The third quarter of 2021 showcased a notable downtrend in the housing sector, particularly in England and Wales, according to Street.co.uk’s latest market report.
Residential property sales across England and Wales experienced a notable decline in the recent quarter, with transactions dropping by 12%. This downtrend was not solely confined to completed sales but also extended to sales agreements, which saw an even steeper decline of 15%.
Interestingly, this descent wasn’t uniform across all regions. The East Midlands bore the brunt of the decline, leading the pack, closely trailed by the South East. This regional disparity hints at underlying factors influencing buyer decisions and market dynamics, pivotal for potential investors to understand.
Property Sizes: Smaller May Be Steadier
Not all property types were equally affected. Smaller properties, specifically those with one or two bedrooms, witnessed more modest declines. In stark contrast, larger residences featuring four or five bedrooms encountered a sharper decrease in sales agreements.
This trend suggests a potential shift in buyer preferences or financial capabilities, possibly driven by the current economic climate, lending criteria, or a reassessment of living needs in the post-pandemic era.
The Southern Struggle: High Prices, Higher Hurdles
The South, known for its pricier housing market, seems to be bearing a disproportionate share of the impact, particularly affected by the uptick in mortgage rates. As Heather Staff, co-founder of Street Group, explains, the financial strain is acuter in high-value regions.
Increased mortgage costs, coupled with dwindling savings, present significant hurdles for buyers in these areas. Conversely, regions like the North East and North West, where property values are comparatively lower, are weathering these conditions better. Here, buyers find their budgets stretching further, making property acquisition a less daunting prospect.
Interest Rates and Future Forecasts
Despite the present challenges, there’s a silver lining. The Bank of England’s decision to hold the base rate at 5.25% offers a glimmer of hope. Staff anticipates this move might prompt lenders to slash their rates to stay competitive, potentially reinvigorating the market come the fourth quarter.
However, any significant upturn might not be immediate. Seasonal trends typically influence property sales, often slowing down towards the year’s end as people’s focus shifts to the holidays. Yet, there’s an expectation for an uptick in new listings, fueled by hopeful sellers planning moves in the New Year.
Q4 Expectations: Slow but Stable
Looking ahead, Q4 is expected to maintain the slow tempo in sales agreements, continuing the trend witnessed in recent months. However, even with this deceleration, the market is projected to perform 15% below the five-year average, an improvement from Q4 of the previous year.
This forecast suggests that while the market is experiencing turbulence, it’s not in freefall. Stability, even amidst a slowdown, indicates inherent resilience—a crucial takeaway for current and prospective property investors navigating the uncertainties of the housing market.