As we await news of a new prime minister and a new chancellor just a week into the job, changes to stamp duty and rising interest rates, it's no wonder that many are wondering what lies ahead for the property market - both locally and nationally.
I asked members of the Norwich & District Association of Estate Agents to share their opinions as we enter what looks to be another week of change.
If he stays in post, what difference do you think Jeremy Hunt as new chancellor will make?
“Well, he can’t do worse than his predecessor,” says Ben Marchbank of Bedfords.
Jan Hÿtch of Arnolds Keys says that who is in the chancellor’s chair is less vital than a sensible fiscal policy emerging. “As with the merry-go-round of housing ministers, policy and continuity is far more important than personalities.”
Nicholas Taylor of Hadley Taylor says that Jeremy Hunt will steady the ship, although “it’s very concerning that the markets and the Bank of England now seem to be dictating our economic policy.”
What does the change in stamp duty mean for buyers? Does it depend on what you’re buying?
“Buyers can expect to save a maximum of £2,500 – which is relatively small in relation to the additional annual mortgage costs that we’ve been experiencing,” says Natalie Howlett-Clarke of Savills.
“As the stamp duty cut is permanent, it is unlikely to bring the same level of urgency to the market as the recent stamp duty holiday.”
Jan Hÿtch adds: “It’s a shame that the opportunity of saving money on stamp duty has come at the same time as an increase in month-to-month mortgage payments for first-time buyers.
“We have not seen a significant upturn in first-time buyer enquiries since the announcement, probably for this reason.”
Interest rates are rising. What does this mean for the housing market?
“Interest rates have been rising since December, so higher rates shouldn’t be a surprise to anyone,” says Nicholas Taylor.
“Younger people will be spooked by higher rates because they’ve never seen ‘normal’ rates before. Higher rates will halt price inflation and we will see prices drop a little – although premium properties and locations will fare better.”
Ben Marchbank adds: “Before Gordon Brown handed responsibility for monetary policy to the Bank of England, the chancellor set the base rate, and it was commonly used as a lever to control the housing market. Whilst it is no longer the chancellor wielding the lever, the mechanism remains effective, and we expect to see a drop in demand.”
What’s happening to those with mortgages?
“If interest rates hit the levels currently being priced in by the money markets, considerable financial strain will be put on existing borrowers who are coming to the end of a fixed rate deal or who are already on a variable rate,” says Natalie Howlett-Clarke.
“The forbearance of lenders will be a critical factor in how the market reacts. Lenders could well take lessons from the pandemic and look at options to reduce the financial pressures on their customers. Though this is unlikely to mean full-scale mortgage holidays, delaying capital repayments might be something they consider.”
Ben Marchbank adds: “As fixed rate deals come to their end, borrowers will either have to accept the higher costs or choose to sell and down-size. This may increase the stock of available properties.”
Nicholas Taylor is optimistic that the situation may ease in 2023. “As we get into next year, lenders will start to offer more competitive fixed rate deals as they start to see where the central banks are going on rates long-term.”
What would your advice be to sellers thinking of putting their home on the market – should they carry on, or sit tight for a bit longer?
“Sellers need to understand that prices rise, and prices fall,” says Nicholas Taylor. “They should make their plans according to what is motivating them to sell in the first place.
“Some sellers just need a bigger or smaller property, some sellers need a cheaper property so that they can retire or pay off other debts, and some sellers need to relocate for work purposes. The ups and downs of property prices shouldn’t prevent folks from getting on with their lives.”
Natalie Howlett-Clarke says that her advice would depend on individual circumstances – although properties deemed best in class still remain in high demand and short supply.
“The lifestyle on offer in Norfolk remains hugely attractive, so for those who can afford to do so and still want to move I think there are still opportunities – particularly for those who may be looking to downsize and perhaps won’t be so reliant on borrowing.
“However, if you are looking to sell, then setting a realistic guide price will be key. The challenging economic outlook means that some buyers are now more cautious – so ensuring your property is sensibly priced is very important.”
With rates rising, is now a good time to down-size?
“For those wishing to down-size to release capital for retirement planning, interest rates for investors will begin to look more attractive than they have in recent years,” says Jan Hÿtch.
There are growing rumours of a market crash. Is this likely?
“For the UK as a whole, we are forecasting a combination of downward pressure on prices and lower transaction levels during 2023,” says Natalie Howlett-Clarke. “The supply/demand imbalance here in Norfolk may well underpin local property prices to some extent.”
Nicholas Taylor says: “The media love to talk about a market crash. They do it all the time. The last ‘crash’ in property prices was in 2008, when we saw a 15pc reduction in house prices across the country. I would hardly call 15pc a crash – after all, when the stock market crashes it can lose 30pc or 40pc, that’s what I call a crash.”
What do you think the government could or should be doing to help the housing market?
As little as possible, says Nicholas Taylor. “History shows us that whenever government gets involved in the property market, it always ends in tears. The government’s job is to tax us as little as possible whilst providing essential services as efficiently as possible – end of.”
Natalie Howlett-Clarke says: “More targeted measures to free up barriers to downsizing would be welcome. There is also a thought that differential rates of tax could also encourage people to improve the energy efficiency of their home.”
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