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Doom and Gloom or Unsurprising? Thoughts on the Jersey Q3 Property Report

When reading the Jersey Government Q3 Property report and subsequent agent commentary you can't help but be captivated by headline which is the 'lowest turnover of properties since 2002' But deep dive a little more and there is some key information for consideration.

Without question when considering the overall market there are some high level observations that may as a property owner or vendor cause concern.

  • The House Price Index witnessed a 2% annual decrease, marking the first consecutive quarterly decline since Q1 2014.

  • 1-bedroom flats and 2- & 3-bedroom houses all recorded an annual decrease in price.

  • On a rolling four-quarter basis, overall housing market activity decreased by 22% compared to the previous quarter (Q2 2023) and 42% compared to the corresponding quarter in 2022 (Q3 2022).

  • Property turnover plummeted by 62% compared to Q3 2022.

  • This quarter observed the lowest turnover of properties (155) since at least 2002, with the previous low point recorded at 162 properties in Q1 2013.

But actually is any of this suprising when you look at the trend of BoE Base Rate over the last 12 months and what this has done to mortgage funding rates?

It's harder for us to get sources of data for Jersey Mortgage approvals, however we can draw insight from the UK market and do a read across in trend. If we refer to data from Statista we can see the mortgage approvals are on a signficant decline since Covid and only overall holding at a decent level due to re-mortgage business. We can compare this approval trend line (Moneyfacts) to mortgage funding rates.

But what does this mean in practice and why does it result in the market trends we are exeriencing. More importantly what does it mean as we move into 2024.

If we go back to a previous blog there are a couple of things the bank will look at when applying for a mortgage. Put very very simply they will look at:

  • Income Multiples (Usually 5 ish times annual salary)

  • LTV - what deposit are you putting down against how much you are borrowing

  • Affordability (how much of your monthly salary has to go into your financial commitents)

It is affordability that is impacted by rising interest rates as not only will monthly mortgage payments increase in correlation with interest rates, they will also be stress tested on an even higher interest rate to ensure that the monthly payment would be affordable should rates rise again.

The knock on impact of this we can have a good buyer, with a good income, significant deposit, but the amount they wish to borrow can tip them outside of the % on affordability (now interest rates have increased) that the bank is comfortable with. In this scenario the buyer has two options:

  1. Hang tight in the hope that interest rates will reduce or

  2. Buy a property that is less expensive

What we are seeing over the last few months is probably a mixture of the two. And with less buyers taking the step to purchase vendors have the option of either

  1. Hanging tight in the hope interest rates will reduce and more buyers will come back to market or

  2. Reduce their property price

As we move into 2024 we are seeing a more settled rate environment and a recalibraiton of expectation following the peak of Covid.

What will work through during this final quarter of 2023 will be purchasers truly understanding their budget following conversations with the banks, and vendors truly understanding the market value of their property following analysis of the 2023 sales (which your marketing agent should provide you with)

There is still demand for higher end properties as we see that 4-bedroom house prices have increased with higher priced (greater than £1.5 million) 4-bedroom houses remaining similar to previous years but turnover of lower priced 4-bedroom houses decreasing.

At Alexander Carmine Estates we want to support you whether you are a buyer or seller, and we use careful insight and market analysis to guide you carefully on your property journey

Please do contact us if you would like to chat through or subscribe to our blogs.



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