9 in 10 aspiring home buyers say that the continued shortage of stock available to buy is inhibiting their ability to move, according to the latest analysis from Savills based on a survey of 1,300 buyers and sellers, to see how their intentions and views on the market have changed.
The research, which took place between the 8th and 18th April, reveals that a lack of supply is being felt most keenly at the top end of the market with 71% and 68% of buyers buying at £1 million to £2 million and above £2 million respectively stating that a lack of available stock is having a significant impact on their ability to buy (vs. 63% of all buyers).
The number of homes for sale is down by a third compared with what was available before the pandemic, according to the latest TwentyCi data, and have been running 8% below average since March 2019. However, there remains a sustained commitment to move. A net balance of +22% of current buyers are looking to move in the next 12 months, and +18% are eager to move in the next three months.
Buyer budgets remain unchanged at the top end of the market
Savills found that in the face of a more competitive market, buyers are having to hold steady on budgets. 4 in 5 buyers (80%) surveyed said that the three consecutive increases on interest rates over the last couple of months has had no impact on their budget. At the same time, almost three quarters (74%) also said that the rising cost of living has had no impact on their budget.
“With the market as competitive as it is, motivated buyers can ill afford to reduce budgets, despite rises to mortgage rates and household bills. But most buyers at the top end of the market will have built up equity in their existing home and will be able to fix into more favourable rates and are therefore less impacted by the squeeze. Our analysis also suggests that as many as 30% will effectively be cash buyers,” comments Frances Clacy, research analyst at Savills.
However, the impact is being felt lower down the prime market. A third (33%) of those who are trying to take their first step onto the housing ladder said that their budgets had decreased as a result of interest rate rises. At the same time, 47% of those looking at properties priced below £500k said that their budgets had decreased because of the rising cost of living.
“Rising interest rates limit affordability at the point of purchase, which will especially impact first-time buyers who have less equity to back them and will no longer have the support of the government’s Help to Buy scheme from April 1 next year if looking to buy a new build home. Falling numbers of first-time buyers starting chains could impact transactions as a whole further down the line this year,” continues Clacy.
Buyer priorities in 2022
Higher energy prices have even persuaded many to spend more on a home. Almost three in five people said that they would be happy to pay more for a property if at least 75% of the property’s energy was powered by renewable sources.
In fact, more than a quarter said they would be happy to pay more than 5% extra for the privilege. This comes as 68% of respondents said EPC ratings were important to their decision making, with a third saying that they placed more importance on this than they did a year ago.
Frances Clacy continued, “As households face mounting energy bills, buyers are ready to pay more for cleaner homes upfront, to offset rising bills in the long term. The fitting of extra insulation and double glazing can cost thousands upon moving in and paying more upfront could prove more cost-efficient in the longer term.”