Having been saving up for a while, I decided this year to start looking to buy my first home.
Up until this point, I have been renting with friends for a number of years and have moved from property to property.
But now I find myself trying to find somewhere to buy, I can’t make my mind up – I feel like a rabbit in the headlights.
I feel in part overwhelmed by the prospect of putting all my savings towards a deposit on a home at a time when house prices are falling and mortgage rates have risen rapidly.
Sage advice: We asked three experts, Matt Thompson, Henry Pryor and Charlie Lamdin, to advise our reader on how to beat their decision paralysis
But I am also overwhelmed by having to pick a home that I will live in for the next five to 10 years.
I know the area I want to be in and type of property I want, but just haven’t seen anything yet that is quite right. There has been no love at first sight.
I have been to see about 40 properties so far, admittedly knowing that most wouldn’t end up being quite right.
I’m probably being too picky, but there is only a limited number of homes coming on the market – and most have no appeal. Prices don’t appear to be falling. Sellers appear to be holding out and only a handful of the best homes are selling.
Do you have any tips to help me get over my decision paralysis? For example, is there some form of a buying checklist?
I have also heard that I should be building relationships with agents as the best homes all sell before they hit Rightmove or Zoopla. Is this true even in a market such as this? And how should I go about doing it?
Ed Magnus of This is Money replies: Decision paralysis is when you lack the ability to decide on something out of fear of making the wrong choice.
I’m afraid it’s part life’s rich tapestry whether you like it or not – it’s a problem that impacts everyone – albeit some more than others.
We live in a world where it can feel like there is an infinite amount of the same thing – but all in slightly different shapes, sizes and guises – whether that be types of bread in a supermarket, jeans in a clothes shop, or TVs in a department store.
It’s the same thing for property – except it’s also likely to be the biggest financial decision of your life, which rather adds to the pressure.
The good news is that you know the area you want to buy in – probably rather well after 40 odd viewings.
The bad news is; there isn’t a manual to help you make that all important final decision.
Some buy with their head and others buy with their heart. You sound like you may fall into the latter camp.
That said, you are clearly concerned by falling house prices.
The latest Halifax and Nationwide house price index show values have fallen the last year by the sharpest since 2009.
Most experts agree prices will slide further from here on, but ultimately trying to time the market is pure guesswork – and some local markets behave differently.
We asked three experts for their advice: Henry Pryor, a professional buying agent, Charlie Lamdin, founder of property website BestAgent and Matt Thompson, head of sales at London estate agency Chestertons.
Advice from the buying agent?
Henry Pryor, a professional buying agent and property expert says they should stay put and continue renting
Henry Pryor replies: Oh dear, you do seem to be struggling, don’t you.
Strange though it may seem my advice to you is ‘stay put.’ Don’t move, you aren’t ready and I expect that you will find yourself full of remorse if you do.
Finding the right house is like finding the right partner. It may happen instantly or it can take a lifetime. Some never do.
Like a partner you will have to compromise. What you want probably doesn’t exist and if it did you probably couldn’t afford it.
You say you are very happy renting and many people are. I’ve been an estate agent for forty years and I rent.
There’s no shame in it and many mortgage holders today would envy your freedom.
If you’ve looked at 40 properties in one place you are getting dangerously close to irritating the local estate agents who will think you’re just a tyre-kicker.
Rather than help you to see off-market properties they are more likely to avoid alerting you to things.
An estate agent doesn’t want to be a tour guide, they want to sell their clients properties.
My advice is to make up your mind whether you really do want to buy a house in what most people agree is a falling market when interest rates are high and stock of homes for sale is down by 25 per cent.
Check what home ownership might give you that renting and saving doesn’t.
Only buy something that you could live in for at least five years otherwise continue renting.
Be much more selective about what you go and see if you decide to continue your search. Remember, estate agents aren’t tour guides there to help you find a home. They are paid to sell you one of the ones they are instructed on.
Finally, buying a home is serious and can be expensive. The word ‘mortgage’ comes from the french word for death. It was a loan until death. It isn’t for everyone and renting is not a second class choice.
Advice from the homemoving expert?
Charlie Lamdin, founder of BestAgent, believes they should keep viewing potential homes, again and again, relentlessly
Charlie Lamdin replies: If there’s any doubt, then there’s no doubt. That’s the number one rule.
You should only commit to proceeding with the purchase of a home if the thought of it fills you with excitement, and it represents a big step forward in all areas of your life, not just financially. It’s too big a decision to get wrong.
Don’t wait to time the market, just be out viewing potential homes, again and again, relentlessly. Make offers on homes you are sure you’d love to live in, but avoid bidding wars as a first time buyer.
Every viewing will teach you something whether it’s a front line insight to your market from the agent, or a feel for what’s selling and what’s not.
In a falling market, you should view homes that have asking prices outside your budget. Agents are quieter now, and more willing to show you homes they were too busy to show you a year ago.
If and when you find a home that really feels that bit more special than the others you’ve viewed, and you find yourself wanting to offer, remember the following.
First. Sleep on it.
Second. Only make your offer by email, not phone or in person. This avoids you being ‘closed’ at a higher price than you’re comfortable with by trained professional negotiators. They can’t intimidate you into a higher price by email.
Third. It’s better to offer your maximum comfortable price and not get the home, than to overpay and be burdened with a financial commitment that becomes a millstone around your neck, as has happened to so many people now caught out by rising mortgage payments.
There are no shortcuts to this process. But you can hugely improve your chances of having your offer accepted if you have a mortgage in principle, a conveyancer, proof of deposit funds and a commitment to buy your search pack immediately if the seller accepts your offer.
This demonstrates higher commitment, that you’re not afraid to embark on the process and that you’re more likely to exchange contracts sooner.
Motivated sellers are seeking certainty of sale over maximum price. This creates a great opportunity for well prepared first time buyers, because you’re chain free.
Happy home hunting.
Advice from an estate agent?
Matt Thompson, head of sales at London estate agency Chestertons, suggests extending their search radius ever so slightly
Matt Thompson replies: Buying your first home can be a daunting undertaking and you are right to be doing it at your own pace, especially if you are in no particular rush to move.
It is good to hear that you have already narrowed down the location you wish to buy in, although it does sound like this area doesn’t offer you a lot of choice which can make your search for the ‘perfect property’ more difficult.
To widen your pool of potential properties, it might be worth extending your search radius ever so slightly as you might be more likely to find the right home within your budget.
It also sounds like you are uncertain about current market conditions and have further questions about the property market.
As I can’t detect from your questions where you are looking to buy, I’m unable to offer you tailored advice and I would recommend finding and setting up a meeting with trusted estate agents in your area to give you a breakdown of the market and fully understand what you are looking for.
Last but not least, your agent is likely to be in ongoing contact with local homeowners and is therefore one of the first to know about any new properties being put up for sale.
It’s therefore advisable to stay in regular touch with your chosen estate agent.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
Home buyer demand plummeted 50% at end of 2022, says Zoopla… while those who did buy sought smaller homes to keep mortgage costs down
- House prices grew 6.5% over 2022, says Zoopla, following stagnant final months
- Buyer demand in January is down 23% on the five-year average
- The difference between sellers’ asking and achieved price is now around 4%
A stagnant final three months of 2022 slowed house price growth to 6.5 per cent for the year, according to Zoopla, as demand for properties plummeted 50 per cent from October to the end of December.
It marked a slowdown compared to the 8.3 per cent growth recorded in 2021, according to the property portal, as higher mortgage rates impacted buyers’ decisions.
Buyer demand in January this year is down 23 per cent compared to the five-year average, it added.
