Leading commentators have told Facilities Management Magazine the UK's residential property sector is showing remarkable signs of resilience despite a continuing backdrop of economic challenges.
Recent data reveals encouraging trends in both mortgage approvals and residential property transactions, indicating that the market is exceeding initial expectations.
Daniel Mahoney, UK Economist at Handelsbanken, highlights an unexpected surge in net mortgage approvals during June, surpassing market predictions and suggesting a stronger housing market than anticipated.
Despite this positive outcome, mortgage approvals still remain below the average levels seen during the late 2010s.
In June, the effective interest rate paid on newly drawn mortgages rose by 7 basis points to 4.63%, while the rate on the outstanding stock of mortgages increased by 10 basis points, reaching 2.92%.
Furthermore, the return of deposits to positive territory in June adds to the optimistic outlook.
Mahoney explains that in May, deposits saw a significant drop, likely due to a combination of reduced net mortgage lending, investments in gilts with attractive returns, and consumers maintaining living standards amidst high inflationary pressures.
However, in June, households deposited an additional £3.4 billion into banks and building societies, signifying an upswing.
Meanwhile, UK businesses, with mostly floating-rate loans, continued to pay down debts, with net repayments increasing from £0.4 billion in May to £5.6 billion in June.
David Hannah, Group Chairman of Cornerstone Group International, emphasizes the market's resilience in the face of challenges: "The UK property market has demonstrated significant resilience in the face of external pressures, according to the latest data from HMRC.
The total number of residential property transactions reached 94,690 in June, a robust increase of 28% compared to May.
However, there was a 9% decrease compared to June of the previous year.
When seasonally adjusted, the transactions reached 85,870, showing a slight decrease of 15% from the same period in 2022 but still demonstrating a promising 6% rise over May 2023."
Hannah points out that despite borrowing costs reaching their highest levels since 2008, the market has found support from strong wage growth, high employment rates, lender forbearance, and availability of long-term fixed-rate mortgage terms.
As major high street lenders initiate reductions in mortgage interest rates, the second half of 2023 may provide more optimism for the UK property market.
These factors have contributed to the market's stability.
The steady return of property transaction numbers to pre-pandemic levels indicates positive prospects for sellers pricing their properties realistically and completing successful transactions in the coming months.
"Some sellers are already adopting this strategy, initiating a cycle of gradually falling prices, which in turn presents attractive buying opportunities for strategic buyers focused on long-term value.
As major high street lenders initiate reductions in mortgage interest rates, the second half of 2023 may provide more optimism for the UK property market.
The potential easing of borrowing costs could encourage more first-time buyers and those moving up the property ladder to capitalize on lower prices," says Hannah.
Looking ahead to the second half of 2023, Hannah remains cautiously optimistic.
He argues historical patterns and economic indicators suggest a genuine housing crisis is unlikely, and adds: "Despite higher mortgage rates and declines in property prices, we anticipate the market to demonstrate the same resilience as witnessed in recent years as we move into H2 of this year.
It is encouraging to see that property transactions were up 28% between May and June of this year, now mirroring pre-pandemic demand levels.
It is important to remember that the UK property market is not solely dictated by interest rates; it is also strongly influenced by the resilience of the labour market and longer-term issues like the structural housing shortage.
As we look ahead to the second half of the year, we expect the easing of borrowing costs to catalyse a resurgence of activity.
This is particularly so for first-time buyers and those looking to step up on the property ladder."
While challenges remain, the market's underlying strength and favourable economic conditions offer potential opportunities for buyers and sellers alike.
As the second half of 2023 unfolds, the market's performance will be closely monitored, with cautious optimism for continued stability and potential growth.
