Ups and downs of family home demands

Increased mortgage rates and the typical summer slowdown have caused potential buyers to pause. Many are re-valuating their home purchase decisions.

The peak in buyer demand was seen in May of last year, but there’s been a noticeable downturn since then. According to recent data, the demand for three and four-bedroom family homes has declined[1]. This decrease has been driven by buyers with tighter budgets seeking more affordable properties and apartments.

Increased mortgage rates and the typical summer slowdown have caused potential buyers to pause. Many are re-evaluating their home purchase decisions. Compared to the past five years, July’s demand dipped by a third, resulting in 12% fewer sales agreed upon. Interestingly, larger family-sized homes bear the brunt of this decline more than smaller properties.

WHY THE DROP IN OFFERS FOR LARGER HOMES?

A closer look at July’s sales data reveals a noteworthy trend – offers for three and four bedroom houses are down compared to the same period in previous years. As mortgage rates rise, many prospective buyers are downsizing their requirements, resulting in less demand for larger homes.

Moreover, rising living costs and higher mortgage rates have dampened the desire to upsize among those already residing in spacious properties. With little urgency to move, these homeowners are likely waiting for more favourable market conditions.

A SHIFT IN PROPERTY SALES

Over the last few years, large homes have dominated property sales, with three or four-bedroom houses making up 60% of all property transactions. However, the pent-up demand for these types of homes has passed its peak, leading to fewer sales.

Lower demand implies that selling larger homes may not be as straightforward as before. Sellers must brace themselves for potential price adjustments when necessary. The selling price will influence how much they can invest in their next property.

REGIONAL VARIATIONS IN PROPERTY TRENDS

As always, regional trends vary. The East Midlands, especially Lincolnshire, is experiencing a steep decline in the sales of three-bedroom houses. Conversely, Scotland’s market seems more robust, with some areas even posting a rise in offers for three-bedroom houses.

While the demand for larger homes wanes, smaller properties maintain their appeal. Sales of flats, for instance, are holding steady, and in some areas like the North East and Scotland, they’re even surpassing seasonal averages.

WHY ARE FLATS OUTPERFORMING HOUSES?

Rising mortgage rates mean potential buyers have less to spend, making smaller properties more attractive. The slow price growth of flats over the years has also made them seem like better value for money. This, coupled with high rental inflation and recent legislative changes, has boosted the appeal of apartments.

This shift in preference is good news for flat owners looking to sell. After underperforming for several years, flats are finally seeing a recovery. Higher activity in this market segment supports the pricing of quality flats.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.

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