Slowing: House price inflation stalled at the end of 2022 dragging down the figure for the year
Its data suggested that buyers are negotiating harder on price, with the difference between sellers’ asking and achieved price now around 4 per cent.
Zoopla warns that if the gap between asking and sale price continues to widen, sellers will feel under pressure to further reduce their asking prices, exacerbating the downward trend.
The research tallies with figures from the Bank of England that show demand for new mortgages fell by 75 per cent at the end of 2022, as homeowners were hit by increased interest rates and the rising cost of living.
Regionally, Zoopla said demand and sales remained strong in the North East of England, Scotland and Wales where homes are priced below the national average.
Market conditions remain weaker in the South East, South West and the East Midlands, where prices are higher or have grown rapidly over the last two years, adding to affordability pressures.
Richard Donnell, executive director of research at Zoopla said, ‘The start to 2023 will be more of a slow burn than in recent years. A portion of households hoping to move in the coming year will be waiting to see whether house prices start to fall more quickly in Q1, as well as how much further mortgage rates are likely to fall back.
‘Mortgage rates for new business are now generally below 5 per cent and look set to remain in the 4 to 5 per cent range in 2023. This is a much better prospect than the 6 per cent to 6.5 per cent levels at the end of last year but buyers will remain cautious in the next few weeks.’
Small is beautiful: Demand for smaller properties has increased as buyers look to move back to cities and aim to find the best value for their money
The number of homes for sale has also increased, according to Zoopla.
There are now an average of 23 homes for sale per estate agent, up from a low of just 14 homes in early 2022. However, the level remains 6 per cent below the five year average.
And data from Nationwide suggests first-time buyer homes are the least affordable they have been since 2008, as the average mortgage payments now eat up 39 per cent of salaries.
Activity in the housing market stalled in late 2022, but has picked up since the start of 2023
At the same time buyers are opting for smaller properties with 27 per cent of new buyers looking for one and two bed flats, a 22 per cent increase from a year ago. However, three-bed homes remain the most in demand property across the country.
The difference in pricing between flats and houses is stark in many areas, supporting this shift in demand as buyers at the start of the property ladder look for better value for money.
Outside London, the average 2-bed flat is listed for sale on Zoopla at £196,000, which is almost £100,000 cheaper than an average 3-bed home (£293,000). One-bed flats are £150,000 cheaper.
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As house prices begin to go down according to many measures, the property market is at an impasse.
There are increasing numbers of sellers setting unrealistic asking prices, perhaps buoyed by higher valuations received in months past. And meanwhile, prospective buyers are standing by and waiting for the cost of a home to fall.
Seven in 10 estate agents say home sellers are being unrealistic about what their properties are worth, according to estate agent membership body, Propertymark.
Agents say sellers are overvaluing their homes, either because they think they have the best house on the street, or because they want to sell at a price which will enable their next move.
It means many are listing for more than their property is actually worth.
High expectations: 71 per cent of estate agents believe sellers are being unrealistic in how they price their properties, according to Propertymark
Sellers might get away with that in a hot market, but at the moment demand among those buying homes is on the wane.
According to Zoopla, home buyer demand fell by 50 per cent in the final three months of last year. The number of sales agreed was also down by 28 per cent year-on-year.
This chimes with what estate agents have been reporting to Propertymark.
Its latest figures show the number of prospective homebuyers registering with agents fell from 2.5 per available property in December 2021, to 1.4 per property in December 2022. That’s a 45 per cent decline year-on-year.
Propertymark also reported that the average number of viewings per property fell by 71 per cent between April and December 2022.
This is not stopping sellers from listing their properties for sale, however. Propertymark found that estate agents saw a fairly steady stream of available properties over 2022, with no change recorded year-on-year between December 2021 and December 2022.
The year 2022 started as a seller’s market, and ended the year back to normality as a buyer’s market
Nathan Emerson, Propertymark
Nathan Emerson, chief executive of Propertymark said: ‘The largest shift we have seen in the sales market is prices agreed, compared to normal asking prices.
‘The year 2022 started as a seller’s market, and ended the year back to normality as a buyer’s market.’
Emerson urged sellers not to pay too much attention to how much other homes in their area were being listed for, as those homes may have been lingering on the market, or could fail to actually sell for the advertised price.
‘The best price is usually achieved in the first four to six weeks of marketing, so we urge sellers not to compare their property to other homes on the market which may not have sold yet, and ensure they receive valuations from a qualified and accredited estate agent,’ he said.
When will sellers accept the new reality?
Higher mortgage rates combined with wider economic uncertainty have forced many Britons to place their home-buying or moving plans on hold.
Demand for mortgages to purchase a home fell sharply in the final three months of last year, according to data from the Bank of England.
It found that new mortgages for property purchases dropped 75 per cent compared with the previous three months.
Starved of buyers, sellers are having to come to terms with the reality that their house price may no longer be worth what it was six months ago.
Mortgage shock: ONS and Bank of England data shows the rapid rise of mortgage rates over the past year
House price indices are beginning to suggest that prices are turning. Halifax and Nationwide both recorded consecutive falls in the final months of last year. However, the data tends to lag behind what is actually happening in real time.
Consequently, it may take time for many sellers to accept the reality of what their home is now worth.
Henry Pryor, professional buying agent says: ‘Usually about 1.2million homes are sold every year, but I am expecting a few as 800,000 this year as sellers sit on their hands waiting to see if they can hold out for the price they had hoped they would have got last year.
‘The housing market is like a supertanker – it takes a long time to change direction or speed, and most of 2023 will be taken up with sellers holding out for last year’s price before realising that what they want to move to has fallen in value just like theirs.
‘So, I’m not yet seeing a Mexican standoff, but I expect to. At the moment, it’s just too early, but the penny will drop by the summer.
‘As always some will get it sooner and some will take until Christmas. Others will cling on for too long as some estate agents try to buy new business by being optimistic for longer.’
How to sell your home in 2023
Sellers need to be careful how they price their property, according to experts.
It can be tempting to match what other properties in the area are on the market for, but the advice is to speak to local estate agents to ensure the house goes on the market for a price that will attract interest, rather than one that’s purely speculative.
‘Sellers need to listen to their agents’ advice and price accordingly,’ says Henry Pryor. ‘The best are still selling and selling well, but you are likely to be punished if you are over-ambitious. Price is what you ask. Value is what you get.
He adds: ‘Sellers would do well to remember that an asking price is not a statement of value. It’s part of the marketing, there to attract potential purchasers to view.
‘Don’t judge an offer with reference to the asking price. If you get more than the asking price, then it did its job well.’
Rob Dix, co-founder of the property forum, Property Hub, suggests sellers might be wise to hold firm or delay selling until later in the year.
‘The market isn’t bad enough that the big sellers are dropping prices,’ says Dix. ‘If you look at the major housebuilders in the UK, they’re not talking about reducing prices.
‘They’re sticking to their guns and carrying on selling at the same price point, so sellers should feel boosted by this.
‘If you can afford to hold off selling in the first quarter, I can see things improving throughout the year.
‘You’re probably going to do better in the second and third quarters of the year than you are now.’
Know what’s happening in your area
It’s worth understanding what buyer demand and house prices are doing in your local area, rather than focusing on the country as a whole.
House prices are not determined by a single market, but rather a plethora of markets across the UK, and the experience can be different right down to the very street or road you live on.
The property market in the UK’s more expensive areas can be less attractive when buyers budgets are constrained – as they are now by rising mortgage rates.
Liana Loporto-Browne, a London based estate agent, said a four-bed terraced house had been unsuccessfully marketed by several other agents before it landed with her.
The original asking price of the property was £1,150,000 and had already been on the market for several months before it was reduced to £950,000 by her agency, selling in the same month for £925,000.
