The Guernsey Residential Property Prices Bulletin has been published for Quarter 3 of 2023.
The mix adjusted average purchase price for Local Market properties was £647,889 in the third quarter of 2023, 7.8% higher than the previous quarter, 3.0% higher than the third quarter of 2022 and 54.3% higher than five years previously.
There were 138 Local Market transactions during the third quarter of 2023, 37 fewer than the previous quarter, 96 fewer than during the third quarter of 2022 and 113 fewer than five years previously. This is the lowest third quarter number of transactions since these records began, in 1999.
The raw median price (realty only) of the 12 Open Market transactions in the third quarter of 2023 was £1,443,438.
The mix adjusted average monthly rental price for Local Market properties was £1,909 in the third quarter of 2023, 2.4% higher than the previous quarter, 10.6% higher than the third quarter of 2022 and 46.1% higher than five years previously.
Nick Paluch, director in the residential sales team at Savills Guernsey, said: “There’s definitely been a return to more normal levels of activity this year, especially when compared to the peaks of 2021 and 2022.
“The rise in the cost of living and increase in interest rates has also made buyers more cautious, resulting in a drop in the number of properties sold.
“Interestingly however the Local Market mixed adjusted average price appears to have increased. Looking at the figures in more detail, this is probably because a larger proportion of properties have transacted at the higher end – the number of three and four bedroom homes sold in the last three months to September for example was the highest it’s been all year. It’s likely these are cash buyers who have decided that now is the right time to act while there’s less competition. In general the market is much more price sensitive than it has been and sellers have had to align their asking price with buyers’ lower budgets.
“When you take into account the Retail Price Index increases throughout the same timeframe there has also been an effective reduction in real terms. However, I think it bodes well for next year. There are definite signs that confidence is starting to return, particularly as interest rates appear to have stabilised in the short term. Certainly in the last month or so – which these figures don’t account for – we’ve experienced an increase in activity. Properties that are sensibly priced have seen strong interest and those buyers who are active are highly motivated and committed to a move.
“Demand will likely remain strong in the Local Market, while in the Open Market – particularly at the higher end – Guernsey still represents good value for money when compared to elsewhere. We may also see more interest from those living in the UK, especially with the prospect of a general election on the horizon.”
Annie Le Prevost (pictured), lettings manager at Savills Guernsey, said: “The rental market continues to be incredibly busy, but there is still a shortage of supply. Consequently, we’ve seen an uptick in the number of people who, although currently looking to sell, have decided to rent their homes in the short term because demand is so high.
“Monthly rental prices also appear to have increased. In part this can be put down to demand, but I also think it’s conducive to the type of properties – there’s been less one-bedroom flats available, for example, than larger houses, so that naturally brings the average price up. Many landlords are aware that the rise in the cost of living is putting tenants under increased financial pressure, so they are trying to keep any potential rises to a minimum. However, they also have to ensure they can cover their own costs – so finding a balance has been crucial.
“The cost of living does continue to be a concern. Properties that appear to be priced too high are not generating the same level of interest, and prospective tenants are also looking at the difference in running costs between certain types of homes. As we head into the new year I expect levels of activity will remain strong. Financial and healthcare workers on Local Permits continue to drive demand. If interest rates drop as expected towards the middle of next year, then we could also see a bit more movement as current tenants start to look for somewhere to buy.”
Richard Hemans, IoD Guernsey’s lead on economics, commented: “The latest property statistics show that the market is lethargic with price growth weak and transactions declining significantly. The substantial increases in interest rates over the last eighteen months, combined with the elevated cost of living, is undermining demand for property. Lack of supply is supporting prices, but the market is not in a healthy state.
“Local market property prices increased by 3% year on year, confirming the weaker trend that has prevailed since the start of the year. However, the most concerning element of the bulletin was the ongoing decline in transactions – Q3 2023 saw the lowest number of Q3 transactions since records began in 1999. The year-on-year decline was 41% and the year-to-date decrease was 36%. The level of transactions is not only concerning for estate agents and other sectors that depend on the property market, but it will also result in lower tax revenues and indicates that consumer confidence has weakened. Simply put, the market is saying that prices are too high, and transactions will likely recover only when either interest rates or prices fall, or supply increases.
“The open market also saw a significant decline in the number of transactions, although year on year price increases remain strong. The price of rentals increased by the highest amount in more than a year as islanders continued to struggle to find affordable housing.
“There are multiple signs that the property market has overheated. Affordability ratios remain very elevated with more than half of average earnings taken up by rent and house prices exceeding sixteen times average earnings. The yield on property as investment is just over 3%, which is in line with historic levels but lower than cash and other assets. Short term capital gains on property are likely to be subdued.
“Housing remains a key issue for politicians and islanders because of the lack of supply and the high cost, making it difficult for both people living here and those relocating to the island to find suitable accommodation. This causes a natural knock-on effect for businesses trying to recruit and retain workers, and increases inflationary pressures. House prices in Guernsey have always been high because it is an attractive place to live and supply is limited, but the current state of the market indicates that prices need to moderate and more housing needs to be built.”
