The Guild of Property Professionals CEO, Iain McKenzie, once again caught up with property market analyst and CEO of Twindig, Anthony Codling, about his thoughts on the property market in the first quarter of 2023.
“Despite the impact of the mini-budget on the final quarter of 2022, over 1.2 million property transactions occurred during 2022, which is a rather robust figure in terms of transactional volume,” says McKenzie. “We often talk about house prices going up and down, as well as inflation, bank rates and various other elements that impact the market. However, as an estate agent the only aspect I would be concerned about is the size of the pie in my area of operation. So, essentially the transactional volume in my region. Are there any indicators with regard to transactional volume during 2023?”
In response, Codling says that the average number of properties sold subject to contract during the last four weeks has been 23,551 per week. “If growth that figure up to get to a monthly figure, it would be around 102,000 properties sold per month. In Q4 last year, we had 305,860, which works out similarly around the 102,000 mark. Looking at the transaction data for January and February, the average monthly figure is at 92,000, so as it stands, we are currently about 10% lower so far this year in terms of completed transactions compared to the last quarter of 2022,” he comments.
McKenzie notes that is probably indicative of the final quarter of the year, which, for the lack of a better word, was quite absurd in some respect due to elements such as the mini-budget and the market reaction which followed.
“Absolutely,” responds Codling, “as those within the sector would know, transactions take time. If you think of the time between offer and completion as a conveyor belt, what we are seeing now is the offers that were accepted several months ago coming through to completion. The hiatus September/October last year where mortgages were essentially taken off the shelves, is still impacting the transactions we are seeing come through, which is probably why the figures are currently lower. Also, looking at fall-through data, during this quarter the number stands at 25.25%, whereas in Q4 2022 was at 38.7%. If you compare the average fall-though rate between 2017 and 2019, which was 28%, this quarter’s figure of 25.25% is better than what we could broadly call a normal market. Interestingly, as estate agents would know well, a third of fall throughs are down to people changing their minds, followed by mortgages, slow progression and the results of survey.”
McKenzie asked Codling about the economy in general and what he is currently seeing happening. Codling answers, “As you would know, inflation was surprising higher than expected. The increase in inflation was driven by domestics, so aspects such as food and alcohol prices, so we couldn’t blame that on external factors and things happening in other countries. After the increase in inflation, the Monetary Policy Committee met and increased the bank rate, making it perfectly clear that they have three priorities – inflation, inflation, and inflation. It is expected that we will see the rate go up again to 4.5% at the next MPC meeting or the one after that, in a bid to attack inflation. It shows that if the MPC doesn’t see inflation coming down, they will continue to hike the rate, which will obviously feed through to people who are on variable mortgage rates, as well as the approximate 1.4 million people who will be remortgaging this year. Fortunately, for the time being the majority of people won’t be impacted hugely, as most are currently on fixed-rate deals.”
Codling adds that another aspect to mention is that he has started see the impact of pay-rises come through the system. “Pay rises are obviously good for the housing market as mortgages are based on what people earn. Wages going up will help under pin house prices as people borrow more money. Speaking of house prices, it is interesting that we are currently getting some conflicting information with one index reporting house prices going up in February, and another saying they are going down. If you look at the Nationwide data we had last week, the actual month-on-month figure was only down by £284, which in the context of £270,000 is not that bad,” he comments.
To hear more of the conversation, visit The Home Stretch podcast.