Grey skies in the housing market: Savills expects double-digit house price falls in 2023, in a year when discretionary movers will sit on their hands
However, quieter and more affordable areas such as the North West are holding their value, according to Propertymark.
Bolton based estate agents Miller Metcalfe reports that 99.5 per cent of its properties are being sold at the asking price.
It sold a two-bedroom terrace house in Bury, Lancashire at the initial asking price of £127,000 in early January, just three days after it went on the market.
However, it conceded that this month’s sales thus far have on average taken 16 per cent longer from instruction to sale agreed compared to last year.
Cooling market: Last month, seven in ten estate agents saw most sales agreed at below asking price, according to industry body Propertymark
Zoopla estimates that close to half of all UK homes increased in value over the final three months of last year, highlighting differences in trends between local markets.
Richard Donnell, executive director at Zoopla said: ‘The profile of gains and losses varies right across the country, knocking any notion of a single market that moves in unison across the country.
‘Housing markets vary by geography and price band. The value of a home is important in unlocking that next home moving decision.
‘While the headlines might talk of UK house price falls in 2023, each home will have its own trajectory – so speaking to an agent or tracking your home value online are ways households can stay in touch with the value of their largest asset.’
What’s the advice for buyers?
Most predictions for 2023 have house prices falling anywhere between 5 and 20 per cent.
The advice to buyers is therefore simple – good things come to those that wait. However, that doesn’t mean putting their lives on hold in order to try and time the market.
‘My advice to buyers is to be patient,’ says Henry Pryor, ‘if you have to buy now then you will have to pay more to do so as it will take time for sellers to understand the new norm.
‘If you want to move later in 2023, start looking now and when you find the right thing, buy it if you can afford it.
‘It may be cheaper in 12 months’ time, but I expect that in three years time it will be worth what you paid for it.
‘Don’t put your life on hold. Judging the top or the bottom of a market is usually down to luck, not expertise.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
UK house prices registered the most widespread falls in 13 years last month as buyer demand and sales activity shrank more sharply than expected in the face of higher borrowing costs and the risk of a recession, a closely-watched survey shows.
The Royal Institution of Chartered Surveyors’ house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, slumped to -42 in December, down from -26 the previous month.
December’s figure was, according to Reuters, the lowest since October 2010 and below the -30 that economists had forecast.
Prices fell across all English regions with East Anglia and the South East reporting the sharpest net balance of declines, according to the Rics.
House prices: East Anglia and the South East of England saw the biggest house drops last month, the RICS said
Mark Hunter, of Grice and Hunter surveyors and estate agents in Doncaster, said: ‘Due to the seasonal downturn there is very little activity and we wait to see what transpires from mid-January onwards.’
Agreed sales continued to fall in December, the Rics said, while new buyer enquiries dipped marginally. The number of people putting their house up for sale was also the lowest since September 2021, the Rics added.
Looking at the year ahead, the balance for price expectations edged down further from November.
Simon Rubinsohn, chief economist at the Rics, said; ‘The latest Rics Residential Survey highlights the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook for the economy.
‘This is reflected in forward-looking Rics indicators around both prices and activity.
‘However, some signs of an easing in inflation pressures more generally could provide a chink of light particularly for those looking to take their first step on the property ladder.
‘Meanwhile feedback around the lettings market once again demonstrates the need for some concerted thinking about how to create a thriving sector that caters for both the private and “affordable” renter.’
Mortgage lenders including Halifax and Nationwide have both shown prices falling in monthly terms as inflation and rising interest rates squeeze prospective buyers.
Jeremy Leaf, a north London estate agent and a former Rics residential chairman, said: ‘Housing market activity dropped and sales are taking longer as buyers reclaim the balance of power due principally to the cost of living and interest rate rises.
‘Prices may soften further before mortgage costs fall despite recent modest reductions as concerns about job security increase.
‘Lack of supply means prices are unlikely to fall sharply as we have found many buyers waiting until early 2023 to see if mortgage rates settle before deciding to move.’
While property prices were reported to have fallen, rents are expected to continue to increase, the Rics said.
Demand in the rental market was set to slow further after sinking to its weakest in nearly two years last month, but fewer landlords were offering properties.
The Rics said: ‘On the back of this, near-term expectations continue to point to rents being squeezed higher, with the net balance of respondents anticipating an increase in rent remaining unchanged from last month at +42 per cent.’
Price shifts: House prices fell in every region in England last month, the RICS said
Making enquiries: New enquiries from prospective buyers fell slightly last month
According to the RICS, one of the fundamental challenges in the housing sector is the continuing lack of high-quality, affordable homes. It said: ‘This inadequate supply of housing has a direct correlation on property prices, rent and quality – which brings with it wider economic and social challenges.’
On Wednesday, figures from the Office for National Statistics revealed that average UK house prices increased by 10.3 per cent in the year to November 2022, down from 12.4 per cent in October 2022.
The average UK house price was £295,000 in November 2022, which is £28,000 higher than at the same point a year earlier, but a slight decrease from the previous month’s record high of £296,000.
Lenders reported that demand for secured lending for house purchases fell in the fourth quarter of 2022, and is expected to slip further in the current quarter, according to the Bank of England in its latest Credit Conditions Survey published today.
Some households could find it tougher to get a mortgage and other types of credit in the coming months, amid lenders’ expectations that more may default on loans.
Kylie-Ann Gatecliffe, a director at Selby-based broker, KAG Financial, said: ‘One point of concern is that lenders expect the availability of mortgages to decrease in the next quarter.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
Savers hoping to get on to the property ladder this year may be disheartened by the current state of the housing market.
While house prices are predicted to fall by up to 10 per cent this year, that only eradicates around two years of price inflation.
The rapid rise of mortgage rates has made homeownership more expensive for the majority who need to borrow to buy, and the Government’s flagship scheme for first time buyers – Help to Buy – ended in Autumn.
Uphill struggle: First-time buyers face many financial hurdles to get on the housing ladder. For some, shared ownership could provide a solution
But there are still options for those who need help buying their first home. One of them is shared ownership, which gives buyers the chance to own a proportion of a property and pay rent on the rest.
We have taken a look at how the scheme works, its pros and cons, and whether it can replace Help to Buy.
>> What will happen to mortgage rates in 2023?
What is shared ownership and how does it work?
Shared ownership is a home ownership option that allows you to buy a percentage share of a property, if you cannot afford the deposit or the mortgage payments on a house on the open market.
It does not mean, as the name may suggest, that you need to share your property with other individuals. Instead, you own a proportion of the home and pay rent on the rest.
Buyers will commonly purchase between 25 and 75 per cent of a property with a mortgage, and then pay rent on the remaining portion to the landlord, usually a housing association. On some properties the purchased share can be as 10 per cent.
When buying through shared ownership you still have to put down a deposit for the share that you own, as you would any other property purchase.
The amount required for a deposit will vary from property to property, but the typical shared ownership deposit is 5 per cent or 10 per cent of the share you are purchasing. This means the deposit can be much lower than what is needed to buy a home on the open market.
Shared ownership allows you to increase your equity share of the property via ‘staircasing’
For example, if you are buying a 25 per cent share of a home with a full value of £300,000, the value of your share will be £75,000. If a 5 per cent deposit was required, you would need to put down a deposit of £3,750. Buying the home in full would require a £15,000 deposit.
Once you have made your initial payment, over time you can build up the portion you own, usually in 10 per cent increments – this is called staircasing. As you do you will pay less rent as the remaining percentage reduces.
It is also likely that you will pay ground rent and monthly service charges for the communal space, as the property is likely to be commercially owned.
However, stamp duty when you move into the property can generally be deferred until your share reaches 80 per cent.
