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Completed sales volumes in prime London remained relatively strong in February, down just 9.1% compared to the pre-Covid average for the month reflecting a pipeline of 2022 agreed sales. Also the number of properties under offer, a leading indicator for sales, was actually 10.5% higher than the pre-pandemic average. But new mortgage approvals in January were at their lowest level since 2011, -40.8% down on their pre-Covid 2017-19 average, according to the Bank of England, a low which is yet to be reflected in completed sales figures.
The ratio of new sales to new instructions across the market as a whole has returned to pre-Covid levels, 14% higher than February last year and 23.6% higher than pre-pandemic. Albeit that this has required sellers to continue to adjust their price expectations. The headline measure of achieved prices in prime London are only down 2.8% over the last year. However, it is the discount to asking price that really highlights how pricing reality has changed relative to expectations over the last few months. The average discount to asking price stood at -8.4% in February. With the current discount for homes selling in under three months being -3.5% and between six to twelve months is now -9.6%, compared to only -1.7% and -7.3% respectively in September last year. The data supports that the average increase has occurred irrespective of the time it takes to sell.
The high interest rates are particularly deterring mortgaged home movers, with their numbers in December down by -6% compared to their 2017-19 average for the month. As they are often more discretionary buyers, there is little incentive for them to move while mortgage rates are high and the economic backdrop is uncertain. It’s also true that higher-value markets, where there is less reliance on mortgage debt, have fared comparatively better so far this year. Prices continue to realign to this higher interest rate environment which favours cash rich buyers, whose numbers are up 10% in November on their pre-covid average. Early this month saw Nationwide release its latest house price index, which recorded a sixth successive monthly fall in the value of the average UK home. With values falling by -3.7% since August last year, annual house prices moved into negative territory at -1.1%.
First time buyers have remained undaunted so far, with their numbers 8% higher in December than the pre-Covid average. Despite the challenges of securing a mortgage with the current high rates, high levels of rental growth and fierce competition for rental stock provide them with a strong incentive to access the housing ladder if they can.
Current figures certainly suggest that market activity will remain robust. The number of new prospective buyers registering in the UK was 10% above the five-year average in February and the number of offers accepted was 42% higher. However, exchanges were down by a quarter, highlighting the prolonged nature of the hangover following last September’s mini-Budget.
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