Q3 Property Market Report including the South East.

Product related figures and static market sales as of 30/09/23. Data Source - Spectre

NEW LISTINGS –14.2%  REDUCTIONS +26.3%  FALL THROUGHS -4.5%  WITHDRAWALS –29.7%  SALES AGREED –24.8% 

As we enter the third quarter of the year, we typically see a seasonal slowdown across the market. It's important to take this into account alongside current economic conditions when analysing any trends emerging in the market. 

As the industry continues to adjust to higher mortgage rates and reduced demand, regional variations are beginning to emerge. Regions with a lower average house price are performing better as buyers in more affordable markets remain more active. 

Sellers continue to grow restless as demand wanes. This quarter shows a 13% increase in vendors switching agents, marking the highest level since 2019. Longer time on the market and challenging selling conditions could be factors contributing to this trend, as sellers seek alternative estate agents. 

Many might say that the period of 'easy sales' is over, so vendors may demand more from their agent in this type of market and therefore are more likely to switch when those expectations aren't met. 

With vendors reacting to longer selling times and a regional divergence in sales activity, it’s becoming more vital for agents to understand local market dynamics to effectively navigate the market.

New Listings.

New listing volumes have shifted this quarter with a decline in new properties coming to market. With a 12% decrease in new listings versus last quarter, this quarter has been quieter than most but doesn’t necessarily signal a cause for concern.  

One interesting trend to emerge is the outperformance of rural areas compared to urban. Rural areas have experienced an uptick in new listings this quarter; this could be as more households sell up and move back into urbanised areas. Alternatively, there could be a more active market in rural areas currently, where budgets might stretch further outside high-cost city centres. More homeowners in rural regions could be mortgage-free and unencumbered with the rising mortgage rates, helping to stimulate activity in this market. 

However, the spotlight falls on Greater London, which has seen the most significant decline in new listings in August, with a substantial 16% drop. The question arises whether this decline is contributing to the urban-rural divide in property market performance. 

On a more positive note, the East Midlands and Yorkshire are exceptions to the overall downward trend, with both regions experiencing growth in new listings during August at 4.6% and 1%, respectively. These regions show some resilience in the face of broader market fluctuations.

Predicted New Listings for Q4.

As we look ahead, these shifts in new listing volumes are likely to continue shaping the dynamics of the market. Model predictions show new listings in Q4 being at least 8% below this quarter. While in part due to seasonality, Q3 performed below the same quarter of last year for new listing levels by some margin, and we can expect Q4 to be similar. September usually sees a small spike in new listings but with this year seeing considerably fewer, it suggests the seasonal decline may have started early and new listings could continue to fall until the end of the year. 

Looking forward, fluctuations in mortgage rates could have a big impact on new listing levels. With the base rate staying at 5.25%, the question remains, how will lenders respond? With several months of falling inflation, some lenders are relaxing their mortgage rates, this could result in others following suit to stay competitive. If so, this would help stimulate the market and lead to a high level of confidence in the market overall. There could be a lag on when we see this increase in confidence become fruitful though as many potential homemovers will choose to wait until the new year to start making changes. In the meantime, valuations will be a good indicator for agents to be conscious of this coming quarter. 

NB: Predicted new listing levels are based on time-series modelling using daily data taken over a 5-year period. 

Reductions.

In August, property reductions experienced a seasonal dip, followed by the typical rise in September. Month-on-month, the gap between current reduction volumes and the historical average has been narrowing. Although reductions remain elevated, this quarter has not seen as many reductions as in previous quarters. Compared to the 5-year average, there has been a 26% increase in the number of properties reducing their price this quarter. However, this is a significant decrease from the 50% increase observed in the previous quarter (Q2). Removing the influence of seasonality, this is a gradual decline in properties dropping their price. Sellers appear to be adapting to new market conditions and heeding agents’ advice to price realistically from the outset. 

The main drivers for price reductions are the South East and East regions. The South East, in particular, stands out with over half of the monthly listings experiencing price drops. In contrast, the North of England, specifically the North East, experienced far fewer price reductions per listing, with 38% of listings reduced this quarter. Looking forward, these trends in property price reductions provide valuable insights into where the market is heading in the future. The decreasing gap between current and average reduction volumes may indicate a move to a more stable but subdued market. The regional disparities emphasise the importance of considering local factors in property market analysis. Observing how these trends continue to evolve will be essential for agents.

Fall Throughs.

Sales falling through have likely seen their peak in July this year and agents can expect a gradual decline into autumn. Wales has experienced the highest incidence of sales falling through, while Greater London stands out as the region with the fewest sales falling through as a proportion of total sales agreed. 

With the significant drop in listings and sales agreed for London this quarter, this may have led to a more concentrated market of motivated buyers and sellers - fewer reach the sale agreed stage but those that do, are far more likely to complete. 

