We may be seeing the early signs of a recovery in the property market, or at least a return to a sense of normality.
In recent years, residential property prices reached unprecedented highs — the result of low rates and skyrocketing demand. However, as the base rate started rising from late 2021, costs came under pressure, mortgages became more difficult to service, and appetite for property seemed to wane. Of course, the ongoing cost of living crisis hasn’t helped, and we’re now seeing the impact of all this.
Average UK house prices rose by 9.8% in the year to December 2022, down from 10.6% in November. The average price sat at £294,000 in December — still high by all accounts, but lower than the record £296,000 seen in October last year.
What’s more, between January and February 2023, asking prices for British residential property rose by just £14, according to Rightmove. This was the smallest rise on record in a month that usually enjoys a seasonable boost. This suggests, for now at least, that homeowners are starting to price their homes realistically.
In a market desperate for more supply, this could bring much-needed sustainability and offer new opportunities. Property investors and first-time buyers may be keen to jump on subdued prices while they can.
The timing could also work out well for participants on both sides of the transaction. Some property investors could be keen to expand their portfolio or move into the market for the first time as prices calm down. At the same time, existing homeowners may be keen to sell up to release capital for other investments.
Where these priorities meet, the specialist finance industry will be there to support the needs of the market.
As the action hots up, speed and flexibility will become paramount, as property investors may require funding quickly to get ahead of their competitors, while sellers may want a niche product that allows them to spruce up their homes and make them more tempting for buyers.
There is some evidence to support this precedent too. According to the latest ASTL data, bridging completions, applications, and loan books all grew in Q3 2022, yet during this period, average house price growth fell from 14.2% to 9.4%.
Specialist lenders need to remember that declining property prices do not always equate to bad news. Now may be an opportune time to prepare for a new period of demand for alternative finance solutions.
