In the last quarter of 2023, the UK housing market continued to experience a slowdown, with house prices falling by 0.6%. This decrease marks the second consecutive quarter of negative growth, impacting both the broader UK and specifically London markets, according to the latest Property Market Index Review from Benham and Reeves.
Adjusting Expectations Amid High Mortgage Rates
As mortgage rates remain high, a significant shift has occurred in the expectations of sellers and the capabilities of buyers. This adjustment has led to a narrowing in the gap between the price sellers expect and what buyers are actually paying, reflecting a mutual adaptation to the economic conditions. In the last quarter of 2023, the average house price in the UK was recorded at £302,912, showing a 0.6% decline from the previous quarter and a 1.4% drop on an annual basis.
London Market
London’s housing market has felt a steeper decline. The average house price in the capital fell to £563,459 in the third quarter of 2023, down by 0.9% from the previous quarter and 2.5% lower annually. This indicates a stronger reluctance among London sellers to lower their asking prices compared to their counterparts across the UK.
The Price Gap
The gap between the average asking price and the final sale price across the UK has shown signs of closing. By the end of 2023, this gap had narrowed to 21.7%, with the average sold price standing at £283,285, compared to an asking price of £361,811. However, in London, this gap widened slightly, indicating a tougher negotiation process, where sellers held out for better offers despite prevailing market conditions.
Expert Insight
Marc von Grundherr, director of Benham and Reeves, commented on the trends: “A further marginal cooling in house prices during the closing stages of last year was only to be expected given the ongoing headwinds of higher mortgage rates which continued to dampen market activity on the buyer side of the market.”
He added, “The good news is that it looks as though buyers and sellers are coming to terms with this new normal of higher borrowing costs, with both parties seemingly more willing to meet in the middle in order to progress with their plans to move. Interestingly, London’s sellers have been less willing to adjust their expectations and while this may have resulted in a reduction in overall market activity across the capital, those who do secure a buyer are doing so at a higher percentage of asking price.”
Looking Ahead
As the market moves into 2024, early indicators suggest a possible rebound in both mortgage market activity and house prices. “It will be interesting to see how the market performs over the year ahead, with mortgage market activity and house prices already starting to regain momentum,” said von Grundherr. This potential recovery could lead to a tightening in the gap between asking and sold prices, sparking a competitive atmosphere as buyers vie for available properties.