On a broader scale, rural areas have encountered a notable 13% increase in sales falling through this quarter. Several factors could account for this rise, but the most likely explanation is a more active sales market. Rural areas have experienced a substantial 21% increase in sales agreed, suggesting a higher volume of transactions and, consequently, a greater number of sales falling through.

Withdrawals. 

Over the last few months, there has been a decrease in new properties listing, fewer properties successfully selling, but a noticeable uptick in withdrawals. In particular, withdrawals spiked by 9% in July, up until this point withdrawals had remained relatively stable throughout the year. The primary driver behind this surge in withdrawals could be attributed to changes in mortgage rates.

At the end of May, there was a significant upward shift in the base interest rate, widely reported in the media. This update not only triggered uncertainty but also left some homemovers with unfavourable mortgage deals or difficulties in selling their properties due to reduced demand influenced by stringent mortgage terms. Another contributing factor may be the prolonged time properties are spending on the market. The time it takes for a property to sell has been steadily increasing over the past two months, which is unusual for this time of the year. This extended period on the market might be prompting more sellers to withdraw their properties, perhaps out of impatience or a desire to reassess their selling strategy.

As the market continues to evolve, these shifts in property withdrawals might require greater vigilance from the industry. Understanding the driving forces behind these trends, particularly the impact of mortgage rate changes and prolonged market times, will be crucial in anticipating the market's future trajectory and effectively navigating it

Sales Agreed.

A signal of the market this quarter is the decline in both new listings and sales agreed. The statistics paint a clear picture: listings have experienced a significant 12% drop, while sales agreed have followed suit, reducing by 15%.

Unsurprisingly, Greater London has not been immune to these shifts. In August, the region saw a 6% decline in sales agreed and a 16% drop in listings. This decline in both sales agreed and listings has contributed to a challenging environment within the capital, which is markedly more pronounced than in other regions.

The graph depicts a noticeable deviation from the 5-year average. Sales agreed had been closely aligned with the five-year average until recently when a distinct change in this year's sales path became apparent.

Looking into potential reasons, the size of properties has played a role in this shift, with a more modest decline in sales agreed observed for one and two-bedroom properties compared to larger residences with four or five bedrooms. This data hints at a reduced demand for larger and typically higher-priced properties, likely driven by mid-sized homeowners downsizing and first-time buyers facing affordability constraints.

Predicted Sales For Q4.

Sales agreed are expected to be 15% below the 5 year average next quarter, likely ending the year not too dissimilar to the performance we've seen throughout the year, slow but stable. It's worth noting though that we expect sales agreed figures to finish above Q4 2022. Agents may fare better than last year without the unsteadiness caused by the mini-budget debacle. 

The recent decision to maintain the base rate at 5.25% should provide some added comfort as we move into the final quarter for agents and homemovers alike. It's expected lenders will further reduce their rates in light of this news in an effort to remain competitive. This will come as a relief for current first time buyers and those on tracker mortgages and could have a positive impact on sales completing.

However, the Bank of England also stated housing remains one of the signs of weakness in the economy with investment down 7.7% YoY and falls in both prices and transactions. The pause in increasing the base rate has provided a much-needed break for the industry, allowing time for some confidence to return. The effects aren't likely to be immediate; seasonality will likely dictate the direction of sales agreed for the rest of the year but we might see a rise in new listings as optimistic sellers look towards homemoving in the new year. 

Property Sold Within 4 Weeks.

The property market is experiencing a noticeable slowdown, with the percentage of properties selling in under four weeks in September reaching its lowest level since January. The month-on-month decline can mostly be attributed to seasonality; the overall trend appears to be following a typical pattern for this time of year, though at a lower level than last. 

The likelihood of properties selling within a month is expected to decrease further as the year progresses, with the usual upturn expected in the new year. However, it's important to note that we shouldn't anticipate a return to when over 60% of properties sold within a month. Recent years have seen a faster-paced market that puts buyers at a disadvantage. With the market now favouring buyers, we can expect sales agreed to occur at a more relaxed pace, allowing them to shop around more than in previous years. Hopefully, this will result in fewer sales falling through, as sales agreed are more thought out before an offer is made.

One significant consequence of the decline in properties selling within the first month is the increase in price reductions. As fewer properties sell quickly, many agents are taking action to generate interest in their listings. We can expect price reduction volumes to remain high as agents try to keep properties attractive to prospective buyers in a market where quick sales are becoming less common.

Days On The Market.

On average, properties are taking 19 days longer to sell compared to the same period last year. This increase suggests a significant shift in the pace of property transactions, with sellers facing longer waiting times for successful sales.

As properties take longer to sell, there has been a buildup of available properties for sale. The market currently has 18% more properties for sale than at the beginning of the year. This, coupled with prolonged selling times, may indicate growing challenges in matching supply with buyer demand.

While the increase in time on the market is prominent, it's important to recognize the influence of seasonality. As the market transitions into autumn and winter, properties tend to stay on the market for slightly longer. This seasonality contributes to the overall increase in time on the market.

Sold Property By Region.

Data used in this article was provided by, and all images belong to Spectre.