March has witnessed a surprising yet welcome development as the average asking price for UK homes jumped by £5,279, reaching nearly £370,000. This 1.5% increase is the most substantial monthly growth observed in the past 10 months, outpacing the usual March average of 1%. This shift is attributed to a blend of increased buyer demand and stronger house sales, signaling a market that is picking itself up after the previous year’s lull.
Rightmove, the UK’s largest property website, has reported that the average asking price is just £4,776 shy of the May 2023 peak. Comparatively, last week Halifax reported that the average UK house price is just £1,800 below the peak recorded in June 2022, further emphasising the market’s rebound.
The Drivers of Change
The resurgence in buyer interest has been particularly pronounced this month, with estate agents across the board noting a significant increase in demand. This increased interest is partly due to more people recognising a window of opportunity to purchase homes at competitive prices. Tim Bannister, the director of property science innovation at Rightmove, highlighted that the number of sales agreed upon since March’s start is 13% higher than the same period last year, with larger homes primarily driving this surge in demand.
An interesting development in buyer behavior is the increased selectiveness, leading to a dichotomy in the market. Properties priced attractively are being quickly snapped up, whereas those with steeper asking prices linger longer on the market. This has pushed the average time to find a buyer to 71 days, the highest for this time of year since 2019.
London Leads the Way
London has experienced the most significant boost in buyer demand, particularly for high-end properties. Factors such as the gradual return to office work, wage increases, stable house prices, and a slowdown in inflation have all contributed to renewing interest in living in the capital. This trend underscores the dynamic nature of the market and the various factors influencing buyer decisions.
The Mortgage Market
Despite the positive momentum in house sales and prices, the mortgage market remains a mixed bag. Over recent weeks, there has been a noticeable creep in mortgage rates, with the average five-year mortgage rate climbing from 4.64% to 4.84%. This fluctuation continues to challenge buyer affordability, highlighting the unpredictable nature of the mortgage market, which sees rates rise and fall in response to the latest economic data.
Optimism with a Note of Caution
The first quarter of the year has painted a more positive picture than many anticipated, with Tim Bannister noting the market’s robust start, “It’s been a positive first three months of the year for the market and better than many anticipated. However, we know from last year how quickly the picture can change. Sellers are right to feel more confident and optimistic this year, but buyer affordability remains stretched and higher mortgage rates are an ongoing challenge. With the market still sensitive to pricing and external events, some caution and willingness to negotiate is advised.”