Housing market update October 2023

House prices continued to slide in September, although analysts have also noted an uptick in consumer confidence. Meanwhile, rents are still rising despite tenants’ growing struggle to afford them.

• Zoopla reported the first year-on-year fall in house prices since 2012. According to their latest report, prices in September 2023 were 0.5% lower than a year earlier.
• Zoopla also reports an uptick in housing demand as measured through estate agent enquiries, thanks to lower mortgage rates improving consumer confidence. The number of agreed sales has also risen.
• Nationwide reports a much bigger year-on-year fall in house prices. Their September House Price Index recorded a 5.3% drop, knocking around £14,500 off the average price of a home.
• The fall is even bigger if you look at it in real terms, according to Savills. Their analysis shows that nominal prices have fallen 2.8% since March 2022, but thanks to high inflation, the real-terms fall is a whopping 13.4%.
• The market is proving especially tough for first-time buyers. The latest Halifax First-Time Buyer Review projects that 186,000 people will purchase their first home in 2023, down by almost 25% compared to last year.
• Those who do get onto the housing ladder are taking riskier steps to get there. The Bank of England has raised concerns over the sudden rise in buyers taking out marathon mortgages of 35 years or more. Around 12% of new mortgages in Q2 2023 were for 35 years or more, compared to 4% in Q1, and the Bank warns that this could lead to debt problems in the long term.
• While house prices fall, rents are still reaching new heights. The Hamptons Monthly Lettings Index for August recorded a 12% year-on-year rise in rents, and 9% excluding London.
• Zoopla predicts that rental growth could be held back by affordability in the near future. Their September 2023 Rental Market Report found that rents for new lets had risen 10.5% year on year compared to 12% the same time last year. The platform expects rental growth for 2023 to be 9%, then fall to 5-6% in 2024.
• While rents are going up, landlords aren’t cashing in. A recent Simply Business survey found that a quarter of landlords are looking to sell properties, and that 9% have let one property go within the last year. Meanwhile, rising interest rates have narrowed the gap between buy-to-let mortgage payments and rents despite double-digit percentage rental growth, turning the screws on landlords’ profitability, according to Octane Capital.
• New housing starts hit their highest level in almost 50 years in Q2 2023, with work starting on 73,600 new homes. However, this was due to developers working to beat the 15 June start date on the Future Homes Standard – tougher building regulations that require homes to have more low-carbon tech built in. Housing starts for Q3 are expected to drop to just 15,000, according to economic research company Capital Economics.