Formby’s Cash Buyers Bolster Resilience Amidst Housing Market Weakness in August
September 12, 2023 6:23 pm
In the ever-evolving world of real estate, we at Stephanie Macnab Estate Agents, based right here in Formby, have been closely monitoring the dynamics of the housing market.
August has come with its own set of challenges, as house prices continue to experience a softening, but there’s an intriguing story to tell—a story of resilience fueled by cash buyers.
Nationwide’s Report: Key Highlights
Let’s start with the facts. According to Nationwide’s latest report, here are the key highlights that provide a snapshot of the current housing market situation:
1. House prices witnessed a 0.8% month-on-month decline in August.
2. House prices now stand 5.3% below their peak in August 2022.
3. This represents an annual fall of approximately £14,600 on a typical home.
These numbers might raise concerns, but they also reveal a complex narrative that’s worth delving into.
A Closer Look at the Numbers
Nationwide suggests that August has seen a further moderation in the annual rate of house price growth, which has dipped to -5.3% from -3.8% in July. This marks the weakest rate since July 2009, with prices slipping by 0.8% over the month, factoring in seasonal adjustments.
The softening of the market is not entirely unexpected. It can be attributed to the significant rise in borrowing costs over recent months, resulting in housing market activity falling significantly behind pre-pandemic levels.
For example, mortgage approvals have consistently fallen below the 2019 average, and recent mortgage application data indicates that this weakness has persisted.
Robert Gardner, Chief Economist at Nationwide, shares an optimistic perspective. He notes, “Nevertheless, there is still room for a relatively smooth landing, provided broader economic conditions align with forecasters’ expectations.
Particularly, unemployment is projected to remain low (below 5%), and the majority of existing borrowers should be able to weather the impact of higher borrowing costs, given the prevalence of fixed-rate mortgages and stringent affordability testing.”
Despite the expectation of subdued activity in the short term, there’s hope on the horizon. The potential for healthy nominal income growth, coupled with modestly lower house prices, could contribute to improving housing affordability over time.
This is especially promising if mortgage rates moderate once Bank Rate reaches its peak.
Cash Transactions Shine in a Sluggish Market
Now, let’s talk about a fascinating trend that has emerged amidst the challenges of the housing market. In the first half of 2023, the number of completed housing transactions was nearly 20% below pre-pandemic levels in 2019 and approximately 40% lower than in the first half of 2021.
However, when we dive deeper into the composition of these transactions, we find a standout group: cash buyers. Despite experiencing a decline from the highs of 2021, cash purchases have displayed remarkable resilience compared to those involving mortgages.
While purchases involving mortgages, including home mover completions and first-time buyer numbers, have seen significant drops, cash purchases have actually shown a 2% increase. This resilience highlights the value of cash buyers in a market characterized by uncertainty.
In conclusion, Formby’s housing market has faced its share of challenges in August, but there are reasons for optimism. The presence of cash buyers has provided stability amidst the uncertainty, and the potential for improved affordability in the future offers hope to both buyers and sellers.
As we continue to navigate these dynamic times, Stephanie Macnab Estate Agents remains committed to providing expert guidance and support to our clients in Formby and beyond. Stay tuned for more updates as we monitor the ever-changing real estate landscape.