>> Could the mortgage guarantee scheme help you get on the property ladder?
What kind of home can you buy on shared ownership?
Shared ownership schemes are available on new build properties owned by housing associations, or on existing homes via shared ownership resale schemes.
There is usually a range of house sizes, apartments and bungalows on offer in an area.
If it is not a new build, the home will have been previously lived in and owned via shared ownership and is being sold under the same system.
You buy the previous owner’s share either outright or by securing a mortgage, and then pay rent on the part you don’t own.
There are also options to buy a share in a home that meets your specific needs – for example, if you have a long-term disability and need a ground floor flat.
But bear in mind there are different rules on shared ownership in different parts of the UK, so make sure you check the requirements in your region before applying.
Who can use shared ownership?
The scheme is aimed at buyers looking to get on the property ladder but who are unable to buy a home with a traditional mortgage.
While the most obvious beneficiaries are first-time buyers, it may also provide an option for separated couples looking to buy individually with the equity from their shared home.
With the rising cost of living and oncoming mortgage shock for those coming off a fixed deal with a low rate, it may also provide an option for those who find they cannot afford to remortgage at today’s rates.
However, applicants must have a household income of £80,000 or less, or £90,000 in London. If you are buying with someone else your combined income cannot breach the cap.
Help to Buy: Could shared ownerhip be a viable alternative for Government’s flagship scheme?
Furthermore, you must be able to show that you cannot afford the deposit and mortgage payments on a house that meets your needs on the open market.
What this means in practice, says Jon Lord, managing director of Metro Finance and one of the Mortgage Advice Bureau’s shared ownership experts, is whether a prospective house purchase would breach Home England’s affordability calculator that works on a maximum of 4.5x income and 45 per cent debt to income ratio. In short, he says, ‘If 4.5 x income + deposit = full house value’ – then it’s likely a rule breach,’ and therefore unaffordable.
You also cannot own another property when you buy through the scheme, and like any property purchase, mortgage lenders will check your credit score.
And of course, you must be able to put down a deposit of at least 5 per cent of the share of the property you are purchasing.
What are the benefits of shared ownership?
The main draw of shared ownership is it offers a route to property ownership for those who otherwise would not be able to afford it, offering them lower deposits and more accessible mortgage costs.
One benefit of shared ownership is you can increase your share of the property – the amount of equity you own.
Once you have lived in your property for a period of time as described in your terms, you will have the option to purchase a larger share of the home with most people being able to build up to full ownership through the scheme, although some properties cap ownership at 80 per cent.
Adding to the equity you own will mean extending your existing mortgage to cover the extra or remortgaging altogether, unless of course you can pay for the additional share outright. It will also involve the usual additional costs associated with house buying included a surveyor and conveyancer.
Under shared ownership you don’t pay stamp duty on your initial purchase. Furthermore, the scheme allows you to sell your home whenever you like in the same way as any other property.
What are the drawbacks of shared ownership?
First, bear in mind that not all lenders offer shared ownership mortgages. For this reason, it may be worth getting in touch with a broker who is familiar with the area.
You will also need to budget for additional annual costs such as the ground rent and service charge on the property. Shared ownership buyers will likely have to pay both irrespective of the size of their share.
This is because shared ownership properties are owned leasehold not freehold, essentially meaning that you own a percentage of the building but not the land it is on.
Planning an overhaul? Although buyers are allowed to redecorate, there may be limits on what structural changes can be made to a shared ownership property
And while you are unlikely to pay stamp duty on your initial purchase, you will have to pay the tax on the whole value of the property if you increase your share to 80 per cent or more.
There may also be restrictions on the physical changes you can make to the property if you do not own it outright. You will be free to decorate the property as you wish, but may need to obtain permission from the housing association for any structural changes.
Finally, when you come to sell the home you will need to sell it to another shared ownership buyer – which could be trickier than selling it on the open market as the pool is smaller.
How does shared ownership compare to Help to Buy?
Help to Buy – the Government scheme to support first time buyers get on the housing ladder – ended last year, leaving many prospective owners looking for alternative routes.
Shared ownership could be an option for some of them, but buyers should be aware that the schemes are quite different.
‘In principle, the shared ownership scheme is an excellent way for those with lower incomes and or smaller deposits to get on the housing ladder,’ says Justin Moy, managing director at EHF Mortgages. ‘[But] in recent years, the rent and service charge costs have increased substantially, and can make it arguably more expensive than a traditional purchase.’
He suggests buyers consider whether they can purchase a property on the open market through a 95 per cent or even 100 per cent mortgage, rather than opting for a shared ownership scheme.
He tells This is Money that he would like to see changes made to the scheme including the capping of rent and service charges for tenants, especially in areas where property prices are particularly high.
‘Having any scheme to provide support to buy a property is important, and shared ownership needs to evolve more in 2023 to be a true replacement for Help to Buy,’ he adds.
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House prices slumped 2% in December, says Halifax: Lender forecasts 8% drop in 2023 as cost of living crisis weighs on property market
- Monthly growth hit -1.5% in December, slightly more than November’s -2.4%
- The average UK house price is now £281,272, down from £285,425.
House prices fell 1.5 per cent in December taking the average UK house price to £281,272, down from £285,425, according to Halifax’s latest house price index.
Annual growth sat at 2 per cent, well below November’s figure of 4.6 per cent.
However, despite the slump the average house price remains 11 per cent higher than it was at the start of 2021, when the pandemic saw record price growth.
Halifax HPI: Annual rate of growth dropped to 2.0% in the last month of the year
Kim Kinnaird, director, Halifax Mortgages, said: ‘As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.
‘As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8 per cent over the course of the year.
‘It’s important to recognise that a drop of 8 per cent would mean the cost of the average property returning to April 2021 prices, which remains significantly above pre-pandemic levels.’
A forecast of an 8 per cent drop in prices puts Halifax’s prediction within the scale of other views in the market.
Predictions vary, but several analysts have suggested house prices could fall between 10 and 15 per cent over the next two years.
The Office for Budget Responsibility has said house prices are set to fall 9 per cent between the end of 2022 and the end of 2024.
And elsewhere estate agent Savills has updated its forecast to a 10 per cent fall in house prices over 2023.
>> Read our round up of the property market predictions for the year ahead
All nations and regions saw annual house price inflation, although the rate of growth has slowed, Halifax said.
On an annual basis, the North East saw the greatest slowdown in growth, with annual house prices rising by 6.5 per cent, compared to 10.5 per cent the prior month. Average house prices in the region are now £169,980.
Simon Gerrard, managing director of Martyn Gerrard estate agents comments:’But the big issue continues to be supply. There simply aren’t enough properties coming onto the market, which could well have reduced the magnitude of today’s reported drop in house prices, which is lower than that for November.’
Iain McKenzie, CEO of The Guild of Property Professionals, adds: ‘After hitting an all-time high of nearly £300,000 in the summer, house prices have now fallen back below the level they were in March. There’s no need to panic, as a readjustment in the market was to be expected following more than two years of inflated house prices.
‘Fortunately for sellers, the demand for quality housing is still high, and many areas of the country are still seeing a shortage of stock, which will keep prices buoyant in the months ahead.
‘Pessimism over the future of house prices may be misplaced. Employment figures remain strong, and there are signs we may soon see falls in the wholesale fuel prices, which have helped drive up inflation and the cost of living over the past year.’
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As we approach 2023, it appears the property market has hit the perfect storm.
Mortgage rates have risen to levels that were unimaginable just 12 months ago, a cost of living crisis rages on, and there is a widespread belief that house prices will fall next year.
With the typical home costing roughly nine times the average UK annual salary, that may not necessarily be a bad thing – especially for those hoping to get on the property ladder.
