Is the housing market back on track?

Local Market, News

With interest rates rising at a rapid rate and the post-Covid boom seeming like a distant memory, 2023 was not looking like it would be a good year for the housing market in Guernsey. So, what actually happened? Swoffers negotiator Antonia Thomas takes a look.

As we entered 2023, the fastest rise in interest rates for more than 70 years – combined with a deepening cost of living crisis – significantly reduced people’s affordability, and certainly dampened confidence, threatening to derail the housing market.

But demand remained resilient and, breath held, the sales kept coming, albeit slower than in previous years. As we teetered further into Spring, it became clear that the volume of Local Market transactions was down on both the previous quarter and the same period in 2022. Whilst movement was sluggish, prices remained relatively stable, dipping only a few percent (down 4% from the previous quarter); a colleague succinctly described the inevitable adjustment in prices as more of a ‘parachute’ down painting a much more genteel picture of the situation.

Spring turned to summer (no one told the weather), King Charles became official, food price inflation finally started to fall, and Q2 figures showed that transaction levels were up (175 from 113), but the average house price fell for the second consecutive quarter, down from £613,942 to £600,836. Still no sign of that predicted derailment though, with prices still around 45% higher than they had been in 2018.

As the summer progressed, Guernsey’s attention turned to hosting the NatWest International Island Games, where our shooters, swimmers and runners did us proud, and the success of the games kept morale going through the August washout. September brought respite in the form of a gorgeous Indian summer and the welcome news that after 14 back-to-back rises, the Bank of England held the base rate at 5.25%. Was this beginning of the comedown? The consensus was that rates had peaked.

The red herring release of the Q3 statistics in November indicated that house prices had incredulously gone up 7.8%; on closer inspection, a low number of transactions (138 – 37 fewer than the previous period) combined with a handful of high-value sales skewed the figures and this was not a true reflection of the whole market.

Regardless, there was – and continues to be – a sense of optimism that we have at least peaked on the interest rate front. Monetary policy in the UK will dictate a slow reduction in rates, and there is the further impact of recent global events to consider, but there are certainly green shoots in the mortgage market, maybe not yet above the ground.

Ultimately, the 2023 crash that Guernsey didn’t experience was underpinned by a shortage of property available, rather than any significant strengthening of buyer demand. However, we are taking comfort in the knowledge that rates have surely peaked, and that confidence is returning, and with it demand and stock levels too, completing a much more positive outlook for 2024.

 

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