As I review the performance of the Fife property market in 2023, it’s evident that despite the challenges, the housing sector in the area has shown remarkable resilience.
At the beginning of the year many commentators suggested house prices would drop like a stone in 2023. The Halifax thought there would be an 8% drop, Savills suggested 10%, and the respected Nomura Bank 15%, yet according to the Land Registry, they ended 0.5% higher. Looking at the Land Registry figures for Fife …
Fife house prices are 3.1% higher than a year ago.
The final quarter (Q4) of 2023 recorded above-average levels of new property sales in the UK, 11.1% higher than the year before (221,996 homes sold stc in Oct/Nov/Dec ’23 in the UK compared to 199,807 for the same three months in 2022).
What was of particular interest was a drop of 25.4% in the number of sale fall throughs (sale fall through being home sales agreed yet cancelled before legal exchange and completion), dropping from 75,033 in Q4 in 2022 to 56,761 in Q4 2023.
Looking at the local figures for Fife (KY1-12 and KY14-16) …
In Q4 2022, 1,168 Fife properties had a sale agreed on, but 240 property sales fell through, meaning there were 928 net property sales.
Looking at Q4 2023, 1,250 Fife properties had a sale agreed on them, yet only 171 property sales fell through, meaning there were 1,079 net property sales.
This surge in activity is a testament to the enduring value and attraction of homeownership.
Market sentiment has been bolstered by rising incomes and an initial decline in mortgage rates, making property investment increasingly feasible for many.
Demand is also considerably higher, up 19% according to Zoopla’s property searches from last year.
Coupled with an increase of 20.7% in available properties for sale (633k in Q4 ’23 vs 524k in Q4 ‘22) compared to last year, the property market has seen an increase in choice, supporting robust sales.
This pricing alignment between buyers and sellers has reduced the downward pressure on values.
So, why didn’t Fife house prices fall by 8% to 15% as predicted in 2023?
Despite average mortgage rates climbing from just over 2% to over 6% in the last two years, house prices haven’t plummeted as anticipated. This defiance against more significant falls is attributed to several key factors:
- Labour Market & Earnings: The UK’s robust labour market and a 7.3% growth in average earnings have provided British households the financial stability needed to sustain mortgage repayments, even amidst rising rates.
- Lender Restraint: Lenders have adopted policies to support many British households struggling with repayments, effectively reducing the number of forced sellers and maintaining market stability.
- Mortgage Affordability Testing (Stress Testing): Perhaps the most influential factor has been the introduction of stricter mortgage affordability ‘stress testing’ (the Mortgage Market Review tests) for new borrowers since April 2014.
These ‘stress test’ regulations were designed to prevent British households from taking on excessive levels of mortgages during periods of low mortgage rates. They have been pivotal in preventing a significant housing crash because, like 1988 and 2008, when borrowers borrowed too much in the years before, that caused rapid house price inflation (due to over-borrowing). The added advantage to stress tests is the built in resilience for higher mortgage rates, enabling many households to manage the transition to higher mortgage rates more effectively.
For instance, even though the average rate all new mortgage borrowers have paid has dropped from around 4% in the autumn of 2014 to just under 2% in the autumn of 2021, borrowers have had to prove they could afford a 6.5% to 7% mortgage rate to secure that mortgage during that time frame. As interest rates have risen in the last couple of years, the stress levels have increased to an average of 8.7% (i.e., borrowers now need to prove they can afford to pay a mortgage of 8.7%).
Impact on Fife’s property market in 2024.
As an estate agent witnessing these trends first-hand in Fife, I’ve seen our local market reflect this national resilience. The regulatory constraints on buying power, while capping the purchasing ability up to and post-pandemic, have, on reflection, maintained a steady demand for quality homes.
Fife first-time buyers are still buying plenty of homes, yet approaching the market with slightly more caution and greater financial preparedness than a couple of years ago. They are adapting to the current economic climate by opting for smaller Fife homes to offset the elevated costs associated with borrowing. Interestingly, another reason for higher first-time buyer demand is rising rental prices, which have risen at nearly double-digit annual percentage increases since 2021.
As I anticipate the future, it’s crucial to understand that while base rates may start to fall later in 2024, the regulatory constraints on buying power continue to hold. While ensuring market stability, these limitations suggest that house prices are unlikely to rise sharply in 2024 and are more likely to drift slightly upwards by 1% and 3%.
For homeowners and prospective buyers in Fife, there’s an opportunity to plan and navigate your property decisions with a long-term perspective.
As the housing market navigates through fluctuating mortgage rates, there’s cautious optimism that a slight ease in these rates might boost buyer confidence. This shift could encourage more individuals to proceed with buying homes.
Those ready to ascend the property ladder may leverage the buyers’ market depending on the type and location of their second or third home in Fife, presenting offers lower than the asking price in hopes of securing a deal.
Additionally, those looking to relocate would welcome any dips in fixed-rate mortgages. A significant decrease in two-year rates has already been observed, potentially enticing a segment of buyers to re-enter the market.
Buy-to-let Fife landlords are facing a mixed scenario.
While they may be experiencing notable increases in rental income, the financial pressure from elevated interest rates, insurance costs and taxation is real. There’s plenty of speculation in the press that these factors may lead to a reduction in the number of rental properties as landlords potentially exit the market, which could further impact the availability of rental stock. However, as the number of British landlords selling up has increased by 55% (over the last couple of years) and the number of landlords buying has only decreased by 22% (again in the previous two years), the net numbers of British buy-to-let properties are still very marginally growing!
Final thoughts to Fife Homeowners.
To all Fife homeowners considering a move in 2024, I encourage you to view this period as an opportune time to evaluate your options. With a comprehensive understanding of the local and national property landscape, I am committed to guiding you through every step of your property journey.
Whether you want to buy or sell or want to discuss your options, I invite you to connect with me. There’s no cost or obligation – just a straightforward conversation to help you make informed decisions in a changing market. Let’s navigate your future move in the Fife property market together!
