Cheadle Property Market Update December 2022

We don’t think that there will be many people sorry to see the back of 2022. It has been an incredibly challenging and stressful year for many families. The outlook for 2023 appears to be pretty grim, with the cost of living crisis set to continue, and the country seemingly on strike every other week, however things can change quite quickly, so we like to be optimistic at the start of a New Year and of course try to look at the data to give us a steer on the direction of the local Cheadle Property Market, which after a good first half of 2022, descended into an unprecedented decline at the start of Q4 and from October to the end of the year, we saw both sellers and buyers pause for reflection and to wait and see what is next for the market, interest rates, house prices and mortgage repayments. 

As always, we try to cut through all the noise and hysteria whipped up in the national press and media, to offer a balanced view of how we see things, based on selling homes for over 25 years in the SK8 and SK3 area, through both good and challenging markets.

Here are the facts – UK house prices in December fell for the fourth month in a row, the longest run since 2008, as the average price of a home dropped to £262,068, according to Nationwide.

Annual house price growth also slowed sharply as the year drew to a close, to the lowest rate since mid-2020, with all regions of the country affected, according to the building society’s monthly survey.

For 2022 as a whole, Nationwide said property prices finished the year 2.8% above where they were at the end of last year, about a third of the pace of growth in 2021. The average price of a residential property in December fell to £262,068.

Soaring interest rates and the sharpest cost-of-living squeeze in memory strained affordability for many buyers, whose wages are falling further behind the worst bout of inflation in four decades. Mortgage rates are now near where they were in 2008 when housing costs were in the middle of a 16-month slump.

Robert Gardner, Nationwide’s chief economist, said: “It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labor market widely projected to weaken as the economy shrinks.

“A fourth monthly decline in the UK nationwide house price index shows the housing correction rumbling on in December. We see home values continuing to fall in the coming year as higher mortgage rates bite and the biggest squeeze on real incomes in a generation continues.”

The Bank of England lifted its key rate nine times over the past year, bringing the benchmark to 3.5%, which is also the highest since 2008. That’s set to hit mortgage holders hard, with those who need to remortgage likely to see their monthly payments double.

Nationwide forecasts a 5% fall in house prices in 2023, other forecasters have predicted anything from 3% to the more pessimistic forecasts of 30%, but pretty much everybody thinks there will be some correction in the market in 2023. 

What is happening with interest rates and inflation? 

Inflation – a measure of the cost of living – is at 10.7%. The Bank of England is raising rates in an attempt to bring it back down to its target of 2%.

By raising interest rates, borrowing becomes more expensive. The Bank has hiked rates nine times since December 2021, when the cost of borrowing stood at 0.1%, to its current level of 3.5%.

Its target CPI rate of inflation for a healthy economy is 2%, but inflation is currently 10.7%. But the risk is that higher interest rates will squeeze consumer and commercial borrowers too much, putting the economy in a recession, without significantly easing the cost-of-living crisis.

Bank of England governor Andrew Bailey said inflation could begin to fall back from the middle of next year. The Bank of England also said the UK could be on course for its longest recession since reliable records began a century ago.  The longest recession, in 2008, lasted for 18 months (or five consecutive quarters).

It is this uncertainty which is causing buyers and sellers to hang fire. 

How do interest rate rises affect mortgages?

If you’re on a tracker, standard variable rate (SVR) or variable, your payments will rise almost immediately in response to the latest base rate hike. These products move in line with the Bank of England, so when it rises, your payments rise, and when it falls, your bills fall, too.

With 850,000 properties on tracker mortgages and 1.1 million on standard variable rates, one in four mortgage customers have seen their mortgage payments rise every six weeks since December 2021.

After a base rate change, your lender will write to you and let you know how you will be affected. Your mortgage contract should explain how quickly these changes should take effect.

How much will my variable mortgage go up by?

To give an example, on 23 September, the bank raised rates by 0.5% to 2.25%. That hike meant a homeowner with a 75% LTV on a £270,700 property would be paying £196 per month more than in November last year. Repayments for the average home also rose by an average of £52 a month.

A rise of 0.50% on the current average SVR of 6.40% would add approximately £1,509 onto total repayments over two years.