But for homeowners who saw the value of their properties grow substantially during the pandemic housing boom, seeing those gains potentially fall away will be a concern.
Property price predictions: We look at the main forecasts for 2023, from mortgage lenders, property websites and estate agents
The latest evidence shows that house prices may have already begun to fall month-on-month.
The average house price fell by 2.3 per cent in November, the highest monthly fall since 2008, according to Halifax’s index. It marked an acceleration compared to the previous month, when prices dropped 0.4 per cent.
But other indexes show less substantial falls or even minor gains – and when it comes to the outlook for 2023, predictions vary even more widely with annual price falls ranging from 5 per cent to more than 20 per cent.
We look at the different forecasts for house prices next year, analyse the factors weighing on the market and ask what those looking to buy or sell in 2023 need to know.
High mortgage rates push down house prices
Much of the recent change in house price trajectory is being put down to mortgage rates.
The average two-year fixed mortgage is now 5.80 per cent with a five-year fix at 5.61 per cent, according to Moneyfacts. This time last year they were 2.34 per cent and 2.64 per cent respectively.
>> Check the latest mortgage rates you could apply for
This means that a typical buyer requiring a £250,000 mortgage, who is fixing for two years with a 25 year term, will now have to pay £1,580 per month compared to £1,102 a year ago. That’s a 43 per cent rise in costs and a total of £5,736 more per year.
This combines with the fact that, over the past 25 or so years, the gap between house price rises and wage increases has grown ever wider.
Since 1997, the ONS says that housing affordability has worsened, with property prices in England and Wales moving from 3.5 times the average salary to 9.1 times.
The pandemic house-buying boom hastened this, with the house price to income ratio ticking up sharply from from 7.9 times salary in 2020 to its current level.
Ups and downs: Mortgage rates have gradually risen since the Bank of England began raising the base rate. They then spiked after the mini-Budget, but are now slowly reducing.
Home buyers put moving plans on hold
Given these higher mortgage rates, combined with wider economic uncertainty, early signs suggest that more Britons are putting their home buying or moving plans on hold.
Mortgage approvals for house purchases fell by more than 10 per cent to 59,000 in October, according to the most recent figures from the Bank of England. This was 20 per cent down on the 74,400 mortgage approvals recorded in August.
Property portal Zoopla has claimed that demand for homes is down by 50 per cent on the year, as buyers hold out to see what the market holds in January and early 2023. The number of sales being agreed is also down by 28 per cent year-on-year.
It means many sellers are having to accept bigger discounts, with Zoopla finding that an average of 4 per cent taken off initial asking prices last month to achieve a sale.
Amid all this doom and gloom, it’s perhaps not surprising that most predictions have house prices falling, with the Government’s official forecaster the Office for Budget Responsibility predicting a 9 per cent house price fall.
This is what the other house price indexes are predicting.
What the biggest mortgage lenders say…
Halifax
- 2022 prediction: +1 per cent
- 2023 prediction: -8 per cent
Halifax says that it expects average values to drop 8 per cent next year.
While it declined to put a monetary value on this drop – saying it doesn’t yet have the data for December – it said that this level of fall would take prices back to roughly what they were in April 2021, which was £258,295.
It reported that annual house price growth slowed dramatically in November to just 4.7 per cent, down from 8.2 per cent in the 12 months to October.
The average house price in the UK is now £285,579, down 2.3% from October, says Halifax
It means the average home in Britain costs £285,579, down £6,827 from £292,406 last month.
Halifax says that the increasing cost of living will put more pressure on household finances while rising interest rates will impact monthly mortgage payments.
This has resulted in more caution among both buyers and sellers, which has seen demand soften as people take stock.
It expects an even more challenging economic environment next year and for the housing market to continue to ‘rebalance’ to reflect these new norms.
Nationwide
- 2022 prediction: None
- 2023 prediction: -5 per cent
Nationwide has predicted house prices will fall by 5 per cent next year, as it expects activity to ‘stabilise’ to just below pre-pandemic levels.
The prediction from the UK’s largest building society suggests a softer landing for the property market in 2023 than others have forecast, despite the choppy economic conditions.
Nationwide expects it will be hard for the market to regain much momentum with economic headwinds set to strengthen.
High base: Nationwide shows 2022’s house price growth compared to previous years
These headwinds include real earnings falling further thanks to high inflation, the Bank of England moving interest rates higher, and rising unemployment expected as the economy shrinks.
However despite all of these risks ahead, Nationwide thinks the UK property market still has a a good chance of achieving a relatively soft landing next year with activity stabilising modestly below pre-pandemic levels and house prices only edging lower.
What the biggest property portals say…
Rightmove
- 2022 prediction: +5 per cent
- 2023 prediction: -2 per cent
Rightmove is predicting a 2 per cent drop in average asking prices in 2023.
This time last year it forecast a 5 per cent rise in average asking prices in 2022, re-forecasting to 7 per cent later in the year. Average asking prices ended up 5.6 per cent higher, it said.
It says economic headwinds will lead to less market activity, though it says price falls will be tempered by the fact there will be few repossessions or forced sales – a different situation from the 2008 property crash.
It also says affordability constraints will bite in some parts of the market much more than others.
Cooling market: Last month, seven in ten estate agents saw most sales agreed at below asking price, according to industry body Propertymark
This, Rightmove says, will lead to a more pronounced ‘hyper-local’ market, where one side of a city, town or even street could fare better than another, depending on the types of property available and the desirability and affordability of the exact location.
But overall it expects there will be less urgency in the market as buyers wait for the right home to become available for their needs, and some sellers will hold out hoping for a price that matches their expectations.
It says there could therefore be a stand-off in the early months of 2023 between some sellers who are in no rush to drop their prices, and affordability-strapped or hesitant buyers.
This will lead to homes taking longer to sell, and Rightmove says it could be up to 60 days – similar to pre-pandemic levels. Currently, homes in the most popular areas get an offer in as little as 15 days.
Zoopla
- 2022 prediction: +3 per cent
- 2023 prediction: -5 per cent
Last year, Zoopla forecast house price growth would slow to 3 per cent with as pandemic driven demand slowed and higher mortgage rates impacted growth.
It says that house prices look set to end the year 7 per cent higher thanks to continued demand from ultra cheap mortgage rates and pent-up demand to move in the wake of the pandemic.
Zoopla says price growth has slowed in 2022, and expects falls in the first half of 2023
It says there will be 1.3million homes sold in 2022, even with a rapid slowdown in the final three months.
For 2023, Zoopla says it sees house prices falling 5 per cent with 1million sales.
It believes the impetus to move will remain but higher mortgage rates and cost of living pressures will put some buyers off.
Zoopla also said that 1million sales would be well ahead of the lows recorded between 2008 and 2010.
What the estate agents say…
Savills
- 2022 prediction: 3.5 per cent
- 2023 prediction: -10 per cent
Savills is now forecasting a 10 per cent fall in house prices next year, a significant downgrade from its prediction of a 1 per cent fall back in May.
Given the prospective path of the Bank of England base rate, it expects to see mortgage rates elevated through 2023 and well into 2024.
Mortgage affordability, it says, will therefore remain stretched by historical standards.
Grey skies in the housing market: Savills expects double-digit house price falls in 2023, in a year when discretionary movers will sit on their hands
It is anticipating double-digit house price falls in 2023, on account of movers who can afford to wait sitting on their hands and both first-time buyers and buy-to-let investors curtailing their activity.
However, after price falls next year, Savills expects buyers to gradually return into the market and allow a return to modest house price growth from 2024 onwards, with a more pronounced rebound in 2026.
