The Bank of England has held off on further interest rate rises for now but agents warn that there is still further for house prices to drop.
The cost of borrowing had been raised for 14 consecutive months between December 2021 and August 2023 from 0.1% to 5.25% in an effort to tackle high inflation.
At the same time, average mortgage pricing has risen above 6%, hitting buyer budgets and pushing house prices down as the market slows.
But inflation has been easing recently, prompting the Bank of England to hold interest rates at its latest meeting yesterday.
The central bank said there were signs that the rate rises were hitting the economy and the labour market.
Commenting on the announcement, Lucian Cook, head of residential research at Savills, said: “The Bank of England’s decision to maintain the current base rate is an important signal to the mortgage markets and should take some of the edge off the affordability pressures buyers are currently facing.
“However, a material improvement in mortgage affordability requires the prospect a cut in interest rates coming onto the horizon. That still looks some way off, suggesting buyers’ budgets are going to remain constrained and that there is a little way to go before house prices bottom out.”
Richard Donnell, executive director of Research at Zoopla, said this will be welcome news to homebuyers.
He added: “There has been some softening in mortgage rates but as long as rates stay over 5% then house prices will continue to fall. The concern is that money markets expect base rates to stay higher for longer in the face of higher inflation which will keep two and five-year fixed-rate mortgage rates higher.
“As we saw this Spring, mortgage rates in the low 4% range would bring buyers back into the market but this would require money markets to expect base rate cuts rather than an ending to further base rate increases.
“Today’s homebuyers and remortgagors are taking what they will hope is short-term pain to get a better, lower, rate in two years’ time with 40% of new mortgages being taken at the higher 2-year fixed rate.”
Nathan Emerson, chief executive of Propertymark, added: “It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially.
“This now indicates that rises to interest rates have been impactful and that the fall in house prices has helped to even the affordability playing field and keep the wheels of the housing market turning.”
Agency software provider Alto has announced a new partnership with home setup provider Just Move In.
Customers of the Zoopla-backed firm will be able to offer vendors, buyers and renters a free home moving service that helps to sort council tax, water, sewerage, and energy bills – as well as additional services including removals, storage and insurance.
The partnership will be switched on automatically following significant agent uptake in the testing phase of the integration.
Alto will automatically highlight Just Move In’s services to vendors, buyers and tenants at the most appropriate moment in their moving journey and will send emails on behalf of agents, in their branding, when their clients reach certain milestones.
Riccardo Iannucci-Dawson, chief operating officer at Alto said: “Regardless of whether you’re a property owner, prospective buyer or renter, moving home is one of the most stressful things many of us will encounter.
“This innovative new partnership with Just Move In will not only help alleviate the stress associated with this milestone for many – but will also provide an opportunity for agents to stand out from the competition.”
Ross Nichols, co-founder at Just Move In, added: “We’re excited to be rolling out with Alto after many months of hard work from both teams. This unique integration will allow more agents, and indeed more customers than ever before, to benefit from our services and save both time and money.”
3. The number of property sales this year is down 21 per cent against 2022;
4. Mortgage-backed sales are likely to be 28 per cent lower than last year due to higher rates, while cash sales won’t be hit;
5. Despite this, faster wage growth is improving housing affordability. Lower mortgage rates are key to boosting market activity in 2024.
In detail it says that the market continues to feel the impact of higher mortgage rates and cost-of-living pressures. It’s resulting in weaker demand from buyers, fewer sales and very low house price growth.
In the last four weeks or so, demand from buyers is 34 per cent lower than average in the same period over the last five years.
The number of agreed property sales is down 20 per cent.
Annual UK house price growth of 0.1 per cent is a virtual standstill. This is the lowest annual growth rate for 11 years, since August 2012.
There is a clear north-south divide in house price inflation. Every region in the South of England has seen house prices fall by up to 1.0 per cent in the last year.
But all other regions and countries of the UK are posting low single-digit house price growth. Scotland seeing the highest house price growth of 1.7 per cent.
This pattern reflects the greater impact of higher mortgage rates on higher-value housing markets.
A renter buying the home they rent would find it cheaper to buy than rent in the six UK regions and countries with the lowest house prices.
In Scotland and the North East, average mortgage repayments are up to 18 per cent lower than rental costs. This supports access to the housing market and demand for homes.
