Let’s not be hasty and write off this year’s property purchase appetite

There is understandably a lot of focus on the maturities and remortgage market, not least after the various trade body forecasts for the year ahead were released, and it’s fair to say according to them, suggested purchase activity would see a fairly sizeable fall-off from what was achieved in 2022.

However, even taking the extremes of some forecasts, purchase business will continue to deliver the vast majority of 2023 lending, supported by the fact that few are anticipating the number of housing transactions to be less than one million again this year. 

Forecasts from Intermediary Mortgage Lenders Association (IMLA) suggest house purchase lending will hit £165bn this year and £155bn next, outstripping remortgage lending by some margin, although not if you add in product transfer business. While UK Finance are less optimistic, arguing purchasing lending will only get to £131bn, before dropping again to £122bn. 

However, these are just forecasts and my own view is that we should not underestimate the UK public’s desire or need to purchase or move home.   
 

Demand remains 

At the tail-end of last year, Savills put out a survey which talked about buyer commitment and how it had showed an improvement from the last time the research was carried out in August. 

Earlier this month, Rightmove issued its latest house price index, and surprised many by showing a monthly increase – although this is an asking price index rather than completed prices. However, it also highlighted an increase in demand from the pre-pandemic ‘normal’ market of 2019 and said there had been a 55 per cent increase in new buyer enquiries over the first couple of weeks in January, compared to the previous two weeks – this was up on the 45 per cent increase for the same weeks last year. 

Now, of course, it’s very early days and you would expect that, after Christmas and New Year – which gives people time to ponder what they might do next – there would be a boost in activity on the property portals and a greater number sounding out agents and the like. However, we might still have more of a purchase market to throw resource and expertise at this year, than many might have thought possible. 

What was also interesting about the Savills research was its focus on which ‘buyer groups’ would be most active and there was a distinct split suggested, with ‘needs-based buyers’ in the first part of 2023, followed by equity-rich, lifestyle ‘right-size’ buyers becoming more active in the second part of the year.  

That would certainly chime with a market which has always had its base level of purchase activity available to it, as a result of death, divorce, employment moves, etc, and one which may benefit from a more benign interest rate environment as the year progresses and, hopefully, as inflation falls negating the need for further rises to rates. 
 

A shift in the mood 

Certainly, as witnessed by a number of our adviser member enquiry rates, the early signs appear to be that purchase activity could be much more resilient than some might have been expecting. One area we have not mentioned in all of this is how lenders react and what they focus on, particularly in terms of rates but also in terms of purchaser demographics, whether first-timer, upsizer or downsizer. 

As I write, a steady stream of positive lender product changes is being communicated, and while the first week of the new year seemed relatively slow, I anticipate there will be a far greater number of encouraging changes in the near future. These of course are mainly rate cuts and criteria improvements, but it’s a clear sign we are slowly inching towards a mortgage marketplace which resembles that of August last year rather than post-mini Budget. 

That, in turn, should provide a greater degree of comfort and confidence, but more importantly, should allow those would-be buyers who were either put off or just couldn’t get their numbers to work at the tail-end of last year, to look again at what might now be achievable. 

Of course, the further unknown here is supply – the perennial problem of the UK housing market – and just how much of it will be available. Again, if we can match this up with demand, then as advisers we will have a much healthier purchase client base to support the longer the year goes on.