Jonathan Hopper, Chief Executive of Garrington Property Finders, has pointed out a potential silver lining to the cloudy outlook of the housing market. Amidst rapidly rising interest rates and a decreasing number of determined buyers, sellers are starting to slash house prices in anticipation of the market’s downturn, opening up potentially lucrative opportunities for investors.

Hopper asserts, “With the onset of the summer slowdown, we are witnessing a change in pricing behaviour. Some pragmatic sellers are acting pre-emptively, adjusting their expectations by reducing prices to stay ahead of the market, instead of being forced to subtract thousands in response to a low offer.” He adds that such double-digit price reductions are becoming increasingly commonplace, especially in areas that experienced extreme excesses during the boom, as well as those with high levels of Help to Buy ownership.

This adjustment will undoubtedly be a bitter pill for many sellers to swallow. However, according to Hopper, this situation is far more preferable than the standstill of having their property sit on the market unsold for months before inevitably having to reduce the price.

Hopper’s comments follow the release of recent government figures indicating a significant drop in property transactions. In May, property sales were down 25 per cent from the previous year, marking the slowest May in a decade, except for the period when the market was effectively closed due to Covid-19 in May 2020.

The flagging performance has led to warnings of a potentially worsening market throughout the rest of 2023. However, for opportunistic investors on the lookout for a bargain, this could be an attractive prospect.

Sarah Coles, Head of Personal Finance at business consultancy Hargreaves Lansdown, elaborated on the situation: “The scorching inflation has led to a parched May for the property market, with sales dwindling down. The transaction figures from May, which are already a quarter lower than the previous year, were finalised months earlier before the mortgage rate hikes started to disrupt the market. This indicates the risk of a significant sales dry spell setting in later this summer.”

Coles pointed out that these figures represent sales completed in May, which were agreed upon around February, a time when inflation was the dominant concern. In the wake of rising mortgage rates, conditions have only worsened. Average two-year fixed rate mortgages, which stood at around 5.3 per cent in February, have now soared to 6.37 per cent, while five-year fixes have also seen an increase from 5.0 per cent to 5.94 per cent.

Concluding her remarks, Coles stated, “This drastic increase severely limits what buyers can afford, leaving them to either make significant compromises on their purchases or brace themselves for astronomical monthly payments at a time when they can hardly afford it. This dilemma will likely contribute to further drying up of property sales as summer progresses.”