In contrast, it is more expensive to buy a home than to rent across all areas of southern England and the Midlands. In London, the average mortgage repayment is 24 per cent higher than monthly rent.
Zoopla says this is a key reason why house prices will fall the most across the South of England.
While house price growth has slowed rapidly over the last year, the primary impact of higher mortgage rates has been a lower number of sales – down 21 per cent compared to last year, although still on track for a million completions in 2023.
It will be the lowest number of property sales since 2012 and the equivalent of every household moving once every 23 years.
This fall is largely from mortgaged buyers: the portal expects the number of mortgaged sales to drop 28 per cent on last year. On the other hand, cash sales will fall just one per cent compared to 2022.
Homeowners with a mortgage typically account for a third of annual property sales. This group is under less pressure to move as they already own a home. Where possible, many of them will wait for mortgage rates to improve before they move.
Landlords are also being squeezed by higher mortgage rates. Mortgaged buy-to-let purchases make up around 8.0 per cent of property sales in the UK.
But buy-to-let investors in southern England now need to have equity of 40-50 per cent of the property’s value to get the numbers to stack up. As a result, new investments will be lower this year.
With more landlords selling previously rented homes, there is more supply of homes that appeal to first-time buyers. These are typically priced 25 per cent lower than the wider housing market.
The property market is set for its quietest year for sales since 2012, Zoopla claims.
The portal’s latest House Price Index estimates that the market is on track for 1m sales completions this year, which would be 21% below 2022 and the lowest amount for more than a decade.
Zoopla said the housing market continues to adjust to higher mortgage rates and cost-of-living pressures with weaker demand, fewer sales and very low house price growth.
Looking at the past four weeks, Zoopla revealed that demand for homes is running 34% lower than the five year average, while sales agreed are down 20%.
Listings are up 16% in some good news for estate agents.
Based on trends during the first half of 2023, Zoopla estimates that cash sales will fall just 1% this year compared with 2022 levels. However, the number of mortgaged sales is projected to be 28% lower.
Weaker demand, more price-sensitive buyers and fewer sales have also led to a “rapid slowdown” in house price inflation, Zoopla said.
Annual UK house price growth is now at 0.1%, the lowest annual rate since August 2012.
There is also a north-south divide in house price inflation.
All regions across southern England are registering year-on-year price reductions of up to 1%, according to the research, while all other regions and countries of the UK are posting low single digit price growth.
Richard Donnell, executive director at Zoopla, said: “House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates. Prices are falling more in southern England where higher mortgage rates have priced more people out of the housing market, weakening demand.
“While UK house prices are 0.1% higher over the year, it is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage reliant buyers. Cash buyers are more immune and on track to account for more than one in three sales in 2023. Mortgage rates have started to fall slowly but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023.”
OnTheMarket critic Brett Stone has issued a second open letter to shareholders of the portal, accusing it of “irresponsibly diluting shareholders” and making misleading statements.
The letter, posted on LinkedIn, highlights data from OTMs’s recent stockmarket update that showed it is losing agency branches and has seen a reduction in site visits.
Without change and proper investment, Stone claims OTM will keep destroying value, keep “irresponsibly diluting shareholders,” keep losing estate agent customers, keep failing to prevent customers’ increasing spend on portals and keep making misleading statements.
Key points Stone makes within the letter include:
(1) OnTheMarket is underinvesting in their products, teams and business handing an easy win to Rightmove and resulting in the loss of estate agent customers, fewer listings, less visits to their site, slowing revenue growth and a declining share price.
(2) Since OnTheMarket listed in February 2018, shareholders have seen the value of their investment decline by two-thirds, customers have seen their aggregate property portal costs more than double, and the property commerce category in the United Kingdom has remained slow, inefficient and stressful for estate agents and consumers.
(3) OnTheMarket are losing customers with 1,084 estate agent branches lost last year and more than expected being lost so far this year. (Rightmove lost 178 branches last year as a comparison). Portal visits are down 14% and revenue growth slowed in the second half to up £0.4 million or 2.4%.
(4) OnTheMarket is irresponsibly diluting shareholders and granting options to insiders. OnTheMarket issued 19.5 million new shares since IPO and has granted 13.2 million options.
