Droitwich, Worcester & Malvern Market Update – January 2024
COMMENT
The Bank of England held the base rate at 5.25% in their November 2023 meeting. Interest rates, through mortgage affordability, are a key determinant for the residential market outlook. Consensus forecasts compiled by HM Treasury suggest that interest rates are at their peak.
Swap rates give us a good indication of changes in mortgage costs – reflecting the cost of borrowing for lenders. 5-year swap rates reacted well to the Bank of England decision, now at their lowest level since May.
Whilst the market has been adjusting to higher interest rates and mortgage approvals remained low, with interest rates at or close to their peak, improvement in sentiment should be evident from spring 2024. Our experience in 2023 may sound cliché, but it has certainly been a game of two halves. The second half saw the market respond and behave in line with the averages seen pre-Covid.
In light of the recently announced sharp drop in inflation now backing up the sense that interest rates have peaked, we are looking forward to 2024 with a degree of optimism.
The conditions are good and likely to get better for buyers with more stock on the market to choose from and increasingly affordable mortgage solutions becoming available.
2024 really is looking like a return to a ‘new normal’,
LOCAL MARKET ROUNDUP
The latest available Land Registry statistics, for the year ended 30th September 2023, reveal that there were 31% fewer sales across the WR postcode area. The actual number of transactions was 3177.
In Worcester and Malvern, sales were down by 31% at 1397 and 490 respectively in line with the wider average while sales in Droitwich were down 32% at 368.
Over the last 12 months, 14% of the sales across the wider area have been flats at an average price of £151,470, while houses have averaged £318,122 resulting in an overall average of £285,868. Average prices vary across the county but Malvern’s overall average transaction value remains highest at £307,849. Droitwich is next at £286,548 up by 2%. In Worcester, where 44% of the sales were recorded, the overall average price increased by 3% to £254,220.
The increase in average sales price over the last five years is shown below:
Across the WR postcode area, the average rent for homes let over the last 12 months increased by 8% to £857. 38% of the properties let were flats, achieving an average of £701, while houses achieved £987 per month. The average rent for properties let in Droitwich is £727, 14% lower with flats here averaging £590 and houses £936. In Malvern, the average rent on homes let in the last 12 months was £875, 46% of properties were flats, achieving an average of £759 per month, while houses achieved £988 per month. Worcester’s figure remained 3% below the average at £824.
NATIONAL MARKET
HMRC report that 82,910 sales took place in October, 2.5% down on the previous month and significantly down on last years levels. The average price for a property in October was £287,782, down 1.2% year-on-year, and 0.7% on the previous month (ONS).
The year-to-date listings for 2023 are holding steady at 99.2% of the average seen in the years 2017, 2018, and 2019. This consistency underscores a stable market supply, maintaining near-average levels despite varying economic conditions.
Gross house sales for YTD 2023 are at 94.4% of the average of the 2017, 2018 and 2019 levels, which indicates healthy transaction volumes.
ECONOMY
GDP fell by 0.3% in October, after a 0.2% rise in September, with contractions across all main sectors of the economy (ONS).
The OBR has downgraded their forecasts for economic growth from 1.8% to 0.7% in 2024. House prices are expected to fall by 4.7% in 2024, following 0.9% growth in 2023.
Inflation fell sharply to 3.9% in the year to November, down from 4.6% in October (ONS).
LETTINGS MARKET
At 6.2% in November, annual growth in rental prices in the UK continues at its strongest since records began. The Index of Private Rented Housing Prices reports on both new lets and renewals.
The average rent on newly agreed rental contracts was £1,279 in November, an 8.9% rise year-on-year, but a small monthly fall of -0.3% (Homelet).
MARKET INSIGHTS
In response to the regular feedback we receive regarding the value of our Market Updates we have decided to publish more regular market insights online. We are emerging from an unprecedented period of activity at the same time as having to cope with equally unusual economic pressures; added to which there is a measure of political uncertainty fuelled by the mainstream media.
In the midst of this turbulence we believe it is important for you to hear clear, evidence based messages to help you navigate in the current market and make the right choices.
With nearly two decades of experience our MD, Matt Nicol is keen to ensure you have access to expert advice and invites you to ask him directly via our website or by following us on our social media channels.
