Property in: LONDON

Now Might Be Perfect Time For Selling And Buying UK Homes

by Vil
6 minutes

Following the recent signs of the UK property market cooldown, we gather and discuss the recent insights on selling and buying a home in the UK shared by property professionals.

The recent market data suggests that average property prices in the UK spiked by just 0.1% since May 2022. This number represents the minimal growth rate since December 2019, just before the pandemic hit. In turn, the quarterly growth reached 1.4%, the slowest rate since March last year.

UK Property Market

Generally, property prices in the UK increased by 8.4% in May 2022 year-on-year (YoY), down from 9.2% in the prior month. It means we are witnessing the early signs of a market cooldown.

Seller's Market

Current Demand Levels

Property demand in the UK sits 40% above the 5-year averages. However, the latest data shows weekly demand levels start shrinking as the market slowly returns to more typical settings.

As a result, many suggest that sellers are in the perfect place to take advantage of the market and capitalize on the pandemic-led property market buoyancy.

However, 5.1% of listed properties were sold under the asking price in May 2022, up from 4.7% in the prior month. Despite that, the number of sales agreed is 21% above the 5-year average, reflecting that demand in the market is still strong.

Moreover, the recent announcement of relaxed mortgage rules means buyers will no longer need to prove affordability when SVR rises by 3%.

As a result, the market will welcome new borrowers, especially first-time property buyers (FTBs).

Current Property Settings In London

Out of 20 major cities in the UK, London shows the slowest annual property price growth level. Average values in the capital increased by 3.9% over 12 months. Current prices in London hit a little over £516k, a £30,000 increase over the last two years.

In addition, it takes 35 days to sell a home in London, the slowest pace of other major cities. It is not surprising as the property market in London has been lagging behind the rest of the UK since the pandemic hit in February 2020.

However, the latest numbers bode well for the trend shifting towards London. Current demand in London remains well-above 5-year averages, while 35 days is a significantly lower level than 50 days (the five-year average number for May).

Noteworthily, the only city that recorded an annual decline in home prices was Aberdeen. Average values in the city dropped by 2%.

Buyer's Market

What Recent Interest Spikes Mean For Property Buyers?

In the past several months, we saw five consecutive interest rises by the Bank of England attempting to fight inflation. In addition, the UK faces the emerging costs of living crisis. 

As a result, current buyers face an average rate of 3.37% for a 5-year fixed-rate mortgage (£250k, 25% deposit). By comparison, buyers could secure an interest rate of just 2.64% for a similar deal in December 2021.

In other words, the annual costs for a £250k mortgage spiked by £870. Moreover, property and mortgage experts anticipate further interest rate spikes as we enter the second half of 2022. If the rates hit 4.62%, buyers will face an annual cost of a mortgage repayment rise by £2,500 against December 2021.

Is Now a Good Time For Buying a New Home?

Many property experts agree that now is a good time to purchase a home, particularly for buyers who were planning to do so for the past several months. Specialists anticipate house prices to grow throughout the rest of 2022, albeit at a more modest pace than we have witnessed over the past 24 months.

Moreover, interest rates are likely to rise more as the Bank tries to fight the growing inflation, further pushing the mortgage costs.

As a result, those looking to secure a mortgage or remortgage should find favourable fixed-rate deals with the most attractive interest rates.

Short-Term Property Market Forecasts For 2022

Property price growth is still strong and resilient. Annual growth levels over the past several months are above the numbers seen in late 2016.

However, there are signs of a downward trend in the market as demand falls from record peaks despite being still 30% above the 5-year average.

Generally, the real estate market is still moving quickly. But the average time for selling a home starts to rise, indicating a gradual return to more normal market settings.

Economic uncertainty and the anticipated interest rate rises are set to ease the market activity in the coming months.

That said, experts anticipate 1.2 million home deals across the UK in 2022.

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