Cheadle Property Market Update January 2023

January has been a long month for most families and the economic outlook remains uncertain at best to give precious little comfort. We have seen more strikes, the cost-of-living crisis getting worse and only yesterday, the Bank of England increased interest rates again by 0.5% to 4% – the tenth monthly increase in a row, and currently the highest they have been for fourteen years. 

In addition to this Britain’s beleaguered home sellers saw a bigger than expected 0.6% drop in house price values in January and are now 3.2% below their peak in August, following a surge in borrowing costs and broader inflationary pressures, mortgage lender the Nationwide Building Society said earlier in the week. 

January’s decline in house prices was the fourth drop in a row and twice the size expected by most market observers, adding to signs that the market slowdown is gathering momentum. 

Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”, which sent the financial markets into meltdown and interest rates soaring.

According to the Nationwide’s chief economist, Robert Gardner “It will be hard for the market to regain much momentum in the near future 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,” 

The Nationwide forecast in November 2022 house prices would fall 5% in 2023.

House prices in January were 1.1% higher than a year earlier, Nationwide said, the smallest year-on-year increase since June 2020 and down from a 2.8% increase in December. 

British house prices soared by more than a quarter during the COVID-19 pandemic, boosted by ultra-low interest rates, tax incentives and broader demand for more living space during lockdown, which was seen in other Western countries too. However, the boom has now gone into reverse, accelerated by disruption to lending since the mini budget.

The Bank of England reported on Tuesday that the number of mortgages approved in December fell to its lowest since the global financial crisis, excluding the very start of the COVID-19 pandemic when there were strict lockdown restrictions.

Gardner said this fall reflected a drop in mortgage applications after the mini-budget, and that it was too soon to know if the volume of house purchases would recover.

While lenders are now more willing to offer mortgages than just after the mini-budget, the BoE has steadily raised interest rates, and home buyers are rightly a little reticent and many don’t know whether to stick or twist. 

If you’re looking to buy a home right now, or you’re coming to the end of a fixed-rate mortgage deal, you’ll no doubt be concerned at the direction of interest rates. If you are in a current fixed term deal, you are safe for now! especially, after the Bank of England (BoE) has announced another interest rate rise of 0.5%, which takes the Bank’s Base Rate to 4%. This is the 10th rise by the Bank’s Monetary Policy Committee (MPC) since December 2021, and interest rates are now at the highest they’ve been since 2008.

But if you’re buying a home, it is important to perhaps bear in mind an interest rate rise doesn’t necessarily mean it’s now going to be more expensive to get a mortgage. That’s because this month’s rise had been widely expected by lenders. The ‘Base Rate’ is set by the Bank of England and is the interest rate it charges to other banks and financial institutions when they borrow money. It’s also used to control inflation.

The BoE has said it would continue to raise the Base Rate to help combat high inflation. The Government sets the Bank of England an inflation target of 2%, but the current level is much higher, at 10.5%.

What is outlook for UK interest rates? 

The BoE Base Rate is forecasted to increase in the first half of the year, but not by as much as the market first thought in the aftermath of the mini budget. This month’s 0.5% increase has already been factored into market forecasts. The current view is that Base Rate may rise to about 4.5% by the Summer, when it’s expected to peak. And after that, it’s thought they should start to come down – but this will be dependent on many economic factors. 

Will mortgage rates go down?

Mortgage rates started to fall towards the end of last year. And even if the Base Rate goes up, mortgage rates are expected to keep going down.

This is because we’re now back in a period of relative stability, compared to the period after the announcement of the Truss/Kwarteng mini budget, which shocked the markets, and many lenders withdrew mortgage products from the market immediately.

But lenders have now priced in higher interest rates, so even though the Bank’s Base Rate increased again in November and December last year, mortgage rates have been gradually reducing from the previously high levels they were at after the mini-budget announcements.

Is now a good time to buy a home?

The mortgage market is now looking more positive compared to the last three months of 2022, which should give people more certainty and confidence ahead of the traditionally busy spring home-moving season. 

The pace at which mortgage rates have been cut over the last few weeks is a clear indication that there is growing competition among lenders. This can only be a good thing for borrowers, as it will mean more choice and availability of mortgage products. This should reassure people that UK lenders can and will continue to lend.

