Signs of housing market slow-down as sales drop

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THE price of a three-bed family home fell at the end of last year and the number of transactions plummeted in the first signs of a slow-down in the property market.

But despite the decreases, would-be homeowners are facing an increasingly tough time getting on the housing ladder following the rise in interest rates and increased nervousness from banks in a potentially volatile lending market.

One mortgage adviser said that it was now ‘almost impossible’ for first-time buyers to borrow in the current climate.

The latest Jersey House Price Index shows that the cost of the average three-bedroom home dropped by £21,000 to £883,000 in the last quarter of 2022, while the price of a two-bed flat decreased by £22,000 to £535,000.

But one-bedroom flats reached a record high of £383,000 – £13,000 higher than the same time the year before.

The average cost of a home in the Island was £691,000, higher than the £623,000 recorded in the same quarter in 2021 – but lower than the record high of £709,000 seen in the third quarter of 2022.

Property types graph. (35234726)

The volume of property sales fell by 27% in the last quarter of 2022 and Housing Minister David Warr said that property transactions in the Royal Court were recently down between 60% and 70%.

Deputy Warr said that the housing market was ‘at a cusp’ and he expressed concern that a market that ‘bumped along’ would act as a disincentive to sellers, who would hold on to property in the hope of catching a rising market in the future – exacerbating the housing crisis.

‘There will be a contraction in the market but the question is how big it will be? It’s been a few percentage points in the past spread over a couple of years. The wheels have never come off the housing market; people will sit on property for longer until things look better,’ Deputy Warr said.

‘I am concerned about people entering the market for the first time. We need to keep building, pursuing those 900 [unoccupied] homes, explore shared equity and look at the £10 million ring-fenced fund to help first-time buyers,’ he added.

The minister is due to meet the Jersey Association of Bankers next week to discuss the plight of those struggling to get on to the housing ladder, looking particularly at equity-release schemes intended to help with affordability.

The house price report confirmed that this worsened last year. A working household with a mean net income was only able to get a mortgage affordably for a median-priced one-bedroom flat, it stated.

Deputy Warr said the government was still considering how to deploy its ring-fenced funds to help first-time buyers but he added: ‘We don’t want to inflate house prices. We have to remember the inflationary impact and how much we are prepared to tolerate, because it’s not a zero-sum game,’ he said, adding that they were looking at ‘creative schemes’ to help, including the possibility of a States-loan scheme.

The extent of problems facing borrowers was confirmed by mortgage adviser Peter Seymour, of the Mortgage Shop, who said that banks were expressing their concern about footfall for mortgages.

‘It is becoming almost impossible for first-time buyers to borrow funds at the moment,’ he said, adding that increased interest rates were compounded by nervousness over the current financial outlook.

‘Borrowers can get a best rate of 5.09% for a 90% fixed mortgage for five years, but the problem is that lenders are still concerned about base rate increases and are stress-testing against rates of 8.2 to 10.19%, almost twice the rate. The fact is that a buoyant economy cannot exist without the housing market and we’ve got to see it get up on its feet again,’ he said.

Mr Seymour warned against too cursory a reading of the latest house price index report, with its headline figure still showing an 11% overall increase in house prices last year.

‘We are now halfway through quarter one and I think things have changed, but not yet fed through to the front line – estate agents, mortgage brokers and lenders. The market is not a very happy one and that is not reflected in the index. It is not a happy situation,’ Mr Seymour said.

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