New listings Low in December 

So, lets drill down into the micro market of SK8 and SK3 and see if we can glean anything from the data. 

Interestingly, the number of new properties listed in December 2022 – 70 was only 2.7% lower than the previous year, so nothing too remarkable there. There was a 37.5% increase on the number of detached homes for sale and a huge 100% increase on the number of flats, however there was an 8.3% drop in the number of semi-detached homes listed, 16% less terraced homes and a 28.5% drop in the number of bungalows. We think the acid test will come in Q1 of 2023, where we will see if more sellers are forced to sell for financial reasons, and there will almost certainly be more of what we call “the need to movers”, people moving for a reason – births, deaths, employment, schools, matrimonial reasons, so we would expect to see a greater choice of listings from January onwards. 

Buyer apathy continues 

The second graphic demonstrates clearly why it will be so important sellers to price their homes competitively if they want to sell. 

It really emphasizes the law of supply and demand. The average number of properties available on Rightmove in December 2022 was 472, which when you compare that to the 318 available in December 2021, shows a 48.4% increase in available stock. This of course is made up of the number of fall throughs that were previously sold, more so than new stock coming onto the market. 

The second set of stats shows the average daily property views by prospective buyers on Rightmove, which was a disappointing 60 in December 2022, against 120.5 in December 2021. This was a drop of just over 50% on the previous year and a reflection of the wait and see policy being adopted both locally and nationally. 

We will be curious to see if there is much of an increase in January and that should give us a better idea of buyer confidence and intentions for the first half of the year. 

House Prices under pressure and some correction anticipated

Detached homes in SK8, which includes Cheadle, Cheadle Hulme, Gatley and Heald Green still ended the year up in value by 5.3% at £508,000. Semi detached homes were up a healthy 10.9% and now average at £363,600. Terraces were up 5.1%  to £281,600 and flats up a modest 2% over the twelve month period to an average of £181,000. 

Detached homes in SK3 which covers Cheadle Heath and Edgeley, haven’t faired quite as well and have dropped 7.6% over the year and now stand at an average of £337,250. Semi detached homes were up a whopping 12.1% and now average out at £255,707. Terraced homes went up 8.3% and they are now an average of £196,738 and flats dropped 1.5%  to an average of £140, 840

Sales slump in December

Finally, lets look at the sales figures for December and these are a little grim. As you will see, overall, the number of sales in the local area dropped 47% from the previous year. 

The number of sales dropped in every category of property – detached, semi-detached, terraces, bungalows and flats, with the most significant drop in the numbers of semi-detached homes, bungalows and terraces, down 50%, 71% and 61% respectively. 

Summary

The continuing pressure on household budgets, rising interest rates and mortgage repayments had a significant impact on the local property market in December, as it did around the country. 

Whilst we are loath to put figures on the scale of any house price correction in 2023, we do feel that prices will come down, but to what extent remains to be seen. What is important to bear in mind, that even a correction of 10% would still have prices above pre pandemic levels, so it is important for sellers not to get too hung up on what they might achieve for their own property, but the differential between what they achieve and what they pay for another property, as they are going to pay less for another home.

There are buyers still out there and plenty who would buy, but with the high cost of borrowing and cost of living crisis, they will only buy at the right price. Many other are still adopting a watching brief and waiting to see which way the market falls and whether there is an increase in supply, a drop in prices or a further drop in interest rates. A lot to ponder! But we have already seen a significant increase in the number of enquires and viewings being booked since coming back to work after the holiday break which is encouraging.  

What is important for sellers is choosing a well-established agent with a much wider marketing mix than just listing a house on the property portals such as Rightmove. This will include social media, an established database and groups of pre-qualified buyers ready and waiting for the right home to come on to the market. 

If you are undecided on whether now is the right time to sell or you would like to know where you should position your asking price to sell in 2023, please contact Joe, Patrick or Maurice and arrange for a FREE market appraisal of your home on 0161 428 3663, e-mail sales@mkiea.co.uk or why not pop into our office on Cheadle High Street for an informal chat. Alternatively, you can book an appointment online following the link below.

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