(5) OnTheMarket are making public statements which do not appear to be based in reality or supported by evidence (examples of which are examined in an appendix to Brett Stone’s open letter) and do not appear to be acting in the best interests of customers, shareholders, or consumers.
He said OnTheMarket has rejected attempts made last October to have a discussion about an offer including “capital and digital market expertise” required to deliver returns for shareholders and products for customers at speed and scale.
Stone, founder of Trunkstone, a new long-term holding company focused on the property commerce category and the managing partner of private investment partnership Edengen, said in the letter to shareholders: “The proposal included a significant investment in new ordinary shares and was a win/win/win solution for shareholders, customers and employees.”
He said the proposal required shareholder approval at a general meeting, required no additional capital or commitment and retained OnTheMarket’s public listing.
It also protected customer’s interests through an “irevocable commitment to cap agents’ listings fees indefinitely” and included a pay rise for all employees to help with the impact of high inflation, Stone said.
A spokesperson for OTM said its response hasn’t changed since receiving the first letter in October.
OTM said at the time: “The board of OnTheMarket received a letter from Brett Stone in late 2022 and, after careful consideration, unanimously agreed his proposal was detrimental to stakeholders.
“Stone is not a shareholder in OnTheMarket, did not provide any evidence of shareholder support for his proposal or any details of any available funding.
“The board consider that OnTheMarket has strong prospects as an independent business, as evidenced by our recent trading update which showed record revenues and profitability, alongside on-going strategic progress.
“The board also place great value on OnTheMarket’s majority agent owned shareholder structure and believe that this continues to benefit all of the company’s stakeholders and the property market as a whole.”
More than one in four estate agents are unsatisfied with the property portals that they use, according to a new survey.
An online survey of estate agents asked participants to rate the portals they subscribe to in terms of user satisfaction and were asked to rank the portals out of five.
The results of the survey revealed that more than 25% of those surveyed were unsatisfied with the country’s three main property portals.
Fewer than 11% of respondents gave Rightmove a score of five out of five, while 27% of the survey’s participants gave a score of 1 out of 5, the lowest satisfaction score.
The survey also revealed that fewer than 4% of respondents gave Zoopla five out of five for customer satisfaction, while 27.5% gave the portal one out of 5.
OnTheMarket was the worst-ranked portal with just 3% of respondents giving the portal five out of five, while 28% gave it 1 out of 5 for satisfaction.
Jeremy Rosenblatt, founder of challenger portal Jangle, which conducted the research, said: “It is clear that the major portals are simply not providing the customer satisfaction levels that they should be achieving.
“In any other industry, companies providing such low satisfaction levels would not last. Imagine what would happen to high street brands or car manufacturers, if their customer satisfaction levels revealed that nearly 30% of their customers were completely dissatisfied.”
The Jangle survey also revealed that the majority of estate agents subscribe to more than one portal, with 36% of agencies subscribing to the three major portals, 40% utilising two and 24% using just one. The survey also showed that 40% of respondents are spending over £2,000 each month on portal subscriptions.
It comes as Rosenblatt, a former director at Dexters and Hanover Residential, continues with plans for a new portal that won’t charge agents for listings and there will be an API that automatically uploads their properties.
He added: “Our survey not only confirms the market’s widespread dissatisfaction with the costs charged by the big portals but also reveals the level of overheads being incurred, explaining the appetite of agents and developers for a Zero Portal Spend model,” commented Rosenblatt.
“The challenging market conditions that agency firms are currently experiencing are unlikely to improve in the short term and many are asking if the prevailing property portal concept is fit for purpose.
“By gauging market sentiment through engagement with the estate agent community, there is a clear desire for a service that assists property professionals to efficiently market properties without subtracting from their bottom lines.
“From our conversations and the expressions of interest regarding our concept, there is a clear desire for zero portal Spend, which we will deliver.”
House prices are expected to fall by 5 per cent over the coming year, with the gap in house price growth between the south of England and the rest of the country widening.
Price growth plummeted to just 0.6 per cent in the 12 months to June, according to Zoopla’s latest house price index, as higher mortgage rates lead to a sharp fall in demand.
In June last year, house price inflation was at 9.6 per cent.
However, even with the expected falls, property values would still be 15 per cent higher than pre-pandemic levels.
Zoopla said house prices are likely to lag behind the growth in price inflation and earnings, as the market adjusts to higher mortgage rates.
