There are growing signs of changing trends in the housing market as more homeowners appear to be downsizing in the face of the cost-of-living crisis.
According to the Q3 Property & Homemovers Report from property and data insight specialist, TwentyCi, the housing stock squeeze is beginning to ease.
Despite being significantly lower than historical norms most regions now have between 2.5-3 months of supply as of September 2022, up from two months last quarter. This could be a sign that homeowners are beginning to reassess their housing needs as energy and food prices soar.
At the peak of the pandemic demand for rural four-plus bedroom homes were at a premium, however, with rising costs homeowners could potentially be looking to scale back down to two- and three-bedroom properties.
The figures also show that sales agreed have increased by 7.7% since Q3 2019 (the last ‘normal’ period of performance within the residential property market, prior to the impact of Covid-19), while exchanges are up by 6.8% highlighting the continued buoyancy in the homemoving market and the high level of transactions post pandemic.
The residential property market remains a seller’s one with prices changes and withdrawals staying low as sellers find less of a need to discount or remain in their property when sales can be achieved more quickly.
In contrast, in a potential sign of market pressure there has been a marked increase in fallen through transactions – hitting 20% – which could be due to rises in interest rates and the withdrawal of mortgage offers and products.
The continued short supply of stock and high demand has underpinned strong gains across all regions since Q3 2019. The average asking price is now £435,000 in comparison to £344,000 in Q3 2019, an increase of 23%. Wales and the West Midlands have realised the highest increase in asking prices, both experiencing 28% growth.
Sales agreed across the whole of the UK were 9% higher in Q3 2022 than in the same period in 2019. Inner London has seen a significant rebound realising a growth of 22.5 per cent since Q3 2019. This is unsurprising given the drop in sales the capital experienced during the pandemic.
However, another potential indicator of a softening market is the fact that the picture is not uniformly positive across all regions.
Six major cities have experienced drops or stagnation in sales agreed including Edinburgh (-1.7%), Nottingham (-1%), Plymouth (-0.2%), Manchester (-0.1%), Norwich (0.3%) and Sheffield (0.9%).
At the beginning of October 2022, there were nearly 1.55 million households progressing through the home-mover, owner-occupied journey. Almost 401,000 homeowners are wanting to move soon suggesting that demand for relocation remains strong. It might also support the change in market demographics, with an emerging trend for downsizing in the wake of the cost-of-living crisis.
As far as the letting market is concerned, the sector continues to face challenges. In Q3 2022 new instructions were down by 25% and lets agreed dropped by 19%. There is a marked supply and availability issue as some landlords withdraw from the market due to tax changes.
The average asking price was £1,605 per month, 19% higher than in Q3 2019. Lack of stock, which now sits at an average of just 1.5 months across all regions, and continued demand are the key drivers of higher rental prices.
Colin Bradshaw, MD of TwentyCi, said: “Whilst we still have not seen a recalibration of the housing market there are signs that we will start to see change. However, if homeowners do look to downsize in response to the cost-of-living crisis then the number of householders in the homemoving journey will remain high.
“For many sectors, this could provide a significant lifeline as the value of this market is significant because of their propensity to spend.”