The UK housing market returned to its pre-pandemic size hitting £342bn, although its make-up has changed compared to four years ago, according to Savills.
There were 15% fewer completed transactions in the year to March, compared with the 12 months to March 2020, when the first UK lockdown began, says the property agent.
But it adds this has been offset by 17% higher average sale prices.
Overall, the total value of the UK housing market came in at £342.4bn, compared to £342.8bn in March 2020, a 0% difference after statistical rounding.
But the agent adds that the total value of the UK housing market slumped by 21% in the 12 months to March, “off the back of the height of the mini housing market boom which temporarily peaked at £521bn”.
Savills head of UK residential research Lucian Cook says: “The contraction of the market primarily reflects the impact that the higher costs of mortgages have had on the appetite of buyers to take on more debt, with mortgaged home movers and buy-to-let investors particularly affected.”
“Demand from equity-rich buyers has been more robust. And that from first-time-buyers has stood up surprisingly well, albeit heavily supported by the Bank of Mum and Dad.”
Homebuyers used £20.7bn mortgage debt to buy properties in the year to March, 13% less than the same period four years ago.
But this was offset by an 11% rise in the use of equity.
The agent says: “An increase in the use of equity was specifically fuelled by a 19% increase in spending by cash buyers over four years. Spending among those cash buyers stood at £144bn in the year to March.
“This is the equivalent to 42% of the total spend on house purchases across the UK.”
FTB debt fell 3% to £57bn over four years, while debt raised by landlords slumped 27% to £8.7bn over the same period.
However, the business expects a wider range of buyers to enter the market over the coming year when the Bank of England base rate falls.
Cook points out: “Interest rate cuts will mean that the range of buyers coming to the market will widen, and we can expect to see their spending power pick up over the next 12 months.”
“Those who have put off plans to trade up the housing ladder over the past two years are likely to underpin growth in the housing market going forward.”
Cook adds: “Though the headwinds haven’t completely died down, we have already seen a pick-up in agreed sales on the back of more stability in the mortgage markets.
“That suggests that as rates fall, the market will return to growth, despite owners who are yet to come to the end of their fixed rate experiencing an uplift in their underlying housing costs.”
The agent forecasts house prices will grow 2.5% in 2024, primarily due to falls in the cost of mortgage debt, and jump by 21.6% by the end of 2028.
It expects house transactions will hit 1.05 million this year, slightly up from the firm’s 1.01 million forecast at the back end of last year.
Savills data is drawn from HM Revenue & Customs, the Office for National Statistics, Bank of England and HM Land Registry records.
