The Q3 2023 edition of Landmark’s Residential Property Trends Report is live. Within the report, you’ll find the latest insights into the residential property transaction pipeline from listings to SSTC/SSTM, and from searches to completions.
Whilst supply is holding up, subsequent pipeline metrics such as SSTC / SSTM, searches ordered and completions remain low.
Key findings from Q3 include:
- Listing activity is up in England and Wales – 1% higher over Q3 ’23 vs Q3 ‘19.
- Completions dropped in England and Wales in Q3 ’23 – 35% lower than Q3 ‘19.
- In Scotland, listings are 4% up on Q3 ’19, but completions are subdued by 18% vs Q3 ’19.
- Overall, supply is still struggling to progress through the pipeline.
Download the Cross Market Activity edition for England, Wales and Scotland, and view the latest residential property market data for Q3 2023.
We hope you find the report helpful.
The residential property market has experienced a number of extreme stressors over the past 18 months: the cost-of-living crisis, rising inflation, rising interest rates, and the fall-out from last September’s mini-budget … not to mention the economic effects of the war in Ukraine.
No wonder overall market activity is down and transactions in 2023 are running at around 85% of the pre-Covid average (2015–2019). All this considered, you might think that every area of the market would be suffering. But there’s one market segment that’s showing remarkable resilience:
The non-lender buying sector, aka cash buyers.
In this blog post, we’ll look at the reasons behind that market resilience. But also, what are the potential risks for non-mortgage purchasers? And how can you help your cash-buyer clients make more confident investments, without sacrificing the strength of their negotiating position?
Cash purchases on the rise
According to statistics recorded by Savills, cash buyers accounted for nearly 8 out of 20 transactions (38.5%) in January 2023. By contrast, mortgaged home movers accounted for just over 5 out of 20 transactions (25.3%).
Since then, cash buyers’ share of the market has continued to grow. In an upcoming OneSearch webinar featuring Savills Director of Residential Research, Emily Williams, it points to data showing cash buyers comprised about 46% of all transactions in April 2023 – up from around 34% in late 2022.
The proportion of cash buyers is even higher in prime markets. In those areas, buyers tend to be less dependent on mortgage finance. For instance, this year in prime central London as many as 14 out of 20 buyers (71%) have purchased using cash only. That’s up from around 12 out of 20 buyers (60%) in 2022.
What factors are contributing to this resilience?
Cash buyers have, in fact, represented the largest market segment since 2011.
One reason for their apparent recent growth is down to the surge in lender-backed purchases post lockdown. Increased activity from mortgaged home movers saw cash buyers’ market share squeezed between 2020 and 2022.
Since March 2021, we’ve seen the proportion of mortgaged-backed purchases drop from 1 in 3 transactions to around 1 in 4. And while the market turmoil in the wake of the mini-budget made the headlines in October 2022, a noticeable falling-off in transactions has been evident since the stamp duty holiday came to an end in September 2021.
In large part, the dampening effect in the market stems from the cost of borrowing going up. That continues to be the major constraint on first-time buyers and mortgage-backed home movers.
But part of cash buyers’ market strength is also down to their comparative ability to move fast to completion. This can make them an attractive proposition to many sellers. Indeed, those with access to readily available funds can often negotiate a reduced sale price on the basis of a time-limited offer.
Yet a determination to move fast can see cash buyers take on risks that mortgage lenders would not.
To search or not to search?
It’s imperative to understand that searches play a vital role in a property transaction and whatever the circumstances a full range of searches as advised by a conveyancer is always the best way to get all the property information required to make an informed decision. However, some cash purchases are negotiated by buyer and seller and the timescales of search delivery can fall out of these agreed parameters, so some form alternative safeguard maybe required to enable the purchase to proceed.
Bypassing the searches altogether however, is ill-advised. Property searches typically only cost a little extra; the possibility of local authority delays mean that delays could push completion, back several weeks, which is why your cash buyer clients may want to skip this part of the conveyancing process – particularly if they have negotiated a sale using a timescale caveat (e.g., exchange in 31 days).
Fast forward a couple of years, however, to when your client is looking to sell: a more prudent buyer’s searches could uncover defects that were there to be discovered. Defects such as:
- Unauthorised building works
- The property’s location on a floodplain
- The lack of connection to a sewerage network
- Planned changes to traffic schemes
- Proposals for a nearby railway
- Previously rejected planning permission applications
- And many more.
These types of defects can significantly affect the resale value of a property. Not only might your client be unable to achieve the profit they had expected to make, but they might struggle to persuade other buyers and their lenders that their property is worth anywhere near what they paid for it.
Why might a vendor be keen on a quick sale? Why might they be happy to accept a low offer? And why might they be marketing their property as for ‘cash buyers only’?
These are questions your cash buyer clients should be asking themselves.