Data from the property platform shows that price falls have been concentrated in the south east of England, with some areas seeing decreases of more than 2 per cent.
In contrast, other areas of the country are still reporting growth of more than 3.5 per cent.
Prices are responding to the fluctuating demand for homes. In the first half of this year demand rose as mortgage rates came down from the highs seen last October.
Richard Donnell, executive director of research at Zoopla, said: ‘The decline in demand is less stark than that recorded in the wake of the 2022 mini-Budget, or when the first lockdown was introduced.
‘Demand has weakened off a lower base and is currently running 6 per cent below 2019 levels. Year-on-year, demand is down 40 per cent but sales agreed are only 17 per cent lower, yet we see more committed sellers and buyers in the market.’
However, as they have risen again this year, surpassing the levels seen in Autumn, demand has fallen rapidly in the second quarter – dropping 18 per cent over the past two months.
In welcome news for prospective homeowners and borrowers, Zoopla says rates are now ‘close to peaking’ and likely to return to between four and five per cent this autumn.
Currently the average two-year fixed rate is 6.83 per cent, according to Moneyfacts, and the average rate for a five-year loan is 6.34 per cent.
Mortgage rates have soared over the past two months as disappointing inflation data increased the chance of further Bank of England base rate rises. As a result, swap rates – the bank borrowing rates which reveal where the financial markets think fixed-rate mortgage prices will be in two and five years’ time – have been rising.
However, better-than-expected inflation data from June put some confidence back in the market and swaps are now falling with some high street lenders including HSBC and Nationwide reducing the rates on their fixed mortgages.
The news offers a glimmer of hope for homeowners, who have been struggling with the mortgage shock when coming off lower fixed rates.
Chris Druce, senior research analyst at Knight Frank, said: ‘Growing expectations that we may be nearing the peak for interest rates as inflation slows will help to settle buyers’ frayed nerves in the coming months, but the affordability challenge will remain.
‘However, more pain will build in the system as fixed-rate mortgages continue to be renewed at higher rates, with the higher cost borrowing acting as a drag on the UK property market. This will see house prices continue their decline, falling by 10 per cent during the remainder of this year and next.’
Around 6.5 per cent of homes are selling for more than 5 per cent under the asking price. This is 60 per cent more than the five-year average.
‘These trends are a clear sign that buyers have become more price sensitive over the last 2 months,’ says Donnell.
‘Sellers need to set their asking prices at the right level if they are serious about achieving a sale.’
Digging further into the regional splits house prices continue to increase at an above-average rate in affordable markets next to major employment centres.
Halifax had the highest rate of annual price growth (4.3 per cent), followed by Wolverhampton (3.7 per cent) and Falkirk (3.0 per cent).
At the same time the type of property buyers are looking for is changing as higher mortgage rates limit affordability.
New sales of three- and four-bed family houses have been hit harder than for smaller homes with lower prices.
Sales of these properties are down by 41 per cent over the last four weeks compared to the same period over the past five years.
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Agency software provider Alto has launched a new way for users to keep track about its latest product developments.
The Zoopla-backed cloud-based software provider has launched a new Product Releases section for agents.
Easily accessible on the Alto website under “What’s new,” agents will be able to learn about the latest features and functionality.
The website section collates all of Alto’s latest product developments in one place – be it product release notes that capture every change made to Alto, new partner integrations or bigger feature launches – which can be accessed via Alto Agenda.
Improvements in Alto’s latest release notes include the ability to look up properties in Add a Market Appraisal or Property journey to find out more information such as current valuation, floor space and energy performance certificates.
Recent larger changes to the software include enhancements to Alto’s mobile functionality – which was the most highly requested feature by Alto customers and enables agents to operate much more flexibly when outside the office and attending viewings.
Agents can now access keys and alarm codes on the mobile view of the appointment details page – while they can also now access full branch and colleague calendars.
This lets them see appointment details for their colleagues across multiple branches – provided they have access to their calendars – and they can also navigate from one day to the other.
Commenting on the launch, Ric Dawson, vice president of software at Alto, said: “We’re releasing updates and new features every day and we want to keep our customers informed of this progress in a simple way.
“By investing heavily in new, larger features as well as constantly improving what we’ve already built – we’re confident of further simplifying that day to day lives of our customers.”
