“There have not been mass repossessions and although many landlords have exited the market, the exodus has not been as severe as feared. Those who don’t have to sell either stay off the market or test it and if no buyer bites, withdraw and stay put”
– Jonathan Rolande – NAPB
There is rarely a quiet year in the property market and 2023 has been no different. On the plus side, we’ve not had lockdown or covid to contend with. And there wasn’t a disastrous mini-budget for us to contend with either.
But there have still been huge challenges, and they are likely to continue into 2024.
As we move into the New Year the lessons learned from the past 12 months can be used to try and map out a more prosperous future.
Here are the five biggest lessons I’ve learned in 2023:
Lack of Supply
In a market where buyers hold more cards, it’s usual for more and more properties to come to market and by remaining unsold, the level of stock rises, triggering further reductions in prices. Unusually, this hasn’t been the case in 2023. The equilibrium between the number of buyers and sellers means that in most locations, there is a buyer for every property, as long as it is competitively priced.
There have not been mass repossessions and although many landlords have exited the market, the exodus has not been as severe as feared. Those who don’t have to sell either stay off the market or test it and if no buyer bites, withdraw and stay put.
The number of desperate sellers remains thankfully low, supporting prices but the lack of stock has a downside too. With less choice, many potential buyers are put off, unable to find what they like. This isn’t good in the long term, a steady flow of buyers and sellers is essential for a well-functioning market.
Revolving door of Housing Ministers
Chaos and lack of focus at the top of government over many years have allowed the property supply problem to worsen. Caught between a need for more than 300,000 newly built homes a year and a lack of urgency from property developers as well as local objections no housing minister has yet cut through to get the job underway.
Michael Gove looked the most likely to kickstart the market when he blamed large housebuilders but momentum was lost as the market slipped away and yet more Housing Ministers came and went. Lee Rowley is the 16th since 2010.
Rates
Six interest rate rises understandably dampened the market and consumer spending as it was intended to do. Extreme pressure has been placed upon homeowners not lucky enough to have a fixed rate mortgage, and landlords, the latter often passing the pain on to their tenants by way of rent increases.
Many were pushed to just short of breaking point and bank forbearance has helped those pushed just beyond it. More rate rises in 2024 will be felt very acutely, especially as millions have gradually come off fixed-rate loans in the meantime.
Price drops
Wished for by many hoping to snag a bargain, in fact, rapid and/or substantial drops in price are a bad thing for everybody. Why? To think that lower prices improve affordability is usually wrong. A crumbling housing market would lead to job losses in construction and all of the associated businesses that rely on movers.
And why would prices fall? Only if the rest of the economy was doing badly. Or if rates had had to increase to the 15% mark as they did in the 1990’s. Those like me, in the property sector don’t want or need prices to increase rapidly as they did post-lockdown. A more steady, reliable market is better for us, and for homeowners and those who want to own their own property.
And finally…
It could have been worse; If, last December I was told everything that would happen in the next 12 months I would have predicted a property market disaster and dramatic price falls. Instead, we have had a more managed slowdown despite all of the ingredients in place to have been so much worse. The market is still near the cliff edge but has not tipped over it yet.
