NOVEMBER 2024

Thursday, November 7th, was a busy day. The Jersey Statistical Unit unveiled the latest House Price Index figures, closely followed by the release of the latest Base Rate decision of the Monetary Policy Committee of the Bank of England.

Since the local property market crashed over two years ago, there has been a variance between the excellent figures produced by the Statistical Unit and the reality of the local property market.

HOUSE PRICE INDEX STATISTICS

The most recent statistics for Quarter 3 confirm that house prices are falling, and the release of this report should go a long way towards convincing vendors that their expectations of selling at the prices seen two years ago are no longer realistic.

DECREASES IN SELLING PRICES

The latest figures show a decrease of between 2% and 20% in the various house types during the third quarter of the year, which clearly reflects the downturn in the market as vendors are slow to reduce asking prices in a bid to achieve a sale.

The extent of the current situation, which is unique to Jersey, can be gauged by the fact that there are currently 1667 apartments and houses on the market, and many of these will not move for two reasons.

HOUSE PRICES MUST FALL

The first as already described is the need for vendors to accept that they are unlikely to secure a sale unless they lower their asking price – a difficult pill to swallow as many owners saw the value of their properties rise to very high levels post Covid.

REDUCED LENDING CAPACITY

The second factor is the reluctance of mortgage providers to continue using the high-income multiples that had been the mainstay of mortgage lending for decades until galloping inflation caused largely by the Russia’s invasion of Ukraine resulted in the Bank of England introducing five rate increases between March 2020 and July 2022.

The multiples were replaced by risk-based affordability assessments which take into account overall income, regular outgoings and potential changes in a borrower’s financial situation and these measures   immediately reduced the borrowing capacity of most purchasers seeking a mortgage.

MARKET SLOWDOWN

High property prices and reduced borrowing capacity have now resulted in the current slowdown in the Island’s housing market, although there has been a noticeable increase in footfall to our offices by people keen to find out how much they can borrow and how much they have to save to cover a deposit.

A CHANGE IN THE NEW YEAR

Following the recent announcement about the lowering of the Base Rate by 0.25% to 4.75%, and with the promise of more reductions to follow next year, it is possible that after years of waiting for house purchase to become more affordable many more potential purchasers will start to look at the market.

First time buyer activity is likely to increase as it is this part of the market where prices have fallen most. There are many well remunerated purchasers in their late twenties who are likely to consider a move next year, with extra momentum being given by the Andium First Time buyer scheme, subject to more funding being provided by the Government.

The Homemover sector shows the largest reduction, where the mean price of a three bedroom house has fallen to £749,000 which is £52,000 lower than the previous quarter, although purchasers might still struggle until asking prices drop further, as the lending criteria imposed by all lenders will still restrict increased activity

RATES WON’T CHANGE IMMEDIATELY

It is uncertain if the recent Base Rate reduction will be felt immediately by borrowers as it always takes time for lenders to review their mortgage interest rates following a Base Rate change, this is usually 30 days.

Since the beginning of the year Jersey mortgage rates have fallen marginally although there will always be a difference, between the rates offered in Jersey as opposed to the noticeably lower rates that lenders’ UK counterparts will charge.