turbulent period. Here's a breakdown of just some of the latest trends that have cropped up that may affect your estate agency activities in the coming months. 

1. Residential sales trend downwards year on year

Data from HMRC has shone a light on how sales trends compare to last year and last month. While the year on year comparison is less than rosy - with sales at 25% lower than in May 2022 - the number of transactions was 10% higher than in April.

However, when taking into account seasonality, sales dropped by 3% between April and May. They're also around 20% lower than before the pandemic. This could be attributed to inflation and interest rates affecting buying decisions.

2. House prices rise slightly

House prices have confounded economists with a slight increase between May and June of 0.1% on average - despite predictions that they would fall by 0.3%.

As with transaction data, prices trended lower than last year, at 3.5% less than 2022. But, overall, the month on month data shows relative stability in the market, which should be taken as a positive - however short lived it may be as more fixed-term mortgages come to an end.

3. Affordability of house buyers

On that note, let's take a look at affordability. House prices currently sit at 8.8 times the average household income - which means more than double since the 1970s when taking into account inflation.

That affordability ratio has been increasing since the 1970s when it was at 4.1 times earnings. Although mortgage approvals increased in May by 3%, stress tests may start to prove more restrictive as interest rates rise.

4. A mortgage charter - but too little, too late?

Mortgage rates have peaked above the 6% mark for some lenders, for both two and five-year deals, after the jump in base rate. Even before this news hit the headlines, the government held a crisis meeting to discuss support for homeowners.

Prime Minister Rishi Sunak had previously said there would be no direct Treasury support for mortgage holders.

However, it worked with lenders to create a mortgage charter to help protect homeowners, with measures such as customers being protected from repossession for the first 12 months of falling into mortgage arrears.

Buy-to-let mortgages will not been included in these measures.

5. Positive movement in the buy-to-let market

That said, despite a dip in residential sales, the buy-to-let investment market is on the up.

The headlines suggest it's all doom and gloom, and yet investor sentiment has improved, with four in ten landlords planning to buy more properties in the next year, according to a recent survey.

This trend is most visible with investors with portfolios of 11-20 properties. The top reason given? The growing demand from tenants tempting investors thanks to the potential for high rental yields.

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