It may be that the seller simply wants a fast and uncomplicated sale. Perhaps they need the proceeds quickly and don’t want to risk a sale falling through. So they’re prepared to accept a lower price to guarantee a speedy transaction.
Those are the good scenarios. But it could be they’re trying to rush through a sale so that known defects aren’t looked at properly. And because of the rundown condition of the property, perhaps they suspect that a mortgage provider won’t lend funds to a would-be buyer.
As corner-cutting goes, not undertaking searches can be particularly dangerous. Which is why mortgage lenders would never take the same risk. And why, at OneSearch, we believe a full suite of conveyancing searches remains the best way to gain a true picture of a property and its history.
But now there’s a new way for your clients to secure a level of protection, without jeopardising a speedy transaction or risking a drop in the property’s onward sale value.
Introducing Cash Buyer Express
Created for an area of the residential property market where speed is paramount, Cash Buyer Express from OneSearch has been designed with time-sensitive purchases in mind.
It’s the perfect solution for those cash buyers who don’t want to put transactions at risk but who want to be better informed and suitably protected. The ideal tool for those who don’t want to risk waiting 6–7 weeks for searches to come back, but who want to feel more confident in making what is, after all, a significant financial investment.
How does it work?
Peace of mind… at pace
OneSearch is the only company to hold a national database of most of the available local authority data on every property in England and Wales.
Cash Buyer Express provides up to 70% of the information you would normally get from local authorities. But your clients can expect results in as little as 24 hours, so there’s no hanging around.
In practical terms, a sale will go through just as fast with or without Cash Buyer Express. The difference is your clients will be better informed. More importantly, they will have the security of an insurance policy covering a reduction in the property’s resale value from unidentified defects.
Protection… on purchase
Your clients are protected by a £1 million No-Search Insurance policy with Aviva. This is tailor-made for non-mortgage transactions and provides cover for:
- A search of the local land charges register on form LLC1
- A search of CON29R and/or CON290 records
- A search of water and drainage records on CON29DW
- A search of the coal authority’s records on form CON29M
- An environmental risk assessment
- A full chancel repair liability search
The policy will compensate your clients for the difference between the price they pay for a property and any subsequent reduction in value caused by unidentified issues – for example, the existence of a public right of way – that a full local authority search would have revealed.
In a nutshell, Cash Buyer Express gives cash buyers clarity, confidence, and complete peace of mind – without delay.
At OneSearch, we believe that exceptional customer service is at the heart of every successful business. As we celebrate National Customer Service Week (NCSW) this week, we are proud to reaffirm our commitment to delivering first-class customer experiences.
Great customer service is more than just a buzzword for us – it’s a core principle that drives everything we do. We are committed to continuously improving our services, processes, and communication to better meet and exceed our customers’ expectations.
As a testament to our dedication to excellence, we are thrilled to share that we are active members of the Institute of Customer Service. This membership reflects our commitment to putting our customers at the centre of our business, as well as staying up-to-date with the latest industry trends, best practices, and customer service innovations. It also connects us with a community of like-minded businesses striving to raise the bar for customer service standards.
Customer Service Manager Carol Dodd said: “National Customer Service Week is a time to celebrate our commitment to excellence; for us, exceptional customer service isn’t limited to one week, it’s a daily commitment. Our team is dedicated to going above and beyond to meet our customers’ needs, and we take immense pride in being members of the Institute of Customer Service.”
As OneSearch celebrate over 30 years in the industry, our company vision remains as resolute as ever: offer reliability, impact, and excellence to our customers and partners within the property industry.
The Q2 2023 edition of Landmark’s Residential Property Trends Report is now live. Within the report, you’ll find the latest insights into the residential property transaction pipeline from listings to SSTC/SSTM, and from searches to completions.
The report found that whilst supply is relatively strong, demand volumes are struggling to progress through the transactional pipeline.
Headlines from Q2 include:
• Supply is up in England and Wales – with listings 12% higher in June ’23 vs June ‘19
• Completions dropped in England and Wales in Q2 ’23 – 39% lower than Q2 ‘19
• In Scotland, the picture is marginally better but buyers are similarly constrained
• Overall, demand volumes struggle to progress across Great Britain as high interest rates, restricted mortgage availability and squeezed affordability continue to drive an uncertain market.
Download the Cross Market Activity edition for England, Wales and Scotland, and review the latest property market data during the second quarter of 2023.
We hope you find the report useful.
The latest report from our parent company Landmark’s Market Research analysis focuses on how the residential property sector is embracing automation and deriving benefits from digital transformation.
It’s clear, being able to surface more insights earlier can speed up transactions and deliver more buyer certainty. Landmark asked over 100 residential conveyancers to share their experiences of going digital and moving to a business model that automates more key systems.
- The percentage of firms committed to automation and increasing their IT budgets
- The biggest challenges to digital transformation – what’s holding business back
- Which aspects of the sales process might benefit most from more automation
- The percentage of businesses that say automation makes them more profitable
Landmark Information Group collects, manages and delivers data across every part of the property industry’s value chain. The breadth of our work means we can undertake a wide range of surveys just like this one, surfacing key insights on subjects such as automation, Home Movers’ Experiences, and Climate Change.
