Caution creeps into the property market as just under one-in-three property sales falls through
32% of property sales fell through before completion between January and March of this year, according to new figures from Quick Move Now.
Of the sales that failed, 25% of property sales fell through because the buyer struggled to secure mortgage finance. This suggests that lenders are beginning to show more caution in response to rising interest rates and living costs.
Danny Luke, Quick Move Now’s managing director, said:
“Property prices have increased significantly in recent months. At the same time, the UK has seen a steep rise in inflation and most people are beginning to feel the pinch from steep rises in the cost of living. It was inevitable that the squeeze on people’s wallets would begin to be reflected in mortgage companies’ affordability assessments. From our conversations with potential buyers and estate agents, it is clear that lenders are being more cautious about which properties they’re prepared to lend on and how much home buyers can afford to borrow in light of rising day-to-day living costs. Energy prices have already risen by 50% for most UK households, and they look set to increase even further through the latter half of this year and into 2023. That, of course, has a significant impact on homeowner affordability.”
It seems it’s not just lenders that are feeling cautious. Other reasons for failed property sales in the first quarter of this year included:
- Buyer changed their mind about the property (34% of failed sales)
- Seller pulled out of sale due to slow progress (25% of failed sales)
- Buyer attempted to renegotiate the agreed sale price (8% of failed sales)
- A change to the buyer’s circumstances meant they could not proceed with the purchase (8% of failed sales)
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“The property market has defied many predictions over the last two years, remaining buoyant and thriving despite challenging external conditions. Demand has remained strong since the end of the stamp duty holiday, and a shortage of properties coming to the market has led to exponential house price growth. However, both buyers and sellers are beginning to show more caution. Steeply rising living costs and worries about future financial security will undoubtedly impact buyer confidence. It’s little surprise that 34% of failed sales are attributed to the buyer changing their mind about a property after agreeing a sale. There is such stiff competition for properties at the moment, it’s easy for buyers to be pressurised into agreeing a higher purchase price than they’re comfortable with, in order to secure a property. A few weeks in, when the sale really begins progressing, it’s understandable that buyers might start to get cold feet about the agreed sale price – which accounts for 8% of failed sales – or pull out of the purchase altogether.”
“Sellers also seem concerned that the current property bubble is unsustainable. 25% of failed sales since the start of 2022 have been as a result of the seller pulling out of the sale due to slow progress. Sellers are keen to lock-in the sale of their property before demand or prices begin to dwindle.”
If your sale has recently fallen through, our guide What to do if your house sale falls through offers some great advice on your options.