After almost three years of fairly frenetic activity, experts are forecasting something of a cooldown for the UK’s property market this year.
The average UK house price increased by almost 23pc – or nearly £55,000 in cash terms – between March 2020 and August 2022, thanks to the Stamp Duty holiday and a pandemic-induced ‘race for space’.
Demand soared and prices rose but now, almost three years on, Halifax is predicting a fall in house prices by around 8pc. Context, though, is important.
Even with an 8pc dip, Halifax homes director Andrew Assam says the average house price would still be at “roughly the level it was in April 2021, reversing only some of the gains made during the pandemic.”
But there are other complications. Surging living costs, including higher mortgage rates, predicted unemployment rises and reduced help for first-time buyers are all expected to impact the market.
So what do estate agents in Norfolk think will happen? Here are their five predictions.
More caution - but a better balanced market
Boxing Day is traditionally the start of the market’s activity for the year. Rightmove says the number of sellers putting homes on the market is up by 46pc compared with the same day in 2022, but closer to home, this hasn’t been so pronounced.
“The usual Boxing Day feed of new properties was certainly at a lower level across the board this year,” says Joanna McIntyre of Musker McIntyre. “For most of our clients the reason for holding back is the lack of potential onwards purchases, which creates this ‘domino effect’ – there is little stock to buy hence there is little stock to sell.
“That said, we have seen a higher level of new instructions in the first trading week of 2023 than normal, with many of our clients understanding that if they are not actively on the market, the chance of making a move is unlikely.”
According to David MacDuff, manager of Arnolds Keys’ county hub in Aylsham, many landlords and holiday cottage owners have also been enquiring about sales figures, and more downsizers are evidently looking for better value in their homes. “Viewings arranged are at an almost identical level year-on-year, whilst applicants/new buyers are up by over 20pc,” he says. “Market appraisals are almost treble the same period last year.”
But Ben Rivett, joint head of residential at Savills Norfolk, believes we’ll see a drop in transactions this year. “Generally, it is widely agreed that transaction levels will be down, possibly by 25pc in some cases, which is sensible given that some prospective sellers may well wait until they know what the market is doing,” he says.
“There may be others who postpone their sale entirely for 2023. However, from the discussions we are having, the appetite to buy is still very much there. We have around 30 houses already lined up for various stages of 2023, which is promising.”
High demand and low supply have been consistent features of the market over the past few years, though Norfolk agents seem hopeful that 2023 might bring some rebalance.
“A combination of factors, which include higher borrowing and running costs, may lead some owners to consider a sale,” says Bedfords’ Ben Marchbank, “particularly as fixed rates come to an end for those who bought a buy-to-holiday let investment.”
Nick Taylor, managing director of Hadley Taylor, agrees that stock levels could be boosted by investors selling their properties. “Much of the property coming to market will be ex-rental stock, as landlords divest from the property sector – good for first-time buyers and not so good for anyone looking for a family home.”
Norfolk will stay resilient as prices dip
While Halifax is predicting a price drop, it’s expected that Norfolk’s property market – as well as Suffolk and areas of north Essex – will remain resilient.
“Norfolk and East Anglia form somewhat of a micro climate,” says Minors & Brady’s Alex Brady. “Whilst the market in other parts of the country does naturally have some effect on what happens, the region remains consistent.”
James Mcguire, area manager for William H Brown, agrees: “Norfolk is and has always been an area that stays ahead of upward trends and behind downward ones.”
Nick Taylor believes that in terms of asking price there will be a dip but not a crash. “There are always regional variations, but as always, premium properties and premium areas will fare better. The long-term prospect for property prices is up, due to population growth.”
Setting a realistic and competitive guide price from the outset is key to helping the market gain momentum, adds Ben Rivett. “This is not going to be the year for agents who simply quote a high price and hope for the best,” he says.
“Instructing someone with a proven track record of having access to the right buyers for the house in question will be important. It has not been difficult, generally, to sell houses throughout 2021 and most of 2022. We are now returning to a market where an agent has to prove their worth.”
Managing clients’ expectations is vital, agrees Joanna McIntyre. “Inevitably the market will see a small dip given interest rates, inflation and the cost of living crisis. But it is important to realise that a drop of anything between 2-8pc is in the context of an unsustainable and unrealistic rise of between 12-16pc in certain hotspots in 2021/22. Once you take that into account, we will still have seen a positive move over the two-year period of something in the region of 8-10pc.”
North Norfolk in particular looks set to escape the worst of any price drop, according to NDAEA members. Clive Hedges, manager of Arnolds Keys’ coastal hub in Sheringham, says: “On the north Norfolk coast, demand remains high. Prices will undoubtedly level off, and may drop slightly, but not as much as some areas of the country, as long as demand remains where it is.”
That view is echoed by Ben Marchbank. “It has been reported that North Norfolk attracts the highest percentage of cash buyers in the country, and certainly our experience suggests that is true. Rising interest rates therefore might not impact conditions locally, although even those who are not borrowing are attuned to the mood and sentiment of reports in the press that prices are falling, which might make some buyers reluctant to transact.”