Zoopla has delivered strong vendor lead performance for agents in the first half of 2023 despite the challenging macroeconomic backdrop – with vendor leads up 6% year on year, the portal claims.
It comes as Zoopla’s latest Spring marketing campaign concluded last week and delivered a 38% uplift in vendor leads compared with Zoopla’s pre-campaign average.
Live since Easter weekend, the campaign featured across a range of channels including TV, digital and social media.
With mortgage rates also having a negative impact on demand and buying power – Zoopla said it has also been optimising its search experience for consumers and has converted more buyer sessions on its website to sales leads as a result.
Improvements to the website include using data science and machine learning to display intelligent recommendations on Zoopla’s listings details pages which has resulted in increased conversion from those who clicked a similar property by 11%.
It has also built a new image gallery for listing details pages to enable consumers to access floorplans and maps from one place. This has improved the conversion rate by 3.9% and engagement with the image gallery increased from 25% to 33%.
Zoopla said it has also been focused on providing high-quality content for agents on its recently upgraded Zoopla Advantage website – which provides agents with information on the right products to achieve their business goals and market insights to aid their conversations with their customers.
This has kicked off with a new three-part video series with co-founder of Base Property Specialists Kristjan Byfield and Zoopla’s director of national sales, Nikki Cole.
The pair discuss ‘What you need to know about the Renters Reform Bill’ – including the potential impact of the Renters Reform Bill on the industry as a whole and what agents can do to prepare and get ahead of its implementation. To view the first part of the series, agents can visit here.
Cole said: “Despite an uncertain first half of the year for the property industry as a whole, we’re pleased to see that key metrics that really matter to our agents including vendor leads have grown in comparison to last year.
“We’re continuing to focus all our efforts to drive maximum return on investment for our agents as we recognise this will be a priority for them for the remainder of the year.”
More than a third of homes have declined in value over the past six months, Zoopla data shows.
It comes despite the total value of the UK’s housing stock hitting £10.7trillion as of May.
The London housing market alone sits at £2.5 trillion which is equivalent to the Midlands, Scotland, Wales and Northern Ireland combined.
Set against a tumultuous market of higher mortgage pricing and rising interest rates, 66% of homeowners have still seen their homes increase in value by at least 1% over the past 12 months, Zoopla said.
This means these homes have increased on average by £7,000, or £19 per day.
But it’s not all positive news as 11.1m homes have fallen in value by at least 1% in the past six months, or an average reduction of £7,700 – equating to 38% of the UK’s housing stock.
The portal highlights that a pick up in market activity during the first quarter of 2023 has supported a reversal of some losses with the average UK home increasing in value by £342 in the past three months.
The analysis is compiled using Zoopla’s My Home tool that lets homeowners track the value of their property and see whether prices are going up or down over time
Some four out of 10 homeowners in Northern England, Wales and the Midlands saw the value of their homes increase in the past six months, Zoopla said.
Just over a fifth of homes in London, the South East and Eastern region increased in value within the same period.
Despite almost 9.2m homes increasing in value over the past six months, the top 10 areas with the highest proportion of homes going up in value are concentrated in the North and Midlands. Only one postal area is located in the South – Dorchester – where 46,000 homes have increased in value since November 2022.
Homeowners located in Yorkshire and the Humber are disproportionately represented with four postal areas seeing increases in value: Halifax, Wakefield, Huddersfield and Bradford, Zoopla said.
The highest concentration of homes falling in value over the past six months are predominantly coastal locations across the South of England.
These locations recorded a rush of buyers since 2020, pushing prices higher as people relocated or looked to commute longer distances to work. Zoopla data shows more than 50% of homes falling in value in these areas as demand cools.
Commenting on the analysis, Richard Donnell, executive director at Zoopla, said: “With a value of £10.7 trillion the housing market is a huge part of the nation’s wealth. Everyone’s home has its own value and trajectory of how that value is changing over time.
“While the headlines report that UK house prices have been falling, our analysis finds that there is more of an even split between homes with price gains and price falls over the last six months when looking at trends on a property level.
“The value a homeowner can get for their home unlocks the options for their next move or impacts how good a rate they might get when they remortgage. More and more homeowners are tracking homes month by month to better understand their most valuable asset and how to make the right decision around their home.”
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