High Mortgage Rates and Sluggish Sales Process threaten market

Rightmove reports that the average price of property coming to the market for sale drops by £21 this month to £375,110 after reaching a record high in May, as prices in June follow their familiar seasonal pattern of recent years and remain flat.

Less expensive and more northerly regions are seeing stronger price growth this month, with five of the six cheapest regions reaching new price records while the higher-priced East of England and London lag behind.

Now that a General Election has been called, Rightmove’s whole-of-market data and a poll of over 14,000 home-movers suggests that activity is largely remaining stable, with the market maintaining its 2024 momentum. The number of sales being agreed and the number of buyers sending enquiries to agents remain steady, with the vast majority of those already in the home-moving market continuing with their plans.

One exception is possible election caution among some would-be sellers, which is most pronounced for those at the typically more discretionary top end of the market, some of whom appear to be pausing their plans to see how the next few weeks unfold.

Tim Bannister, the portal’s director of property science, says: “It’s always difficult to predict how home-movers will react to sudden uncertainty, but looking back through our data, we can see that during previous election campaigns, market activity has remained largely steady. This election has followed a similar pattern so far, and the responses from our poll of over 14,000 people also supports the data, with the vast majority of respondents saying they will carry on with their home-moving plans.

“However, some potential sellers appear to be watching and waiting rather than taking action, evidenced by a dip in the number of new sellers coming to market, particularly at the top-end. This is understandable when many of these sellers have more flexibility over when they act, but overall, it appears to be business as usual for the mass-market.”
 
Rightmove says pent-up demand is a key driver behind increased buyer and seller activity, despite mortgage rates remaining elevated for longer than anticipated. In the first four months of the year, the number of sales being agreed between buyers and sellers is 17% higher than in the same period in 2023, outstripping the 12% increase in the number of new sellers coming to market.

Like pricing activity, these trends are being driven most by the top-of-the-ladder sector, made up of four bedroom detached and five bedroom plus properties.

A lack of available homes for sale in this sector during the pandemic years, together with the rapid rise, and subsequent volatility of mortgage rates in the post-mini-Budget period, meant that activity in this sector was particularly susceptible to some potential movers taking a step back. Now, with mortgage rates more stable albeit still high, and greater buyer choice, many who had postponed their moving plans in this sector appear to be returning.

Bannister continues: “We anticipate the number of completed sales transactions this year to reach around 1.1m. Rightmove’s key lead indicators, powered by the UK’s largest selection of properties for sale and real-time data, suggest positive progress towards reaching this number of transactions. However, the lengthy time to complete a sale after finding a buyer remains a challenge for both agents and movers.

“The average time between agreeing a sale and legal completion is a painful five months, or 154 days. In total, it is taking over 7 months on average from a seller coming to market to completing their move, meaning that as early as it may seem, would-be sellers hoping to celebrate Christmas in a new home need to be coming to the market about now.”

He believes that the sluggish completion process in England is significantly slower that many international markets, highlighting the substantial room for improvement.

The creation of a more seamless process, which includes providing more accurate information about a home earlier to potential buyers, and better connecting the parties involved in the transacting process through technology, are two areas of improvement that Rightmove suggests would be most beneficial to movers.
 
One strategy that Rightmove’s data has identified as providing sellers with the edge to speed up a sale, is to work with an estate agent to price competitively from the outset of marketing and avoid the need to reduce the asking price after coming to market.

It takes on average 32 day for a sale to be agreed for a property that is priced right from the outset, less than a third of the 112 days that it takes if the home requires an asking price reduction before it has found a buyer.
 
Bannister continues: “We expect that the improved market activity levels and conditions this year will result in higher transaction numbers at the end of 2024 than last year. However, the extremely lengthy legal completion process is a frustrating barrier to home-movers converting agreed sales into completed transactions more quickly. It may seem surreal to be thinking about Christmas in May, but we know that many would-be sellers picture celebrating the festivities in a new home, and to achieve that, now is the time to be coming to market.

“One strategy that is still giving some sellers the edge in this price-sensitive market, is working closely with an estate agent to price attractively right at the start of marketing, to give themselves the best chance of finding a buyer quickly.”