"Last year, first-timers were the biggest buying demographic, and it wouldn’t surprise me to see something similar in 2023."
Those working in financial services, particularly within the mortgage and housing markets, are nothing if not realists. I certainly count myself amongst this group, and while I think you can be both a realist and an optimist, I’m also of the opinion that putting lipstick on a pig, doesn’t make it any less of a pig.
Which brings me on to the current activity levels within the UK housing market, what is impacting them and where we might be heading next?
The recent monthly report from RICS makes for somewhat stark reading, but perhaps tells us nothing we didn’t already know. It just confirms what we are all already seeing.
For example, the latest net balance figure of -45 when it comes to new buyer enquiries – the difference in percentage points between those surveyors who are seeing falls, and those who have seen a rise – is the most negative figure since last October’s -51.
Again, it won’t take a genius to work out that this figure was during the eye of the post-‘Mini Budget’ storm, when everyone in the country was attempting to get their heads around what the Government had unleashed, and what that was going to mean for any attempts to purchase a property.
Not surprisingly, many simply decided to put off any plans – at least for the short-term – and while we of course did see stability brought back, what we had effectively done, in terms of interest rates at least, was ‘jump the shark’.
For those not familiar with the phrase ‘jumping the shark’, it has traditionally been used to pinpoint the exact time a once-excellent TV show begin its slide into being far worse than it used to be.
Many long-running shows go through this, perhaps the most notable one in recent years was Game of Thrones and its final season, however ‘jumping the shark’ comes from an episode of Happy Days when the Fonz, in full leather jacket gear, jumps over a shark while water-skiing. There really was no going back after that.
And so, my own feeling is that Truss and Kwarteng executed their own, perfect ‘jumping the shark’ moment with the ‘Mini Budget’ after which rates went stratospheric and we landed in a very different environment.
Even with the market coming off those post-October highs during the early parts of 2023, a combination of dreadful inflation figures and a somewhat uncertain Bank of England/Governmental combo, has quite recently pushed us back to the rates we saw in Autumn last year.
Indeed, for a while it has seemed like we were moving into an even worse position, with more rate rises to come, and therefore much more anticipation of even higher product rates.
And, hence we come to the RICS figures, because there is no doubting that they highlight a purchase market severely dampened by rate rises, albeit – and perhaps here is the silver lining to the current cloud – that surveyors continue to see realistic asking prices secure offers and sales, and that still in the grand scheme of things, house values are still only down “modestly on their recent highs and well above where they stood prior to the onset of the pandemic”.
That is certainly an important point to cling onto, not least because there are plenty who are suggesting a housing market ‘crash’ is inevitable, when that doesn’t appear to be the case. Plus, while swap rates have trended upwards in recent weeks, this is not always one-way traffic and they too have come off recent highs in recent days. Whether that can be maintained however remains to be seen.
For advisers, what to make of this? Well, again, I suspect they have been seeing the impact of this on purchase business for some time, although again anecdotally I’m hearing many have seen something of a resurgence in first-time buyer numbers. Last year, first-timers were the biggest buying demographic, and it wouldn’t surprise me to see something similar in 2023.
However, clearly purchase business is not what we would wish it to be, which makes any purchase cases seen even more important, and as I would always say, advisers need to make sure they cover off as many of those clients’ needs as possible.
But it also highlights a similar message for remortgage business and remortgaging clients, all of which are likely to come with changed needs and circumstances, that demand a thorough review, and again advisers need to ensure no stone, service or product is left unturned when they ‘get in front of’ these clients.
To say every single client is important in this market would be an understatement but given what you are likely to be seeing in terms of purchase business, making the most of every one, right across the board, is an absolute imperative. That is our current reality and that’s what we have to work with.
