House prices see first quarterly increase since mini-budget

House prices increased on a quarterly basis for the first time since Q3 of last year, according to new data released by London lettings and estate agent, Benham and Reeves.

Related topics:  Property,  house prices,  mini budget
Property | Reporter
31st August 2023
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"With interest rates climbing, buyers will continue to demonstrate a reluctance to overstretch and, as a result, the gap between seller expectation and market reality is likely to widen further"

The Benham and Reeves Property Market Index Review is based on data from the top four existing indices, providing a comprehensive view of UK and London house price performance.

It looks at where the average house price sits overall when taking into account mortgage-approved house prices from Halifax and Nationwide, seller expectations via the Rightmove House Price Index, and sold prices from the UK House Price Index.

It also highlights the gap between buyer and seller expectations, as well as the asking price and actual sales price, on a quarterly basis across London and the UK.

Current property values

Based on a geometric mean of all four existing data sets, the index from Benham and Reeves shows the average UK house price sat at £307,191 for the second quarter of 2023.

This marked a 1% increase on Q1 2023, and the first quarterly increase since Q3 2022. This suggests that the previous market decline that came in the wake of last September’s shambolic mini-budget has now passed.

UK house prices also remain 0.4% higher on an annual basis, however, this annual rate of growth is the weakest on record since Benham and Reeves established it’s index in 2018.

In London, the current average house price is £572,230 having increased by 0.8% on the quarter. As with the national picture, this is the first price increase since Q3 2022 after consecutive quarterly declines of -0.7% and -1.8%.

Despite this quarterly recovery, London prices have decreased by -1.1% on an annual basis. This is the first yearly drop in London since Q4 2019.

Market Gap Between Mortgage Approval Price (Buyers) & Asking Price (Sellers)

In Q2 2023, the market gap between the mortgage approved price of a buyer (£273,431) and the asking price expectations of a seller (£370,651) increased to 35.6% across the UK. This is 1.5% higher than the previous quarter, and the largest gap seen since Q3 2020.

This increasing gap suggests that buyers are choosing to act with caution as borrowing becomes unusually expensive, but that sellers, who have upped their asking prices in the past quarter, are yet to accept that the UK market has started to cool.

In London, the gap between buyer (£516,923) and seller (£686,271) is 32.8%. This is 0.4% higher than last quarter, and the largest gap seen since Q1, 2020.

Market Gap Between Asking Price (Sellers) & Sold Price (Buyers)

Upon analysing the gap between the average asking price and the average sold price, the mismatch between seller expectations and the reality of current market conditions becomes abundantly clear.

Across the UK, the average sold price of £286,032 currently sits -22.8% below the average asking price of £370,651. This gap has been increasing quarterly since Q3 2022 and is 1.4% wider than the last quarter alone.

In London, the gap between the asking price and sold price sits at -23% having also increased steadily since Q3 2022.

Director of Benham and Reeves, Marc von Grundherr, commented: “It seems we have a market of cautious buyers coming up against optimistic sellers, and the gap in their expectations is widening.

"But it’s by no means unusual for sellers to want more than buyers are willing to give, particularly given the fact we’re yet to see any meaningful decline in market health. So none of this is unexpected, especially while the cost of living and borrowing is so high.

"With interest rates climbing, buyers will continue to demonstrate a reluctance to overstretch and, as a result, the gap between seller expectation and market reality is likely to widen further.

"However, the house price crash predicted by many experts following the disastrous mini-budget simply hasn’t materialised and we expect the market to stand firm over the mid to long-term.”

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