UK Housing Market Returns to Pre-Pandemic Size

The UK housing market has returned to its pre-pandemic size, according to new research by Savills. This comprehensive study indicates that the total value of the UK housing market contracted by 21% in the year leading up to March 2024, a significant adjustment from the peak levels observed during the pandemic-induced housing boom. The market's total value now stands at £342 billion, the same level as before the pandemic.

At the height of the housing market boom, the market temporarily peaked at an impressive £521 billion. This unprecedented surge was driven by a combination of factors, including a rush to take advantage of low interest rates and a desire for more spacious living accommodations during the pandemic lockdowns.

Despite the market's return to its pre-pandemic size, its composition has notably changed. The number of completed transactions fell by 15% compared to the year leading up to March 2020. However, this decrease in volume has been counterbalanced by a 17% increase in the average sale prices of homes. This trend suggests that while fewer homes are being sold, those that are on the market are fetching higher prices.

The research also highlights significant shifts in how homes are being financed. There was a £20.7 billion (13%) reduction in mortgage debt used for home purchases in the year up to March 2024 compared to four years earlier. This reduction in debt was largely offset by an 11% increase in the use of equity, reflecting a growing reliance on cash reserves and equity-rich buyers. Specifically, spending by cash buyers surged by 19%, amounting to £144 billion in the year to March. This figure represents 42% of the total expenditure on house purchases across the UK.

Lucian Cook, head of UK residential research at Savills, explained the market contraction primarily reflects the impact of higher mortgage costs on buyers' willingness to take on more debt. This effect has been particularly pronounced among mortgaged home movers and buy-to-let investors. Conversely, demand from equity-rich buyers has remained robust, and first-time buyers have also shown resilience, often supported by financial assistance from family members.

Cook anticipates that expected interest rate cuts will broaden the range of buyers entering the market, potentially boosting spending power over the next year. He noted that those who have delayed their plans to move up the property ladder in the past two years are likely to drive market growth moving forward. While some challenges remain, increased stability in the mortgage markets has already led to a rise in agreed sales, suggesting that as interest rates decline, market growth will resume.

For prospective home buyers in Rugby these insights are particularly relevant. The local market is likely to reflect these national trends, with higher average sale prices and a significant role for equity-rich buyers. Whether you're looking to buy your first home or move up the property ladder, understanding these dynamics can help you navigate the current market conditions effectively.