Plans on hold: Savills has predicted these likely scenarios for buyers and sellers in 2023
Knight Frank
- 2022 prediction: +3 per cent
- 2023 prediction: -5 per cent
Knight Frank says the mini-Budget has been a distraction from the fact the era of cheap debt is ending, and house prices are due to fall after rising by more than 20 per cent during the pandemic.
As the mini-Budget, which spooked markets and led to a spike in mortgage rates, works its way through the system, it says the UK housing market exists in a strange reality of falling mortgage rates and a rising bank rate.
Knight Frank says some buyers and sellers are therefore pressing the pause button over Christmas.
More clarity should come next year, it says, as the spring selling seasons gets underway and the price expectations of sellers are properly put to the test.
It forecasts that higher borrowing costs will keep transaction volumes in check and result in more widespread price declines in 2023, with values expected to fall by 10 per cent over the next two years as buyers and sellers recalculate their options.
Hamptons
- 2022 prediction: +3.5%
- 2023 prediction: 0 per cent
Hamptons says that although mortgage rates increased far more sharply than anyone expected since their October peak, rates have started to come back down to a more manageable level.
While buyers reacted to this spike in October and November, it says sentiment seemed to settle in December with an uptick in what buyers were prepared to pay.
The direction of mortgage rates will set the tempo, but it does not foresee sizeable price falls just yet.
Hamptons believes that the recession, while painful for many households, is likely to be shallow.
It says the stricter lending criteria and stress testing of mortgage applicants, introduced in the wake of the global financial crisis should limit forced sales – a key stimulant of price falls in 2008.
The areas in most jeopardy, according to Hamptons, are those where price growth has been strongest in the past few years and where buyers have the largest mortgages relative to their incomes.
It is transactions that are likely to take a bigger hit this year, it predicts, as buyers and sellers ponder their strategies for the new interest rate environment.
The three Ds – debt, divorce and death – will be the reason why most properties are put up for sale, according to the estate agent.
Perfect storm: The highest mortgage rates recorded since the financial crisis and a cost of living crisis have combined to create a widespread belief that house prices will fall
Chestertons
- 2022 prediction: +4 per cent
- 2023 prediction: -1 per cent
London estate agent Chestertons is also predicting that the housing market will not see a big drop in values next year.
Instead, it forecasts that prices across England and Wales will fall by around 1 per cent in 2023.
The agent doesn’t believe that prices will fall substantially as ‘strong underlying demand’ for homes combined with fewer-than-expected forced sales will ‘cushion’ prices.
Instead, it expects that many homeowners will adopt a ‘wait-and-see’ approach for the first half of 2023, which will reduce the number of property sales that take place compared to a normal year.
It says the lack of supply, combined with the strong underlying demand for homes, will ultimately insulate the market from any dramatic falls in prices.
Should you trust house price indexes?
Although property price predictions arguably influence public sentiment, forecasts should always be taken with a pinch of salt.
A number of major organisations, including the Bank of England, Savills and Knight Frank predicted house prices would fall in 2020 following the outbreak of Covid-19.
It seemed the only logical conclusion, particularly when the property industry effectively shut down – not to mention the entire country.
However, these predictions did not foresee the extent of furlough or the stamp duty holiday. Nor did they foresee the extra importance and value people would place on their homes once they were spending almost all their time within them.
In fact, prices increased by 8.5 per cent in 2020, according to the ONS.
Many may argue that this time it’s different due to 40-year high inflation and the highest mortgage rates in more than a decade.
But as we have seen in the past, the property market is capable of defying all expectation and we never know what economic factors may change.
Higher interest rates may well be the new normal. But that isn’t guaranteed.
It is also conceivable that next year inflation could fall, or that mortgage rates could fall or our fears about a recession and rising unemployment may never transpire.
Ultimately, nobody knows what the future holds, so trying to time the market based on house price predictions is not a sound strategy.
Should you buy or sell in 2023?
It’s worth pointing out that mortgage rates have been falling since they peaked in October, although they still remain much higher than in years gone by.
The top five-year fixes come in just under 4.5 per cent now – that compares to between roughly 2 per cent and 2.5 per cent a year ago.
Sellers may have to accept that buyers simply cannot afford to pay 2022 prices for their home in 2023, but the flipside of that is that their own new home should be cheaper, too.
Nathan Emerson, chief executive of membership body for property agents, Propertymark, says: ‘A gradual shift back to a more realistic and sustainable market has already started to emerge with the average house price starting to fall and we would expect this easing to continue into 2023.
‘But, if you dig under the surface, prices falling in this way are not as alarming as they may initially seem. Although house prices are coming down, they are still between 19 per cent to 20 per cent higher than in March 2020.
‘This means that even with a further 10 per cent drop next year being predicted, most homeowners will still have gained a 10 per cent rise in the value of their property since before the pandemic. It remains a good time to buy and sell.’
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A calm is descending on Britain’s property market. After two and half years of soaring prices and frantic bidding wars, for sale signs are staying up longer and estate agents’ phones are quieter.
In 2020 and 2021, there wasn’t the usual pre-Christmas slump. Buyers were keen to take advantage of the stamp duty holiday and rock-bottom home loan rates, even during the December festivities.
But this year is different. Money Mail has spoken to estate agents across the country and many of them say the housing bubble has burst, with soaring mortgage costs putting buyers off moving.
Cooling market: Last month, seven in ten estate agents saw most sales agreed at below asking price, according to industry body Propertymark
‘I have never seen the market go from so warm to so cold in such a short space of time,’ says North Wales estate agent Ian Wyn-Jones.
‘Properties are being put on the market for £250,000 and selling for £180,000.’
Lesley Prescott, a surveyor at London-based Reliable Property Group, agrees.
‘It is the fastest hot-to-cold market I have ever seen,’ she says.
‘The current trend is a downward spiral as vendors struggle to sell their homes, due to the process taking longer than 15 weeks and mortgage offers being withdrawn from buyers. There are roughly 50 per cent fewer properties being processed.’
Suddenly, the power is back in the hands of house-hunters. It means there is a chance to haggle on prices again.
Last month, seven in ten estate agents saw most sales agreed at below asking price, according to industry body Propertymark.
In March this figure was just 15 per cent. And data from estate agency Hamptons shows the fewest homes in England and Wales achieved their asking price in November since January 2021.
Buyers have been made nervous by headlines suggesting a housing crash is imminent. Earlier this month, one of Britain’s largest lenders, Halifax, forecast that property prices would fall by 8 per cent.
This means about £23,000 will be shaved off the value of an average home. Yesterday, Nationwide predicted a similar fall, but remarked that any crash would have a ‘soft landing’. However, agents are not so sure.
Gloomy outlook: Earlier this month Halifax forecast that property prices would fall by 8%. This means about £23,000 will be shaved off the value of an average home
Joel Edgerton, of Wigan estate agency Regan and Hallworth, says: ‘We’re definitely in a buyer’s market now. We’re seeing houses being sold for less than they would have fetched earlier in the year.’
But buying agent Emma Fildes, who runs Brick Weaver in London, spies an opportunity. She says: ‘In the past two years it has been bidding war after bidding war.
‘Now you can more aggressively turn around and negotiate a better price. Everyone is doing it. No one wants to feel they are overspending right now.’
First-time buyer Robert Bolohan plans to buy a property with his wife Mariona in the new year — and intends to haggle.
The couple had all but given up on their home ownership dream after prices soared in recent years, thanks in part to pent-up demand from the pandemic and stamp duty cuts.
They have been living at home with his parents in West Drayton, London, while they save money.
Robert, 28, who runs his own translation business called Lotuly, says: ‘Just a few weeks ago we went to see a couple of houses in the Reading area.
It was really nice because these areas were so expensive last year, but now they feel so much more affordable.’