So, what about the outlook for the SK8 and SK3 property market? And what have we seen so far since the start of the year. Is there anything in the data that can reassure buyers and sellers? Well, maybe not in the data itself, but since we came back after the Christmas and New Year break, we have been considerably busier than many of us expected, with a steady number of listings and a lot more buyers registering, viewing and offering, which is encouraging, although this does not seem to be being repeated across the area looking at the figures.  

Sluggish start for new listings 

Clearly, looking at the first graphic the uncertainty is affecting seller’s confidence generally across the SK8 and SK3 area and the number of new listings that came onto the market in January 2023 is down 21% on January 2023, down from 145 to just 114. The biggest drop was in the number of bungalows, down 44% and terraced houses down 39%. Semi detached homes were also in shorter supply down 19% and detached homes down 9.5%. Strangely though the number of flats coming to the market increased by 8% – The next couple of months should prove interesting, but obviously with such a low number of new homes coming available, this will help offset downward pressure on prices, but it is still more important than ever to market any home going on the market at the right price if sellers wish to attract serious interest. 

Stock levels grow but buyers unimpressed

Perhaps the starkest sign of where the market is at the moment, is reflected in the second graphic. The stock level of available properties has risen almost 35% from 391 in 2022 to 526 in 2023 but given that the number of new listings is down, this would suggest there have been a huge number of sales which must have fallen through and flooded back onto the market. However, the number of daily property views on Rightmove is down 48% from 184 in January 2022, to just 96 in 2023. It is so important that sellers now price their homes competitively to stand out from the crowd and attract buyers attention. 

Prices holding firm – but do they need to drop? 

Somewhat against the national trend, house prices in SK8 are holding firm! At least for now with detached houses up on a month ago and year on year up 6.2% and now stand at an average of £513,000. Semi detached homes are now worth an average of £369,500, up 12.6% year on year, terraced homes are now £282,500 up 5.1% and flats now stand at an average of £182,000, up 2.1% year on year. 

In SK3 detached houses are now standing at an average of £371,031 up 1.2% year on year. Semi detached homes are up a healthy 11% and stand at £255,212, terraced homes are an average of £197,725 up 8.3% year on year and flats in the area are up 7.2% and now average out at £146,500 

Sales continue to fall

Reflecting the downward trend in buyer enquiries, sales have dropped 21% on the same period last year. The biggest drops were in the number of detached homes down 45% and flats down 50%, but the number of semi detached homes sold, bucked the trend and actually increased on a year ago by 13% up from 39 to 44. Terraced home and bungalow sales were also down 22% and 17% respectively. It remains to be seen whether this will pick up during the remainder of Q1.

Summary

It is clear that the market is shifting, albeit not as quickly in SK8 and SK3 as other areas of the country, but the most worrying aspect must be the general apathy amongst potential home buyers. There is clearly a pool of buyers who are looking on a “need to move” basis, which is encouraging but if the number of homes coming onto the market continues to rise, this will inevitably cause downward pressure on prices. 

The continuing pressure on household budgets, rising interest rates and mortgage repayments are holding buyers back, but with the Bank of England softening their forecast on the outlook for the economy and a feeling that interest rates will reach a maximum of 4.5% before starting to drop back after the Summer, the local housing market may not be as badly hit as originally forecast. 

With most housing market commentators and forecasters predicting a 10% correction in house prices in 2023 and the Nationwide suggesting  a 5% drop, it is important to remember that if you are selling your home and you have to reflect this in your asking price, the properties you might be looking at are coming down too. With less buyers looking, only the most competitive properties will stand out and attract viewings and if you have to start reducing your asking price, it simply doesn’t have the same effect. 

What is important for sellers is choosing a well-established, experienced agent who is used to operating in more challenging markets and is equipped with the widest  marketing mix to reach the serious buyers looking at the moment. Simply listing a house on the property portals such as Rightmove and relying on those enquiries, when they are 50% down is not going to cut it. Agents now need good social media presence, an established database and groups of pre-qualified buyers ready and waiting for the right home to come on to the market, whom they are in contact with constantly. 

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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