Last week the Q1 property statistics were released. After many years of an upward trend it was a very interesting read. Here are the thoughts of Harry, our Residential Director, on some of the questions that it raised:
Yes there were many new build completions during the quarter (45%). We knew it was going to happen and Statistics Jersey has been very clear that if you removed them from the picture then turnover was down 55% (not 26% with the new developments included). It is worth noting that the statistics tell us what has happened in a factual way. As an industry, we knew turnover was down. Though I must admit that 26% is a high number on its own. Without the context.
In short, 1 bedroom apartments, plus 3 and 4 bedroom houses all dropped in mean value yet 2 bedroom houses and apartments increased in mean value. The likelihood behind this is the following. 1 bedroom apartments dropped due to the new development completions all having agreed prices from 2017 onwards, when prices were lower. For the 3 bedroom houses, the main demographic for these properties, in general could not afford them due to high mortgage repayments and purchase prices. This meant that the turnover (as described above) was down, and those properties that did complete probably sold for less than the asking price. This is the same for the 4 bedroom houses.
This is the one stat that everybody wanted to talk about. Why is it so high? Simple. Most of the new development sales were to investors that had sale agreements in place. This meant that once the government implemented the added stamp duty the investors were caught between a rock and a hard place. Couldn’t pull out unless they incurred a penalty so had to complete and pay the added stamp duty. Hence the 49% rate of properties purchased in the first quarter that were ‘not main residence’. One final point on the above. With 2 new blocks at Horizon coming on stream this year plus a few others, I expect this figure to remain high until we can get a proper idea of the impact of the new stamp duty charge on second homes which is likely to be Q1/Q2 2024.
What is the property market looking like moving forwards?
- Outside of the new developments where people have signed up already. There will be a drop off of BTL purchases as now with high interest rates there are better options out there than an apartment or house as an investment. The extra stamp duty has had an impact on this.
- We will see more properties come to the market as more people cannot afford the new mortgages offered as their current fixed rate mortgages come up for renewal
- Since March we have seen an increase in properties going under offer. Whether this continues or we have the traditional summer lull is open to debate. However, it is predominantly houses.
- If the new proposed rental regulations come in how will that affect the BTL market? Will landlords decide that owning rental properties is too much stress and look elsewhere?
Historically, Jersey always remained a robust market, and while there may have been dips in average prices, over the years it has mainly been on an upward trend. Again, only time will tell if this is still the case.