When we rolled into 2023, we were eyeballing the upcoming year with slight trepidation. There were early signs that it was looking like there would be a marked change from the previous years of high turnover and what was, in hindsight, the end of the most recent property ‘boom’.
There is no sugar coating it, 2023 has been one of the toughest property markets in years. While property markets, like many others, are cyclical with peaks and troughs, the best way to describe what has happened last year is that housing market activity literally fell off a cliff. Q3 registered an over 60% decline in activity from the year before. Not good.
Let us unpack some of the contributing factors to this:
Firstly, let’s make this very clear. The main contributor to the housing market slowdown in Jersey is a mix of relatively high interest rates and high property prices. This has had a direct effect on affordability and this in turn has had the effect on the market.
However, while the above affects the main populace and restricts their ability to get on or move up the property ladder there have been other developments this year that have impacted what would usually help a struggling market.
A major change was the Government implementing an additional 3% rise on stamp duty for second homes/investment purchases. This went against all industry advice and cracked on and effectively in one fell swoop killed the investor market. This, while not huge, can be a real help in a struggling market as investors usually look at apartments at the bottom of chains and their purchases then keep the market moving. Small change. Big impact. Not only on the local market but also on the perceived uplift in stamp duty into the government’s accounts. It just hasn’t happened.
Then we had the collapse of 2 of the island’s major building companies. At the time this was a big shock but as the year has continued Jersey’s building companies from the large one’s through to the sole traders are feeling the pinch. High build costs, cost of planning and the time it takes to receive approval has really affected the building community.
Recently the Government has agreed to a new landlord licensing scheme to start in 2024. Again, there has been fervent push back against this that has not been listened to. Now protecting tenants and landlords (it works both ways) is very important. The real fear is that landlords will exit the market, leading to less rental properties, which in turn will lead to higher rents (which, during 2023, have already been increasing). There will be very few new landlords to fill the gaps due to the additional 3% stamp that now must be paid. It feels like a perfect storm for rentals to increase in price next year and nothing to do with the market but down to ill-advised decision making by our policy makers.
We will not go into detail surrounding the Les Sablons development decision by the Assistant Planning Minister, but thankfully the wrong has been righted and the scheme can press on. This will rejuvenate the centre of St. Helier and bring much needed confidence to the market along with hundreds of jobs and be a large income generator.
While the above seems all doom and gloom, let’s look at 2024 and see what we have in store:
The Government will be tinkering with stamp duty again. There will be a raise in the first-time buyer’s relief from £500K to 700K to move more in line with current property prices. This is a welcome step and will help FTB’s enter the market. This will coincide with a £10m pot to be used as a shared equity scheme with the sole purpose for use by FTB’s to purchase properties that are not new builds in order to ‘unblock chains’. Again. Very welcome.
On the other hand, they will also be raising stamp duty on home purchases over £2m. In my opinion, this is not a good idea. Stamp duty at this level is already high and they should be looking to increase the number of sales and not affect the current low number of sales in this part of the market. Affordability is a market wide issue. Not just at the bottom but also through all the levels. To me it seems to be the Government’s default to raise stamp duty. They need to do better.
Interest rates will (hopefully) continue to soften. While this is good news it will completely depend on people’s situations as to whether it will benefit them. There will be a lot of islanders up for remortgage in 2024 and many will be at a very low rate. Their mortgages will become much more expensive, and this may lead to them having to sell their property. This combined with landlord licensing will lead to more properties for sale and a much more competitive market to try and sell your property in.
On the other hand, a drop in interest rates, combined with large numbers of available properties will result in sale prices coming down as vendors take offers (this has started but it will take time for the stats to show this due to the low market activity). This will hopefully increase housing market activity and we will see the market start to recover from 2023.
While Q3 2023 reflected what the industry has been seeing all year, Q4 has (from a Broadlands perspective) seen a marked uplift in sales, and so looking into 2024 we are feeling positive that while it still will be a tough, competitive market, we will begin to see light at the end of the tunnel. Jersey over the years has proven to have a resilient property market and moving into next year we are confident that we will see activity start to pick up as the Bank of England (hopefully) lowers the base rate and affordability comes into play.
