The housing market in Wales has shown signs of revitalisation recently. As mortgage rates begin to soften, a surge in property demand has nudged prices closer to their previous peaks, giving an optimistic picture for the region’s property market.
After a period of relative stagnation, the Welsh housing market is witnessing a rise. According to the latest research by Savills, the demand for properties in Wales has seen a significant resurgence in the past four months. This renewed interest has been fueled, in part, by easing mortgage rates, which have helped lift house prices to just 3.6% below the highs recorded in late 2022.
Data from Nationwide corroborates this positive trend, indicating a 1.3% increase in house prices over the year to Q1 2024, with a 1.2% rise recorded in the first quarter alone. Despite this encouraging development, Savills cautions that the road ahead may still hold challenges. Their current forecasts suggest a potential 2.0% dip in Welsh house prices throughout 2024, although they hint that this could be an underestimate, suggesting the actual outcome may be more favorable.
The Road to Recovery
The path to a full market recovery, however, is not without its obstacles. Affordability remains a pressing concern for many, with a true rebound contingent upon further reductions in interest rates, as anticipated by financial markets. Yet, there’s a silver lining: Savills predicts that house prices in Wales are set to outshine the UK average over the next five years, with an impressive projected growth rate of 21.4% — the highest of any UK region. This optimistic forecast hinges on the expectation that falling base rates will lead to reduced mortgage rates, thereby improving overall affordability.
Interestingly, the affordability crunch in Wales is reportedly less severe than in other parts of the UK, suggesting that the Welsh market may be poised for an earlier recovery. This is a pivotal factor that could set Wales apart, enabling a swifter return to a more robust and dynamic housing market.
A Slow but Steady Increase in Transactions
Despite these positive indicators, the housing market in Wales has been experiencing below-average transaction activity, a trend that has intensified in recent months. The period leading up to January 2024 witnessed the lowest number of transactions in a three-month span since early 2015, with the exception of the mid-2020 anomaly. This decline in activity can be attributed to various factors, including delays in reaching completion.
However, there’s reason for optimism. The recent increase in sales agreements signals a potential shift towards a more active market. This emerging trend suggests that while transactions may continue to lag in the short term, the overall market sentiment is improving, pointing towards a brighter future for the Welsh housing market in 2023 and beyond.