By Evgenia Petrova
The days of enthusiastic house price growth seem to be behind us, and the property market is now facing a biting reality. We are entering a future of low wages, high taxes and high consumer prices – all of which are dragging down house prices.
House prices appear to be softening, but accounts still differ. Latest figures reported by Rightmove suggest house prices are still going up, with the average house price put on sale in October up 0.9% compared to September. Yet, demand has dropped by 21% from first-time buyers. It is no wonder as it’s the first-time buyers who are bearing the brunt of the rising mortgage costs. After the disastrous mini budget, about 1,000 mortgage deals have been pulled from the market to be repriced. An average five-year fixed rate mortgage is now being offered at over 6%.
Buyers that can afford a higher rate are now wondering if they should proceed with their purchases or wait for a market downturn. Agents report price cuts, agreed sales falling through and a decline in new valuation requests. The FT highlights that about 300,000 borrowers come to the end of their fixed mortgage term every month, so the effect of rising mortgage costs will trickle down slowly but surely to the market. The best rates are now double what they were at the beginning of the year and there is talk of them trebling soon.
How can the home sellers weather the storm?
- Do not be seduced to overvalue. Realistic pricing is the key to moving a sale along in the current climate. Even if your property is best in class and likely to attract interest, many investors are expecting discounts. Be prepared to negotiate, of course, but if the pricing is realistic to begin with, you will be in a stronger position later.
- Take action now. If your property is on the market already and you have not had second viewings or offers, do not expect the market to improve and consider a realistic price cut. Some market experts and economists are predicting a deep recession from early next year, so a 5-10% price correction now, will seem like a big win if the prices drop even further.
- Stay put and invest in your property. Energy efficiency is one of the key considerations for buyers of new homes. Do the work now to reap the benefits later.