He adds: ‘I am a business owner; I negotiate in almost everything I do. So, of course, when it comes to finding a home, I am fully expecting to haggle politely.’
Five tips to become a successful haggler
Buyers’ market? Many experts are suggesting a housing crash is imminent
1. Be flexible with time-frames
Some sellers are happier to negotiate if you’re flexible about your move-in dates, says property consultant Alex Goldstein.
2. Know when to sign
Consider why you’re buying the property when negotiating, says Alex Mosley of broker Perrygate:
‘If it’s a dream home, don’t risk negotiating the price down.’
3. Do your homework
Check websites such as Rightmove to get an understanding of what is for sale, says buying agent Emma Fildes: ‘You really need to know what you’re doing before you pitch your offer.’
4. Cosy up to your estate agent
‘That is vital,’ says Alex Goldstein. ‘This is a people business — so if you’re responsive, they will portray that to their client.’
5. Be realistic
Don’t get carried away when negotiating, says Joel Edgerton, an estate agent based in Wigan: ‘You have to think about what you believe a property is worth and be realistic.’
However, experts warn that buyers are out of practice when it comes to negotiating and need to bear some simple tips in mind.
First, it is important to gauge the appetite of the seller, says Ms Fildes. ‘Are they getting divorced or are they having marriage problems — therefore, do they need to sell quickly? You need to know what you’re doing before you pitch your offer.’
Secondly, she says, negotiations must be initiated early in the process, otherwise things can get ‘messy’. Experts recommend focusing on making yourself an appealing seller.
Property consultant Alex Goldstein, based in London, says: ‘If you’re trying to negotiate from a position of strength, you need to have everything ready, including your ID, mortgage agreement in principle and having a solicitor lined up.’
Ms Fildes says buyers in the current market should only expect to cut down the price by no more than 10 per cent.
Mr Goldstein adds: ‘You can overstep the mark.
‘It’s a people business and, if you come in with a lowball offer, then you’re going to anger the seller. If you get off on the wrong footing, then it breaks trust.’
Above all else, buyers must be realistic, as not all homes will be up for negotiation.
Aneisha Beveridge, head of research at Hamptons, says in the current market you are more likely to be able to haggle down the price of a larger home than a one-bedroom flat.
It signals a reversal of the pandemic-induced ‘race for space’, when buyers were demanding bigger properties with more spacious gardens.
She says: ‘As mortgage rates have risen, higher repayments are causing buyers to forfeit space in order to climb onto the housing ladder, boosting demand for smaller homes.’
And at the top end of the market, house prices are expected to remain buoyant.
In holiday hotspots, for example, estate agents seem unfazed by news of a property market crash.
Shireen Cunliffe, who works for John Bray estate agents in North Cornwall, says: ‘We are in a prime location where sellers will always hold out for the best offers they can get.
‘There are no signs showing that this will ever be a buyers’ market.’
moneymail@dailymail.co.uk
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Average UK property prices increased by 12.6 per cent in the year to October, up from a 9.9 per cent rise seen in the 12 months to September, official figures show.
The average UK house price was £296,000 in October, which is £33,000 higher than this time last year and little changed from last month, the Office for National Statistics said.
The increase in annual average house price percentage change was mainly because average house prices fell by £6,000 between September and October 2021, following the end of the stamp duty holiday, according to the ONS.
However, more up-to-date measures of the housing market have shown property prices falling in month-on-month terms amid higher inflation, interest rates and mortgage rates.
Shift: Average UK property prices increased by 12.6% in the year to October, the ONS said
On a seasonally adjusted basis, the average UK house price increased by 0.7 per cent between September and October, up from an increase of 0.5 per cent in the previous month.
Average house prices increased by 13.2 per cent to £316,000 in England over the period, while in Wales average prices jumped 11.8 per cent to around £224,000.
In Scotland, average property prices increased by 8.5 per cent in the year to October, reaching £195,000, while in Northern Ireland prices rose by 10.7 per cent to £176,000.
Aimee North, head of housing market indices at the ONS, said: ‘Annual house price inflation increased in October, although this was mainly because of the sharp fall in house prices at the same time last year following the end of the stamp duty holiday.
‘London saw the lowest annual growth throughout the UK and was the only region to show a fall in average house prices between September and October 2022, while house prices in the North East saw the highest annual growth.’
The North East continued to have the lowest average house price of all English regions, at £168,000 in October, which is a record high for the region. However, average house prices in the region increased by 1.9 per cent between September and October, representing the biggest rise in average house prices of all regions, the ONS said.
How much? The average UK house price was £296,000 in October, according to the ONS
Variations: Average property prices in England remain the highest in the UK, the ONS said
London’s average property prices remained the most expensive of any region in the UK, with an average price tag of £542,000 in October.
But, London was the region with the lowest annual house price inflation, with average prices increasing by 6.7 per cent in the year to October, down from an annual percentage change of 7.4 per cent in September.
The ONS said: ‘London’s annual percentage change was slowed by average London house prices falling by 0.9 per cent between September and October 2022. London was the only region in the UK where average house prices decreased this month.’
Delving into Land Registry data published today, detached homes saw only the third biggest annual spike in prices, rising by an average of 12.4 per cent to £498,885 in England.
Average prices for terraced homes increased by 14.7 per cent to £258,717 in England over the period, while prices for semi-detached homes rose by 14.4 per cent to around the £303,336 mark.
What do experts say about today’s ONS data?
The data published by the ONS and Land Registry today is somewhat out of date, in that figures pertaining to more recent times have indicated that average UK property prices are falling amid high inflation and rising interest rates. In recent weeks mortgage rates hit the 6 per cent mark, but are now starting to ease again.
Many experts aren’t convinced that today’s ONS figures reveal the full picture when it comes to what is happening in the UK property market now.
Tom Bill, head of UK residential research at Knight Frank, said: ‘Despite today’s figures, double-digit UK house price growth is now a thing of the past.
‘Even as the reverberations of the mini-budget fade, a more adverse lending landscape is emerging after 13 years of ultra-low rates.
‘When the spring market gets under way next March, mortgage rates will be more than two percentage points higher than at the same point in 2022.
‘This will keep transaction volumes in check and means price declines will become more prevalent. Knight Frank expects UK prices to fall by 10% over the next two years, taking them back to where they were in summer 2021.
‘We think London prices will continue to underperform the rest of the country, with the exception of prime central areas, which will benefit from a higher proportion of cash buyers.’
Jamie Durham, an economist at PwC UK, said: ‘Given the current economic conditions, there is considerable uncertainty in the outlook for the housing market.
‘However, stretched household finances, rising interest rates and a likely recession means a decline in house prices does look likely over the coming months.’
Meanwhile, Myron Jobson, a senior personal finance analyst at Interactive Investor, said: ‘The 12.6% jump in house prices over the year to October 2022 does not mean the property market is heating up again.
‘Instead, it lays bare the distortions caused by the stamp duty holiday – which ended in October 2021 and artificially depressed sales in the months after.’
He added: ‘The harsh reality is more and more wannabe buyers simply can’t make the numbers work. This is likely to bring house prices back down to earth following a meteoric surge in recent history.’
On mortgage rates, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Inflation slipping to 10.7 per cent will start to ease pressure on the Bank of England but a half-point increase in base rate this month is still expected.
‘That said, the pricing of fixed-rate mortgages continues to ease, with five-year fixes now dipping below 4.5 per cent.
‘We believe they are heading towards 4 per cent as the cost of funds falls, servicing pressure subsides and lenders look to originate new business in the new year.’
Data: Rightmove data suggests average asking prices fell by 2.1% in the last month
What has other recent house price data shown?
