Worcester, Droitwich & Malvern Market Update – December 22
COMMENT
On the 17th November, the Chancellor pledged to face the economic storm, as he announced widespread spending cuts and tax rises in his Autumn Statement. In the short term, GDP is likely to shrink by 1.4% in 2023 but then, due to the new measures being taken, it is expected to grow by 9% by the end of 2027.
Two weeks earlier, the Monetary Policy Committee voted to raise interest rates by a further 0.75 percentage points to take interest rates in the UK to 3% to curb inflation. Whilst headlined as the biggest rate rise in 33 years it followed a period of exceptionally low rates.
Given the consensus had been that rates would have to rise by 1% in November, when the increase turned out to be smaller than the market was previously expecting the change of Chancellor and Prime Minister appears to have restored some confidence.
Whilst clearly there are still some economic headwinds to face, in the short term, looking two to three years ahead the trends are looking positive again.
LOCAL MARKET ROUNDUP
The latest available Land Registry statistics, for the year ended 31st August 2022, are reflecting the post pandemic market. 3,816 sales in Worcestershire is 38% fewer than the previous twelve months when the numbers had been uniquely boosted by stamp duty incentives. 1679 sales in Worcester is the same 38% lower, with Malvern’s 593 35% lower and 420 sales in Droitwich, is 34% down year on year.
Transaction values vary across the county but all show growth. Malvern’s average remains highest at £290.6K up 8% with Droitwich next at £278.5K up 5% and Worcester, where 44.% of the sales took place, the average sales price has increased by 6% over the last 12 months to £242K.
The increase in average sales prices over the last 5 years is shown below:
The local lettings figures have been fluctuating over the last twelve months, with an increase of 7% recorded in the average figure for properties let in Worcester. Despite recent growth in the average rent for properties let in Droitwich, £719 is still nearly 10% below the overall Worcestershire average of £798. In Malvern, the average rent for properties let over the last twelve months sits at £870, representing an increase of 12%.
NATIONAL MARKET
All the national indices report annual property price growth is softening, with price readjustments expected over the course of 2023. In the 2 years since the re-opening of the market in June 2020, average prices have risen by 23% (ONS).
Close to 104,000 property sales took place in September, on par with August according to data released by the HMRC. Zoopla predict that close to 1.3 million sales will take place in 2022, before sales volumes drop back to around 1 million, more in tune with the pre-pandemic norm.
At 40 days the average time taken to sell a property in October is 4 days longer than this time a year ago. Although increasing, this remains considerably quicker than the pre-pandemic average of 63 days (Dataloft, Rightmove).
ECONOMY
The Chancellor’s Autumn Statement announced widespread spending cuts and tax rises, many in the form of threshold cuts and freezes on current rates aimed to tackle inflation and escalating mortgage costs.
The UK economy is expected to shrink by 1.4% in 2023 but is expected to grow from 2024-2027. Inflation is expected to peak at the end of 2022 before falling back over the course of 2023 (OBR).
At 5.7%, wage growth in the year to September was at its strongest since 2000 (excluding post pandemic furlough), however it lags behind inflation, which reached a 41 year high of 11.1% in October (ONS).
The base rate of interest is 3.0%.
LETTINGS MARKET
At 3.8%, UK rental price growth in the year to October is continuing on an upward trajectory. The ONS index is based on both tenancy renewals and new tenancies hence the lower levels of growth than other rental indices.
Demand is set to outpace supply in the rental market for the foreseeable future as mortgage pressures impact the number of renters able to move into the owner occupation.
JLL predict the cumulative growth in rental values will be 15.9% in the five years to 2027, with higher growth in 2023/24 followed by growth closer to 2%-3% in 2025-2027 as inflation is brought back under control.
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 uncertaintly fuelled by the mainstream media.
In the midst of this turbulance 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.
If the pandemic has taught us anything, it is the value of community and who the real heroes are. Whilst it has been a difficult time for many of us, our key workers, teachers and volunteers consistently stuck to their tasks. Like many, we really admire this commitment and want to continue to support them by donating £100 from every sale we make again this year. So far, we have donated over £25,000 to schools and local organisations through our Community Fund. If you know of an established community organisation or local charity, based in Worcestershire that you feel should be on the list, of potential beneficiaries, please write to us and tell us why. Contact: [email protected]