2023-07-28-莱坊-UK_Residential_Market_Update_July_2023_2页_335kb

UK Residential Market Update - July 2023

Core Content Overview

This report provides a snapshot of the current state of the UK residential property market, highlighting key trends and developments in borrowing costs, buyer sentiment, property prices, and transaction activity across different regions, including London and the Country market.

Main Points

1. Borrowing Costs and Market Sentiment

• The UK residential property market has been affected by the increase in borrowing costs, driven by the Bank of England's decision to raise interest rates.
• In June, the Bank of England raised the bank rate by 0.5% to 5%, the highest since September 2008.
• This has led to a significant drop in buyer sentiment, with the RICS sentiment survey showing:
  • New buyer enquiries fell to -45%, the lowest since August 2022.
  • Newly agreed sales dropped to -34%, the lowest since December 2022.
• The uncertainty surrounding interest rates has made it difficult for buyers to plan, resulting in a contraction in market activity.

2. Property Price Trends

• Property prices have shown relative stability in June, with the largest declines occurring in the months following the mini-Budget.
• The average UK property price peaked in August 2022 and has since declined by 4.1% (Nationwide) and 2.7% (Halifax).
• In June, the monthly change in average property price was 0.1%, indicating a period of minimal movement.

3. Supply and Demand Imbalance

• Property transactions remained subdued, with 80,020 in May 2023, a 27% decrease from May 2022 and a 3% decrease from April 2023.
• Mortgage approvals for home purchase increased slightly from 49,000 in April to 50,500 in May, but are still 24% lower than in May 2022.
• Inventory levels are slightly higher than at the end of last year but remain low compared to long-term averages, contributing to price stability.

4. Prime London Market

• The prime London market showed resilience despite rising borrowing costs.
• New prospective buyer numbers in London were 24% above the five-year average in the most recent four-week period.
• The resilience is attributed to:
  • A significant portion of sales being cash-based.
  • High affluence levels.
  • A weak pound.
  • Increased overseas travel returning to pre-Covid levels.

5. Prime London Lettings Market

• The lettings market in Prime London has seen an increase in supply, with the combined number of lettings listings in Prime Central London (PCL) and Prime Outer London (POL) reaching the second highest level since September 2021.
• The imbalance between supply and demand is easing, leading to a decline in annual rental value growth:
  • PCL rental growth fell to 14.4%, the lowest since October 2021.
  • POL rental growth was 12%.
• The net balance of landlord instructions dropped to -36%, the most negative since May 2020, while tenant demand remained strong at +40%.

6. Country Market Activity

• The Country market remained subdued, with offers made in June down 15.9% from the five-year average (excluding 2020), up from -17.3% in May.
• Exchanges were also down 15.8% in June, compared to -25% in May.
• New instructions for sale were up 10% versus the five-year average in June, marking the fifth consecutive positive reading.
• The supply of properties for sale in the Country market is now at its highest level since September 2020, though still 5% below the pre-pandemic average of 2019.

Key Information

• Inflation: June inflation fell to 7.9%, below expectations, but the Bank of England remains cautious.
• Market Stability: House prices have stabilized, with minimal monthly changes, but long-term declines are expected.
• Supply Constraints: Inventory levels remain low, limiting price falls and contributing to market resilience.
• Regional Variations: London continues to show strength, while the Country market is gradually recovering.

Conclusion

The UK residential property market is navigating a challenging environment marked by rising borrowing costs and subdued transaction activity. While prices have stabilized, the outlook remains cautious. London's prime market continues to show resilience due to a combination of factors, including cash transactions and strong demand, whereas the Country market is showing signs of gradual recovery. Overall, the market is expected to experience limited price declines over the next two years due to supply constraints and strong fundamentals.