Property Market Turns a Page in the UK, Hamptons Says

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Price Reductions Fall & Asking Prices Are Being Met in UK Housing Market

While 2023 was a quiet year for property market activity due to higher interest rates and inflation, new research from Hamptons shows that the market continues to regain its footing.

With buyer and seller activity increasing, it promises to be a more decisive year for buy-to-let investment, with more people looking to take a chance on mortgage rates and trust in the UK economy enough to resume their property search.

Let’s look at the data in more detail and see what it could mean for your strategies for real estate investing.

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Are Mortgage Rates Increasing Activity in the Market?

Aneisha Beveridge, the head of research for Hamptons, reports that the property market has definitively shifted in 2024. The main driving force behind this change is the decrease in mortgage rates, enticing individuals who delayed their property search in the previous year.

As a result, there was a surge in the number of buyers seeking to purchase homes last month, surpassing the figures for any January in the past ten years, including the beginnings of 2021 and 2022, when activity went through a boom period.

Beveridge says: “First-time buyers and second steppers, who tend to be most reliant on mortgage finance, are at the forefront of the recovery. This injection of demand is stabilising house price falls, particularly for mid to lower-priced homes, which should also improve selling conditions further up the chain as the year progresses. That said, the affordability picture is still more challenging than it was a few years ago, which will keep a tight lid on price growth.”

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Are Sellers Still Reducing Prices to Push Through Property Sales?

The number of price reductions has sharply decreased.

In January, sellers showed a reduced inclination to lower their asking prices compared to the past eight months. Approximately 48% of homes sold in January throughout England and Wales experienced a price reduction, a decline from the peak of 55% in October 2023. This marks the first instance since June 2023 where less than half of the homes were sold after a reduction, indicating that more homes entering the market are initially priced competitively.

On average, these homes spent 80 days on the market before the seller made a price adjustment. This reflects the sellers’ gradual adaptation to market changes throughout 2023. However, 27% of these homes eventually sold above their final asking price, the highest percentage since October 2022.

Homes in the £250,000 to £500,000 price range experienced the most significant decrease in price reductions. These properties are commonly purchased by first-time buyers and second-steppers re-entering the market, benefiting from lower mortgage rates that allow them to borrow more for their desired homes.

However, buy-to-let investors may still be able to find properties at reduced prices in the property market, as supply and activity levels still fluctuate due to elevated rates. That being said, one notable way to find reduced-price properties is to consider off-plan investment.

By purchasing a buy-to-let apartment or house directly from the developer before construction is complete, you can add properties to your portfolio for less than their actual value. Developers apply discounts to these buy-to-let properties and serviced accommodations, which are then appreciated during the construction process, allowing for immediate capital growth. Why not read the latest 10 ways to get into Real estate investing with our free guide?

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Are Sellers Achieving Their Asking Prices?

In January, the gap between sellers’ asking prices and what buyers were willing to pay continued to narrow, according to Hamptons’ research. Lower mortgage rates and a stable economic environment triggered demand from buyers who postponed their moves last year.

The average seller in England & Wales sold their home for 98.9% of the asking price last month, improving from 98.5% in December 2023 and January 2023. This marks the third consecutive month of progress in achieving closer asking prices and represents the closest sellers have come to their asking price since May 2023, just before the peak in mortgage rates.

First-time buyers and movers led the way, while those purchasing buy-to-lets and second homes remained more sensitive to prices. For this reason, property investors can be cautiously optimistic that they can find bargains in the buy-to-let market.

Discover More: If you’d like more insights on purchasing multiple properties, see our article on how to build a property portfolio.

Regionally, sellers in East England experienced the most significant annual improvement in asking-to-achieved values. Last month, the average seller in the East of England achieved 98.8% of their asking price, a 1.2% increase from January 2023. Why not learn about how property investment works with the RWinvest guidebook?

With more buyers in the market, newly listed homes are selling faster than in the previous year. In January, 9% of homes sold within a week, an increase from 6% in January 2023. However, this figure remains significantly lower than January 2021, when 19% of homes were sold in a single week, indicating that many buyers and sellers are still adapting to the market changes.

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Author

Dale Barham

Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.