The Welsh housing market is anticipated to significantly outperform the rest of the UK over the next five years, according to research by Savills. The analysis, published by Savills UK residential research, examines the housing market and supply across Wales in 2023 and forecasts expectations for 2024 and beyond.
Sharp increases in mortgage rates have constrained affordability and demand, leading to an average price fall of 1.9 per cent in the year to December 2023, according to Nationwide. This is slightly higher than the UK average fall of 1.8 per cent.
However, price falls have not been uniform across the country. Land Registry data shows that in the 12 months to August 2023, the more affluent locations of South Wales experienced a strong market, with value growth of over 5 per cent in the Vale of Glamorgan, over 4 per cent in Monmouth, and over 2 per cent in Cardiff. Conversely, in North Wales, only Flintshire recorded annual price growth.
According to Nationwide, house prices appeared to stabilize during Q4 2023, with three consecutive months of no change or minor growth. Nevertheless, prices are expected to drop slightly during the first part of this year. However, Savills forecasts a positive outlook from the second half of 2024 onwards, with a projected 21.4 per cent value growth in Wales over the next five years to 2028. This represents the strongest house price growth prospect in the UK.
Dan Rees, head of residential sales for Savills in south and west Wales, commented: “The autumn and early winter market last year was notably more active than over the summer, as the market started to settle with lower inflation, reduced lending rates, and the Bank of England holding the base interest rate. Price reductions have generated more interest from buyers, especially among those who have had to reassess their affordability.
“The year has started positively, with plenty of motivated sellers and buyers supporting a functioning market, with excellent long-term price growth in prospect.”
The analysis indicates that new home completions fell by 7 per cent in the year to September 2023 and remain 6 per cent below the 2017-19 average. However, starts and consents have fallen considerably, with starts down by 18 per cent in the year to June and consents by 31 per cent in the year to September, according to the latest figures from StatsWales and HBF and Glenigan, respectively.
Scott Caldwell, head of development for Savills Cardiff, noted: “Recently, viability has been incredibly challenging due to the 33 per cent increase in construction costs for housebuilders since the pandemic, coupled with higher interest rates and a weaker overall sales market. This will undoubtedly translate to lower completions in the near future. However, on a more positive note, the extension of the Help to Buy scheme to 2025 in Wales will give the new homes market a competitive advantage over the wider UK. The stabilization of interest rates and the availability of more affordable mortgage products will help boost sales rates, increasing build rates.”
Claire Turner, head of new homes sales, agrees: “Use of the scheme had fallen in recent years as a result of changes to the price cap. The newly extended scheme, having returned to the previous limit of £300,000, has encouraged an uptick in first-time buyers and is also an attractive consideration for purchasers from over the bridge. So, although high interest rates may constrain some would-be users of Help to Buy over the next few months, as these ease, we can expect usage of the scheme to continue to steadily increase in the longer term.”
Transactions fell 20 per cent below the pre-pandemic average during the third quarter of 2023. This represents a continuation of the low level of activity seen since late 2022, with transactions down by at least 10 per cent on the 2017-19 average during the first nine months of 2023.
