Understanding the Manchester Property Market

In an age of soundbites and sensationalism, the UK property market - particularly here in Manchester - often finds itself misconstrued by general narratives. 

While we cannot ignore the challenges of increasing mortgage rates and shifting buyer preferences, it is vital to appreciate the broader context to understand what's happening in the Manchester property landscape.

The UK housing market is currently at a crossroads, characterised by its lowest house price growth since 2012. High mortgage rates are making a significant dent in market activity, affecting everything from buyer demand to the volume of property sales.

Manchester properties are still selling but not at the rate or level they were in 2021. Therefore, correctly pricing your property for sale cannot be underestimated. Let me explain why, then the reasons behind the current state of play nationally, and finally, the exact story of what is happening now (and in the future) in Manchester.

The Importance of Correctly Setting an Asking Price for Your Manchester Home

Putting your Manchester property on the market at too high an asking price can significantly deter potential buyers and limit the number of people who come to view it. Buyers often have a budget range in mind, and if your property is priced above comparable homes in the area, it's likely to be filtered out of search results and go unnoticed.

Even if the property gets some attention, the inflated price can send a message that you're not serious about selling or unwilling to negotiate. This can result in your property languishing on the market, which could necessitate future price reductions.

Over time, a stale listing may become stigmatised, leading buyers to suspect that something must be wrong with the property beyond its high price.

Thus, setting a realistic, market-aligned asking price is crucial for attracting a broad pool of qualified buyers and facilitating a quicker, more lucrative sale.

The Impact of High Mortgage Rates

High mortgage rates are putting a strain on the housing market. The latest data shows a significant fall in demand from buyers — about a third less than the average during the same period over the last five years (2018-2022). While there is a greater number of homes available for sale now compared to the previous two years, fewer homes are selling.

Nationally, this year, the number of properties sold stc has been 750,113 (to the end of August). That same sales figure to the end of August 2022 was 903,799 (a 17% decrease), and to the end of August 2021, 1,020,439 (a 26.49% decrease). As you’d expect, mortgage-backed sales are particularly hit hard, expected to be just over a quarter lower than last year. Cash sales are expected to be less affected, but the overall market activity remains sluggish.

Regional Disparities

An interesting aspect of the current housing market is the distinct regional disparity. Looking at the £ per square foot of the sales agreed (not completed) of the August 2022 sales vs. August 2023:

East of England                       -4.85%

North East                               -3.71%

South East                               -2.99%

Wales                                      -2.02%

East Midlands                         -1.72%

Yorkshire and The Humber     -0.85%

West Midlands                       -0.62%

North West                             -0.54%

Outer London                         -0.44%

Inner London                          -0.13%

South West                             2.85%

Scotland                                  3.88%

First-time Buyers and Affordability

High mortgage rates are affecting first-time buyers disproportionately. In 2021/2, low mortgage rates made buying a Manchester home cheaper than renting, spurring a wave of first-time buyers. However, continuing with the regional theme, with current mortgage rates soaring above 5%, renting has now become cheaper on average than buying for a first-time buyer property in London, the South and parts of the Midlands, even despite high rental growth in recent years (although it is still cheaper to buy than rent in the North, Wales and Scotland).

The Role of Wage Growth

Despite the bleak outlook, there is a silver lining. Faster wage growth is making housing more affordable. Average wage rises of 8.2% over the past year are helping to balance out the effect of 22.56% higher mortgage payments on first-time buyers' household incomes (up from 31.9% in Q2, 2022 to 39% in Q2, 2023). As a result, the gap between house prices and earnings is closing, and affordability is expected to improve by 10% over 2023.

The Curse of Overvaluing and How it Could Cost You Your Dream Home

I hope I have proven to you why it is sensible to put your property on the market at a realistic asking price from day one and not be tempted to overcook the initial asking price. You only have one chance of a property being a new instruction (and all the excitement and focus that creates).

Overvaluing homes is becoming a concerning trend in Manchester, often led by estate agents more interested in listing as many properties as possible rather than making actual sales. Such overvaluation harms homeowners, tempting them with unrealistically high prices only to advise price reductions later. The problem is your dream home might have sold by then.

While listing your Manchester home at a price 10-20% higher than its actual value might seem tempting, this strategy often backfires. Research from Which shows that overpriced properties linger on the market and eventually sell for less than those priced correctly from the start.

Additionally, some estate agencies incentivise their staff to list properties rather than sell them, exacerbating the issue. As the Manchester property market stabilises, setting a realistic asking price is crucial for attracting serious buyers and achieving a timely sale.

The Future of the Manchester Housing Market

The immediate future doesn’t hold much promise for dramatic house price growth in Manchester, nor is it expected to fall dramatically (read my previous articles on this).

However, factors like an ageing population, more flexible work arrangements, a strong labour market, and high immigration rates could stir market activity in the next few years. Mortgage rates are also expected to fall below 5% later this year, although the impact may only be felt in the first half of 2024.

The UK housing market is navigating through turbulent waters with high mortgage rates and a severe slowdown in house price growth. However, the emerging trend of faster wage growth could be a game-changer, making housing more affordable in the long term.

Furthermore, anticipated drops in mortgage rates and sociodemographic changes are expected to drive market activity in the coming years. All eyes will be on how these multiple forces will shape the UK housing market in the foreseeable future.

Buyers and sellers can make more informed decisions by understanding these trends and potential future shifts. The market might be under strain now, and homeowners need to be realistic with their pricing; these indicators suggest we might be heading towards a more balanced and accessible market in the coming years.