However, Mr Marchbank also says that buyers waiting for values to fall substantially may be in for disappointment. “Previously when the market has tightened, even in those dark days of the credit crunch in 2008, values of best-in-class houses have held, as their sellers are generally discretionary with the luxury to pick and choose when to sell.”
Mortgage rates are likely to settle
Last year, the Bank of England increased its base rate nine times and the country’s economy was badly bruised by the announcement of the ‘mini-budget’ – most of which was redacted just a few weeks later.
Although we have seen some stability since, most homeowners are still facing higher rates. Clive Hedges says this has already had an effect on chains where there is a mortgaged buyer involved, although rates continue to settle.
“There has been more talk in recent days of fixed rates falling fractionally again,” he says. “I would encourage buyers if they see something they love, try their hardest to buy it, as it may not be there tomorrow.”
Nick Taylor is equally optimistic about rates in the medium term. “The Bank of England will make another two or three modest increases before settling at about 4.25pc,” he says. “Looking further out, I expect rates to fall as the bank tries to manage deflation.”
Understandably, rate rises have also had an effect on buy-to-let investors’ attitudes, says David MacDuff. “Landlords are considering their options as their costs increase and profit margins diminish, whilst homeowners with residential mortgages have been enquiring in record numbers about the likely cost impact of higher rates when their current arrangements expire.
“However, we have also seen a trend of clients who have found the rip-roaring market of the last few years too daunting and competitive to consider acting on a move; they now feel they have a little more time to make a decision, and may benefit financially from having a cash surplus in the bank if they are releasing equity or downsizing.”
Lifestyle choices will continue to govern the market
Will Lightfoot, sales director at Sowerbys, believes Norfolk will continue to offer wide appeal. “The quality of life that Norfolk provides is hard to beat and the county still offers attractive property prices compared to other parts of England, which means there is huge attraction for people to relocate here,” he says.
“The acceleration of people working remotely since the pandemic hasn’t changed, so being restricted to living in the more expensive London suburbs is no longer a necessity. We continue to see more people looking further afield to Norfolk with its direct rail link to the capital.
“As well as people relocating to Norfolk, another trend we expect to see in 2023 is Norfolk downsizers; people living in older, larger properties that are expensive to run and maintain will be tempted to dowsize and purchase a home that is more energy efficient. For that reason modern properties, bungalows and new build homes will be a popular choice.”
Tim Bannister, property expert at Rightmove, has indicated that the differences between “hyper-local” housing markets, where even one side of the street could fare better than the other, could become more pronounced over the next 12 months. But most Norfolk agents say this is already happening.
“The Norfolk housing market has long been hyper-local and this may well become more pronounced as things settle,” says Ben Rivett.
“The hotspots will be where they always are – good quality coastal houses, family homes in North Norfolk within 10/15 miles of the coast, the houses throughout the county that are best in class, presented in excellent condition with appealing architecture, and those priced between £600,000 and £1million which – compared to other areas – offer relatively good affordability.”
Hyper-local markets can be seen in the city, too. “In Norwich, we do have micro-markets which always seem to do better, sitting right next to other areas which follow the regional trend or even fare worse than that,” says Nick Taylor.
Arnolds Keys’ David MacDuff says modern housing developments close to towns are of “increasing interest” – and particularly if they include bungalows. Fringe developments allow families to reduce travel time to schools and social activities, and single-storey homes are well-suited to older clients wishing to be close to doctor’s surgeries and shops.
The region’s market towns have also been helped by the staycation boom, says Joanna McIntyre. “The staycation has turned Norfolk as a whole into a hotspot, and in particular the kind of semi-rural market towns for which our county is famed – as people holiday in such areas, the desire to live in them grows.
“This is good news for such towns: the more this happens, the better the facilities become, and local businesses which help such locations survive are supported.”
There are likely to be challenges for first-time buyers
The Help to Buy Equity Loan scheme ended last year and so far, there has been no replacement, although Andrew Stone, regional land and new homes director for Sequence, does point towards the benefit of shared ownership.
Tom Amis, head of new homes at Savills says it will be “interesting” to see how things unfold in the new homes market, where first-time buyers make up a significant proportion of sales.
“The end of the Help to Buy scheme has massively impacted the sale of homes under £400,000 – particularly two- and three-bedroom properties which were selling particularly well.”
Issues around nutrient neutrality are also starting to affect the county’s housing delivery – which may impact the new homes market even more, even if a lack of purchasing incentives doesn’t. Tom says: “In our office alone we have seen more than 200 new homes delayed that were set to be under construction and occupied this year.”
New schemes that Tom is particularly looking forward to seeing this year included the launch of new luxury apartments in Norwich by FW Properties that offer views of the cathedral, The Fairways in Blofield – a flagship scheme of high-end detached properties by Hatch Homes, and Jubilee Park in Wrentham by Cripps Developments, which is just a short distance from the popular coastal hotspots of Southwold and Walberswick.
“Many of the larger house builders have already started to include more incentives to entice buyers and help reduce the cost of living – including contributions towards mortgage costs and energy bills,” he continues. “Those schemes that look to replicate Help to Buy in some way are also likely to gain more traction.”
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