The negative effects of higher mortgage rates on affordability were overestimated throughout 2023 with house prices dropping 1-2% rather than the forecast 6%, research from TwentyCi reveals.
Its latest Property and Homemover Report shows new instructions were up by 2% compared to 2022 and continued to average around 400,000 per quarter.
CORE OF ACTIVITY
Although a proportion of these new listings were a consequence of homeowners struggling to afford increased mortgage payments and therefore downsizing or selling up, there was still a substantial and solid core of activity.
On average, sellers across the UK achieved 96.6% of their original asking price, a decrease from the 99.4% achieved in 2022 and dropped by 20% to around one million sales – similar to pre-pandemic levels – with fall throughs have declining 14% year on year.
Alex Bannister, Economist
Alex Bannister, Economist and Independent Board Advisor to TwentyCi, says: “A year ago, the consensus forecast suggested residential property prices in the UK would drop by 6% in 2023 amidst a shrinking economy and a view that property was substantially overvalued.
“In reality, house prices dropped by around 1-2% and the economy skirted recession despite higher-than-expected mortgage rates. Transaction levels dropped by 20% to return to pre-pandemic levels of around 1 million sales in 2023.
OVERESTIMATED
And he adds: “It appears most commentators overestimated the negative effects of higher mortgage rates on affordability and while sellers reduced asking prices, this did little to reverse the pandemic-driven surge.”
“It’s impossible to guess the net effect of events such as the conflicts in Ukraine or the Middle East and a UK general election/related giveaway budget. Assuming these have minimal impact, and the labour market remains robust with inflation under control, there is no obvious trigger for a further reduction in average UK house prices.”
Colin Bradshaw, TwentyCI
Colin Bradshaw, TwentyCi Chief Executive, says: “Many sellers have been overly optimistic about pricing, and it seems the tide is finally changing.
“Mortgage affordability and increased supply are forcing a shift in properties with overinflated pricing.
“The housing market is holding up rather well despite everything being thrown at it.
I am not saying all is rosy in the garden, rather given the circumstances 2023 could have been a whole lot worse.”
