Buyers most dependent on borrowing are starting to cut budgets: Savills

The most borrow-dependent movers are starting to cut budgets in the face of rising interest rates and rising costs of living, according to data from Savills.

A late August survey of more than 1,000 potential buyers reveals that commitment to move has also declined, at least in the short term.

The net balance of people who are more committed to moving in the next three months fell to -1.7%, while a net balance of +7.1% is more committed to moving next year, compared to +22% in April this year.

However, the sentiment remains more positive for the medium term, with a net balance of +15% indicating that they are more determined to move in the next two years, which is comparable to the figures for September of last year.

Those looking to enter the market or extend their borrowing are the most cautious when asked if they are committed to moving in the next six months.

This caution is mostly expressed by those looking to expand (net balance of -10%) and those looking for more discretionary purchases such as a second home (-31%) or an investment opportunity (-8.7%) .

But not all buyers are discouraged by the tougher economic outlook, with some groups of buyers becoming more engaged in their pursuits.

Those looking to downsize (+6.6%), relocate (+7.4%) or those currently living in parts of the UK (+3.9%) are more determined to move during of the next six months.

Savills says lack of inventory remains a problem, with more than half of buyers (54%) saying it significantly hampers their ability to purchase a property. However, this figure is only slightly lower than the 63% in April.

This problem is more pronounced at the higher end of the market with more than four in five (88%) looking to buy a property over £1m hampered by a lack of suitable properties.

For the majority of buyers, the amount they plan to spend on their new home has not changed.

Of those surveyed, 54% said there would be no effect and they plan to use the same funding source, while 7.8% plan to spend the same overall, but are likely to reduce the amount they borrow for the purchase, plunging deeper into their equity to finance their purchase.

However, recent interest rate hikes and rising costs of living have also started to impact buyers’ budgets in certain market segments.

Nearly a third (29%) of potential buyers surveyed said they cut their budget in response to these factors.

This is especially true for those more dependent on borrowing – including 50% of those looking to take the first step on the homeownership ladder and 44% of those looking to scale up.

The cohorts that said they were least affected were downsizing, with 66% retaining both budget and funding, and 59% of those moving outside of London.

Frances McDonald, research analyst at Savills, said: “Although transactions have remained robust over the summer months, there is now certainly less urgency in the market, with rising debt costs affecting budgets. of those most dependent on a mortgage. The rising cost of living is also making shoppers much more aware of how much they are willing to spend.

“Ultimately, in the short term, the market will be driven primarily by homeowner needs, rather than the lifestyle influences that have driven the market during the pandemic. Especially now that lockdowns are fading into distant memory.

“As a result, after more than two years of skyrocketing home price growth, sellers will need to become much more realistic when it comes to pricing their homes, especially as more inventory hits the market. .”

“As inflation comes under control, the cost of debt eases and we see a recovery in domestic and global economic growth, we can expect price growth to return to normal. these markets, especially given the strength of buyers’ underlying commitment to move over the medium term.

Previous Bridging Watch: common sense is our anchor
Next Glenhawk seals £200m funding line from NatWest Markets