Residential Market Shows Resilience and Positive Trends, High-End Segment Remains Strong

08th June 2023

Residential Market Shows Resilience and Positive Trends, High-End Segment Remains Strong

Savills’ latest residential update paints a positive image for the market. Despite some reduction in mortgage approvals for first time buyers, the high end market appears to be holding strong.

Data from TwentyCi indicates a consistent improvement in market conditions, showcasing a positive trend. In May, the number of market-wide agreed sales came close to reaching pre-pandemic levels, with only a 2% difference. This is a strong indication of the increasing stability of the market. Additionally, there has been a decline in both deals falling through and price cuts for properties, further reinforcing the positive outlook.

Moreover, the Nationwide reported a minimal decrease of just 0.1% in the average value of homes across the UK in May. This indicates a moderation in the three-month house price growth, which provides a reliable indicator of recent market trends without the volatility of monthly fluctuations. Although there were annual house price falls at -3.4%, the overall trend shows positive progress.

While there was a temporary stall in the recovery of mortgage approvals in April, as evidenced by data from the Bank of England, it is a reminder of the challenges faced by mortgaged buyers and the pressures on their budgets. However, this does not overshadow the overall positive trajectory of the market.

Despite a decline in the headline rate of inflation in April, there is evidence of persistent upward price pressures across various goods and services. This has resulted in an increased market expectation for future Bank base rate, reflecting confidence in the economy. Economists have also adjusted their base rate forecasts, with predictions such as Oxford Economics expecting the Bank base rate to reach 5% by the end of August. These adjustments reflect positive expectations for the future.

Consequently, lenders have responded by increasing the cost of fixed-rate mortgages just before the last May bank holiday. The average effective mortgage rate for a 5-year fixed-rate deal is now just under 5.2%, while a 2-year fixed-rate stands at around 5.5%. Although this may pose some challenges for buyers, it is important to note that lenders are taking measures to assist those facing increased mortgage costs as they approach the end of their fixed rate mortgage.

It is expected that the housing market will remain price sensitive throughout 2023 and into 2024. This emphasises the importance for prospective sellers to set realistic prices for their properties. However, any potential downward pressure on prices is expected to be mitigated by the demand from cash buyers and the support measures provided by lenders.

The high-end market segment, which is less reliant on mortgage debt and more insulated from rate rises compared to the mainstream market, is likely to be resilient against financial pressures.

Furthermore, according to the Capgemini World Wealth Report 2023, the wealth of UK high net worth individuals contracted by a minor 1.1% in 2022. Their calculations indicate a relatively small decline of 3.8% in the number of mid-tier millionaires and 4.6% in the number of ultra-high-net-worth individuals globally.