The guide is available for download now.
Few people are likely to forget 2022.
It was the year we lost Her Majesty; The Queen and King Charles III took the throne. No 10 had three residents since September, inflation reached its highest level since 1982, and the base interest rate, which sat at under 2% since January 2009, rose to 3.5%. As for residential property prices, house prices fell for the fourth consecutive month in December, the worst run since 2008, according to Nationwide. The lender’s final House Price Index of 2022 showed average prices fell 0.1% on a monthly basis to £262,068.”
The biggest challenge facing the industry in 2022 was what could be considered the fifth horseman of the apocalypse – uncertainty. Loathed by consumers and businesses alike, uncertainty, especially in the chaotic month of October (remember that career-ending mini-budget) caused Zoopla to report a 40% transaction fall-through rate during the tenth month of the year.
We sat down with the Managing Director of OneSearch, Elizabeth Jarvis and Robin Wells, the Head of Sales Operations to discuss their thoughts on what lies ahead for the property market in 2023.
The economic outlook for 2023 – a protracted but shallow recession.
Although the UK narrowly avoided tipping into a recession in 2022, the latest report by KPMG (Dec 2022) estimates a lengthy downturn throughout 2023, but with the overall drop in economic activity being relatively modest when compared to previous recessions. Unemployment is expected to remain low, and inflation is set to fall to 4% by the end of the year and hit the target of 2% by mid-2024. As for interest rates, the Bank of England’s base rate is predicted to reach 4% by the end of Q1, dropping to 3.25% at the close of 2024.
What will higher interest rates mean for households? KPMG conclude that although mortgages are the largest component of household debt in the UK, two-thirds of mortgage debts are held by the top half of the wealth distribution, which is also where excess savings accumulated during the pandemic are concentrated:
“With households paying around £14bn in interest (on mortgages and other debt) every quarter, and the stock of excess savings around £86bn, it would in aggregate be enough to cover a doubling of interest payments over six quarters, effectively getting households through the recession. Unemployment is expected to peak at a relatively lower level during the current recession, meaning more households are likely to retain their main source of income. In addition, households are likely to be less leveraged due to more conservative lending criteria, which saw a fall in the share of high LTV mortgages (at a loan-to-value ratio of 90% and above) to 4.5% by 2022 Q3 compared to a peak of nearly 15% in 2007.”
Robin Wells added:
“The energy crisis plays a big part in the decision to move home. For some, it will practically wipe out the prospect of “up-sizing” and with energy bills set to increase again from April the cost of energy is as big a factor as interest rates when it comes to home buying and selling decisions.”
With the predictions for the overall economy set out above, let us examine what all this means for the property sector and Conveyancers.
A year of real estate market stability and confidence? – It is looking positive
The fact that despite 2022 being so traumatic in terms of uncertainty, as evidenced above, house prices still rose by 5.6% on the previous year. This confirms that there remains an appetite to buy and sell property. And according to our Residential Property Trends Report for Q4 2022, the market sat in a holding pattern at the end of last year whilst buyers and sellers waited to see what the New Year would bring in terms of interest rates and new mortgage products.
With interest rates peaking in the first quarter of 2023 and then stabilising, affordable mortgages will begin to return. In conjunction, house prices should continue to fall levelling up the playing field and bringing confidence to first-time buyers.
Commenting on how stakeholders in the property sector can successfully navigate the first few months of the year, Elizabeth Jarvis said:
“The biggest factor stalling the housing market right now is uncertainty. Interest rates must stabilise, and lenders must be clear about their intentions and lending strategies. Mortgage products need to be open to a wider range of the market and mortgage rates need to settle. House prices are consistently reducing and with all these factors I have no doubt the housing economy will become reinvigorated as the year progresses.”
Tips for successfully navigating a complex 2023 property market
Due to an ageing population and the post-pandemic trend of early retirement, almost every country in the developed world is suffering from severe skill shortages. Combine this with low birth rates and there is no escaping the fact that to compete effectively, law firms, along with many other industries, will need to continue to embrace technology. Research recently conducted and released by OneSearch’s parent company Landmark shows over 65% of senior property solicitors and conveyancers acknowledge task automation has made their business more profitable.
For Conveyancers and legal professionals, affordable and supported technology provides a path to speeding up the conveyancing process and thereby acquiring market share from competing practices. In addition, technology can mitigate risks associated with particular elements of the conveyancing transaction, for example, creating manual reports on title. In today’s marketplace, where dissatisfied clients are usually more than happy to leave harsh Google/Trustpilot reviews, ensuring your conveyancing department has access to the technology-based solutions it needs to provide swift, accurate, responsive client service must be a priority for all law firm managers in 2023.