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In an
age of soundbites and sensationalism, the UK property market—particularly here
in Docklands—often finds itself misconstrued by general narratives.
While we
cannot ignore the challenges of increasing mortgage rates and shifting buyer
preferences, it is vital to appreciate the broader context to understand what's
happening in the Docklands property landscape.
The UK housing market is currently at a
crossroads, characterised by its lowest house price growth since 2012. High
mortgage rates are making a significant dent in market activity, affecting
everything from buyer demand to the volume of property sales.
Docklands properties are still selling but
not at the rate or level they were in 2021. Therefore, correctly pricing your
property for sale cannot be underestimated. Let me explain why, then the
reasons behind the current state of play nationally, and finally, the exact
story of what is happening now (and in the future) in Docklands.
The Importance
of Correctly Setting an Asking Price for Your Docklands Home
Putting your Docklands property on the
market at too high an asking price can significantly deter potential buyers and
limit the number of people who come to view it. Buyers often have a budget
range in mind, and if your property is priced above comparable homes in the
area, it's likely to be filtered out of search results and go unnoticed.
Even if the property gets some attention,
the inflated price can send a message that you're not serious about selling or
unwilling to negotiate. This can result in your property languishing on the
market, which could necessitate future price reductions.
Over time, a stale listing may become
stigmatised, leading buyers to suspect that something must be wrong with the
property beyond its high price.
Thus, setting a realistic, market-aligned
asking price is crucial for attracting a broad pool of qualified buyers and
facilitating a quicker, more lucrative sale.
The Impact of
High Mortgage Rates
High mortgage rates are putting a strain on
the housing market. The latest data shows a significant fall in demand from
buyers — about a third less than the average during the same period over the
last five years (2018-2022). While there is a greater number of homes available
for sale now compared to the previous two years, fewer homes are selling.
Nationally, this year, the number of
properties sold stc has been 750,113 (to the end of August). That same sales
figure to the end of August 2022 was 903,799 (a 17% decrease), and to the end
of August 2021, 1,020,439 (a 26.49% decrease). As you’d expect, mortgage-backed
sales are particularly hit hard, expected to be just over a quarter lower than
last year. Cash sales are expected to be less affected, but the overall market
activity remains sluggish.
Regional
Disparities
An interesting aspect of the current
housing market is the distinct regional disparity. Looking at the £ per square
foot of the sales agreed (not completed) of the August 22 sales vs. August 23.
East of England -4.85%
North East -3.71%
South East -2.99%
Wales -2.02%
East Midlands -1.72%
Yorkshire and The Humber -0.85%
West Midlands -0.62%
North West -0.54%
Outer London -0.44%
Inner London -0.13%
South West 2.85%
Scotland 3.88%
In the East of England (as a region), house
prices have fallen by just under 5% over the last year. Conversely, there's
been a 3.8% increase in house prices in Scotland.
First-time
Buyers and Affordability
High mortgage rates are affecting
first-time buyers disproportionately. In 2021/2, low mortgage rates made buying
a Docklands home cheaper than renting, spurring a wave of first-time buyers.
However, continuing with the regional theme, with current mortgage rates
soaring above 5%, renting has now become cheaper on average than buying for a first-time
buyer property in London, the South and parts of the Midlands, even despite
high rental growth in recent years (although it is still cheaper to buy than
rent in the North, Wales and Scotland).
The Role of
Wage Growth
Despite the bleak outlook, there is a
silver lining. Faster wage growth is making housing more affordable. Average
wage rises of 8.2% over the past year are helping to balance out the effect of
22.56% higher mortgage payments on first-time buyers' household incomes (up
from 31.9% in Q2, 2022 to 39% in Q2, 2023). As a result, the gap between house
prices and earnings is closing, and affordability is expected to improve by 10%
over 2023.
Focus on Docklands
In 2021, an
average of 375 properties were coming onto the market in the Docklands area per
month, whilst there was an average of 118 properties selling monthly.
Therefore, there was an average net increase of 257 properties per month in the
Docklands area to buy.
In 2022, an average of 372 properties
were coming onto the market in the Docklands area per month, and sales
increased slightly to 130 properties selling each month. Therefore there was a
slight decrease in supply of properties (average net increase of 242 properties
each month), and demand (property sales) increased slightly (bucking the
national trend). For Docklands homeowners saleability rates were still quite
low though with only a 35% chance of selling.
To the end of August 2023, there has been an
increase in new properties coming on the market (an average of 398 properties
coming onto the market in the Docklands area per month). Yet, demand has
dropped as only an average of 111 properties have been selling per month,
meaning there has been an average net increase of 287 properties per month in
the Docklands area to buy. Consequently, saleability rates have continued to
drop even further as Docklands homeowners have only had a 28% chance of selling
this year.
Docklands
= E14
The Curse of
Overvaluing and How it Could Cost You Your Dream Home
I hope I have proven to you why it is
sensible to put your property on the market at a realistic asking price from
day one and not be tempted to overcook the initial asking price. You only have
one chance of a property being a new instruction (and all the excitement and
focus that creates).
Overvaluing homes is becoming a concerning
trend in Docklands, often led by estate agents more interested in listing as
many properties as possible rather than making actual sales. Such overvaluation
harms homeowners, tempting them with unrealistically high prices only to advise
price reductions later. The problem is your dream home might have sold by then.
While listing your Docklands home at a
price 10-20% higher than its actual value might seem tempting, this strategy
often backfires. Research from Which shows that overpriced properties linger on
the market and eventually sell for less than those priced correctly from the
start.
Additionally, some estate agencies
incentivise their staff to list properties rather than sell them, exacerbating
the issue. As the Docklands property market stabilises, setting a realistic
asking price is crucial for attracting serious buyers and achieving a timely
sale.
The Future of
the Docklands Housing Market
The immediate future doesn’t hold much
promise for dramatic house price growth in Docklands, nor is it expected to
fall dramatically (read my previous articles on this).
However, factors like an ageing population,
more flexible work arrangements, a strong labour market, and high immigration
rates could stir market activity in the next few years. Mortgage rates are also
expected to fall below 5% later this year, although the impact may only be felt
in the first half of 2024.
The UK housing market is navigating through
turbulent waters with high mortgage rates and a severe slowdown in house price
growth. However, the emerging trend of faster wage growth could be a
game-changer, making housing more affordable in the long term.
Furthermore, anticipated drops in mortgage
rates and sociodemographic changes are expected to drive market activity in the
coming years. All eyes will be on how these multiple forces will shape the UK
housing market in the foreseeable future.
Buyers and sellers can make more informed
decisions by understanding these trends and potential future shifts. The market
might be under strain now, and homeowners need to be realistic with their
pricing; these indicators suggest we might be heading towards a more balanced
and accessible market in the coming years.
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