House prices rebound, but the gap between buyer and seller expectations keeps getting wider

To view the full Market Index Q3 2023 click here.

Patient sellers rewarded as gap between asking and sold prices narrows

The latest Property Market Index Review by London lettings and estate agent, Benham and Reeves, has revealed that house prices crept up in Q3 of last year, marking a second consecutive quarter of positive growth across both the UK and London markets. The gap between seller asking price expectation and the price paid by buyers also narrowed for the first time since 2022, suggesting that sellers are being rewarded for their patience when they do find a buyer.

The Benham and Reeves Property Market Index Review is a quarterly accumulation of house price data from the top four existing indices, providing the most comprehensive view of UK and London house price performance. It looks at where the average house price sits overall when taking into account mortgage approved house prices from Halifax and Nationwide, seller expectations via the Rightmove House Price Index, and sold prices from the UK House Price Index.

It also highlights how the market is evolving based on the gap between mortgage approved prices and asking prices, as well as asking prices and sold prices.

Current property values

Based on a geometric mean of all four existing data sets, the index from Benham and Reeves shows the average UK house price sat at £306,462 during the third quarter of 2023.

This marked a 0.1% quarterly increase, and the second consecutive quarter of positive house price growth in the UK. However, despite this growing market momentum, the market is yet to bounce back on an annual basis, with the average house price sitting -1.6% lower than it was in Q3 2022.

In London, the current average house price in Q3 2023 was £569,566 having also increased by 0.1% versus the previous quarter. As with the national picture, this is the second consecutive quarter of growth following declines in Q4 2022 (-0.8%) and Q1 2023 (-1.9%).

Despite these quarterly gains, London’s average house price also remains down on an annual basis, sitting -2.2% below Q3 2022.

Market Gap Between Mortgage Approval Price (Buyers) & Asking Price (Sellers)

In Q3 2023, the market gap between the average mortgage approved price of a buyer (£270,013) and the asking price expectation of a seller (£367,694) increased to 36.2% across the UK. This is 0.7% higher than the previous quarter, and the largest gap seen since Q3 2020.

It’s also worth noting that this average mortgage approval of £270,013 is the lowest it has been since Q1 2022.

This is the fourth consecutive quarter to see the gap increase, and suggests that while buyers have reduced the amount they’re willing to borrow during a period of high interest rates, sellers aren’t reducing their asking price expectations at the same rate.

In London, the gap between buyer (£514,325) and seller (£678,176) is 31.9% which actually marks a quarterly narrowing of the gap by almost -1% following five consecutive quarters of widening. This suggests that London sellers are more willing to meet in the middle in order to secure a buyer.

Market Gap Between Asking Price (Sellers) & Sold Price (Buyers)

The latest index by Benham and Reeves shows that the gap between the average UK asking price and the average sold price is, perhaps surprisingly, starting to close.

Across the UK, the average sold price in Q3 2023 stood at £289,907, -21.2% below the average asking price of £367,694. While this remains a significant gap, it is the first time the gap has narrowed rather than expanded since Q4 2022.

In London, the gap between asking price and sold price sits at -21.9% having also narrowed for the first time in a year.

This suggests that while buyers may be initially borrowing less, they are willing to improve their offer for the right home, while stubborn sellers are having to stomach a smaller reduction in asking price when they do find a buyer in a proceedable position.

Director of Benham and Reeves, Marc von Grundherr, commented:

“Our latest market analysis suggests that while buyers have certainly been treading with more caution and borrowing less in the face of higher interest rates, those who are entering the market are still paying a good price for their desired homes.

In fact, across both London and the wider UK market, the gap between asking prices and sold prices narrowed for the first time during the third quarter, demonstrating that while patience is certainly a virtue, it remains a great time to sell.

With interest rates expected to ease off in 2024, we should see buyers gaining more confidence and coming to market with slightly deeper pockets which should go some way to closing the gap even further.

Once again, the house price crash that so many experts said was an inevitability appears to have been averted and we fully expect the market to go from strength to strength as we move into 2024.

The Benham and Reeves Property Market Index Review gauges the health of the UK and London property markets based on data from the top four existing indices. It looks at where the average house price sits overall when taking into account mortgage approved house prices from Halifax and Nationwide, seller expectations via the Rightmove House Price Index, and sold prices from the UK House Price Index.

It also highlights how the gap has changed between buyers and seller expectation, as well as asking price and actual sales price, on a quarterly basis across London and the UK.
Land Registry, Halifax HPI, Nationwide HPI, Rightmove HPI