On Monday, data from Rightmove suggested that the average asking price of homes being put on the UK market has fallen by 2.1 per cent over the last month, marking the largest pre-Christmas dip of the last four years.
The UK’s biggest property website said the average asking price was £359,137 in early December, which is about £7,862 less than the previous month. The fall in asking prices followed a 1.1 per cent drop in November’s prices.
But, Rightmove added that at the end of this year, average asking prices would still be about 5.6 per cent higher than at this time a year ago, which would be only slightly below the 6.3 per cent growth recorded in 2021.
That said, Rightmove predicted a 2 per cent fall in prices next year, with ‘some locations, property types and sectors faring much better than others.’
Tim Bannister, director of property science innovation at Rightmove, said: ‘After two and a half years of frenetic activity it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer.’
He added: ‘We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales, which would cause a glut of properties for sale and contribute to more significant price falls in 2023.’
On 7 December, figures from Halifax claimed annual house price growth slowed dramatically in November to just 4.7 per cent, down from 8.2 per cent in the 12 months to October.
Month to month house prices also fell by 2.3 per cent, compared to 0.4 per cent last month, according to Halifax. The change means that the average house in the UK now costs £285,579, down £6,827 from £292,406 last month.
Kim Kinnaird, director at Halifax Mortgages, said: ‘The monthly drop of 2.3 per cent is the largest seen since October 2008 and the third consecutive fall.
‘While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (19 per cent since March 2020) – this month’s fall reflects the worst of the market volatility over recent months.
‘When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.
‘Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels.’
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My husband and I are looking to buy a new home, but we don’t want to sell our current house now, as we think we can hold on to it until a better time to sell.
We also want to avoid the home moving stress that comes with selling and buying at the same time.
Luckily we don’t need to sell to buy and plan to sell our current home in the next year or two, hopefully when the property market picks up again. In the meantime, we will rent out the property we buy now for a year or two and then move in when we sell our current home.
Does this mean we will have to pay the extra stamp duty surcharge or can we claim this back as it is our main home? If so, will it be easy to reclaim and what steps will we have to follow to ensure we are not turned down as that could cost us dearly.
SDLT: In September, the stamp duty threshold for house buyers has rose from £125,000 to £250,000 and from £300,000 to £425,000 for first-time buyers.
Ed Magnus of This is Money replies: Although this is a nice problem to have, you’re sensible to be considering the potential stamp duty ramifications.
The rates of stamp duty are set at a percentage of the purchase price, which varies depending on the value of the property you are buying.
For any typical home mover, who isn’t a first-time buyer, they don’t pay any stamp duty up to the value of £250,000.
This will remain the case until 31 March 2025, when the nil rate band will be reduced back to £125,000 for a typical home mover.
You can check how much you would pay to move home with our stamp duty calculator.
Under the current stamp duty system, the portion of a property’s purchase price between £250,001 and £925,000 sees the tax charged at 5 per cent, between £925,001 and £1.5 million it rises to 10 per cent, and above £1.5 million it is charged at 12 per cent of the purchase price.
However, those purchasing an additional home on top of their main residence are required to pay an extra 3 per cent surcharge on top.
This covers buy-to-lets and also second homes and any other situation where the new property you are buying is not replacing a main residence that has already been sold.
| Band | Stamp duty land tax rate | Additional rate for landlords / second homes |
|---|---|---|
| First-time buyers pay 0% to £425,000 then normal rates apply | ||
| £0 – £250k | 0% | 3% |
| £250,001 – £925k | 5% | 8% |
| £925,001 – £1.5m | 10% | 13% |
| £1.5m + | 12% | 15% |
| * No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC | ||
The complication with your situation is that you think your main residence won’t be sold for another year or two and the new property won’t be your main residence to begin with.
However, the government has rules on this exact situation.
If you have not sold your main residence on the day you complete your new purchase you’ll have to pay higher rates. This is because you own two properties.
However, you can apply for a stamp duty refund if you sell your previous main home within 36 months, so it will be very important to bear this timeframe in mind.
If it takes longer than 36 months to sell your previous main home there is an exceptional circumstances scenario where you may still be able to claim the money back, you can find the stamp duty repayment rules at gov.uk.
How much stamp duty could you claim back?
It will be important to reclaim the surcharge, as it can add up to a significant amount depending on the purchase price of the property you are intending to buy.
A £300,000 property for example without the 3 per cent surcharge will cost £2,500 in stamp duty. However, with the surcharge included, it will cost you £11,500 in tax.
A £500,000 property would cost £12,500 without the surcharge included. However with it included, the tax will set you back £27,500.
If you’re able to stomach the initial surcharge, your plan may work, given you will be able to claim it back at a later date. However, it will involve tying up money for a substantial amount of time and you will need to leave plenty of time to sell.
It may prove a way of avoiding the stresses and potential disappointment that can unfold when moving home.
It often takes months for a property sale to complete having gone under offer. Add that to a potentially long property chain of equally anxious buyers and sellers, and there is also a good chance of any deal collapsing.
Many property transactions are dependent on a chain of buyers and sellers, all relying on each other to ensure they can complete on their own purchase.
If any transaction in the chain is delayed or collapses, everyone in the chain is impacted.
We spoke to Tim Walford-Fitzgerald, a private client partner at accountancy firm HW Fisher for their tax advice and Mark Harris, chief executive of mortgage broker SPF Private Clients, on the assumption that the reader will be requiring a mortgage to fund their purchase.
What is the tax advice here?
Tim Walford-Fitzgerald replies: You’ll usually have to pay the 3 per cent surcharge on top of Stamp Duty Land Tax (SDLT) rates if buying a new residential property means that you’ll own more than one.
In your case you’ll be purchasing an additional property, and so you’ll have to pay this surcharge.
Be sure to factor this into your purchase price on completion. This surcharge applies even to the first £250,000 of the purchase price, that would normally be free from SDLT until 31 March 2025.
Surcharge: Those purchasing an additional home on top of their main residence are required to pay an extra 3 per cent surcharge on top.
The good news is that as you intend the new property to become your main home, albeit not immediately, you may be able to claim a refund of that 3 per cent if you sell your existing home, and the new property becomes your home within three years of buying it.
You will have to claim the refund within 12 months of selling your current home. The form is called SDLT16 and it can be completed on-line.
You will need the details from the two transactions in order to work through the steps.
These will include the addresses and title numbers of both properties, the dates of the transactions, the unique SDLT transaction reference for the purchase of your new property and a calculation of the tax you are reclaiming.
However, if things don’t turn out the way you hope and you end up staying where you are, or if you decide to rent out your current home instead of selling it, you won’t be able to reclaim the 3 per cent surcharge.
You will also need to watch out for capital gains tax if this is not to be your final home.
The year or so renting out the property while the market improves may impact on your CGT exemption if you were to move again in the future.
This might be avoided if you were to only rent it on a short term basis, for example a holiday let style, rather than allowing someone to make it their own residents
Could you get a mortgage on another home?
Mark Harris replies: If you need a mortgage to fund the purchase, there are a few things you need to consider.
Firstly, is there a mortgage on your current property that could be moved over to the new property?
You will need to check whether your lender will allow you to port it without incurring a penalty or whether there are any consent-to-let issues.
If a mortgage is required to purchase the new property, the usual income, affordability constraints and background commitments come into play.
The lender will also want to know where the deposit money is coming from. If it is raised against the existing property to be let via a let to buy, then if you are looking to sell in the short or medium term, consideration will need to be given to the mortgage type taken.
It is also worth considering a possible fall in value if you sell your existing home at a later date, although you mention that you are holding onto it until the market picks up.
However, nobody knows when this might be and you may need to sell sooner than you would like for whatever reason, which could result in a loss.
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