The Guernsey Residential Property Prices Bulletin has been published for Quarter 1 of 2023.
The mix adjusted average purchase price for Local Market properties was £613,942 in the first quarter of 2023, 3.8% lower than the previous quarter, 7.1% higher than the first quarter of 2022 and 50.7% higher than five years previously.
There were 113 Local Market transactions during the first quarter of 2023, 68 fewer than the previous quarter, 86 fewer than during the first quarter of 2022 and 27 fewer than five years previously.
The raw median price (realty only) of the 14 Open Market transactions in the first quarter of 2023 was £1,779,375.
The mix adjusted average monthly rental price for Local Market properties was £1,778 in the first quarter of 2023, 3.1% higher than the previous quarter, 7.0% higher than the first quarter of 2022 and 36.8% higher than five years previously.
Gill Mooney (pictured), head of lettings at Savills Guernsey, said: “The rental increases recorded for the first quarter of this year are not necessarily surprising and are broadly reflective of the market. There remains a lot of people coming from overseas to work and we’ve seen consistent demand – particularly for smaller family homes and one and two bedroom properties for individuals and couples. It’s the larger homes that are taking a little bit longer to let.
“Interestingly what we’ve seen on the Local Market is that many landlords are choosing to work with their existing tenants to keep any potential rental increases to an affordable level rather than go for the higher market rate. Where agreements are up for renewal and a tenant has been in place for some time many landlords are choosing to look at the bigger picture. They value the long term and trusted relationship they have with the tenant and rather than go through the process of remarketing and have their property sit empty while they wait for someone new – where they could possibly achieve a higher price – they look at what’s reasonable and come to a compromise.”
Nick Paluch, director within the residential sales team at Savills Guernsey, said: “Certainly when compared to the heights of the previous two years or so activity has been subdued. The rise in the cost of living and increased mortgage rates has led to buyers reducing their budgets, while vendors who haven’t needed to sell immediately have decided to sit tight. This is reflected in the price drop reported in the Local Market for the first quarter of this year. Prices do still remain higher than a year ago, but we’re now starting to see things settle as the market moves back into what you might describe as a more normal rhythm following a period of unprecedented activity.
“Consequently we’re experiencing a return to a more needs based market – people buying and selling due to a change in circumstance such as a new job or for family reasons rather than being driven by a purely lifestyle decision. Demand is still higher than we expected and – while there might not quite be the same level of urgency in the market as there was 12 to 24 months ago – we do expect things to start picking up. A little bit of sunshine always brings more positivity. The underlying reasons that make Guernsey such a great place to live and work have not disappeared. The lifestyle on offer in the island is a significant draw for those looking on the Open Market – and there continues to be a core number of committed buyers who are willing to make a move regardless of conditions on the Local Market. Despite any further increases in the interest rate from the Bank of England, the long term forecasts remain positive.”
Richard Hemans, IoD Guernsey’s lead on economics, commented: “Although it is difficult and risky to draw conclusions from one quarter in isolation, the latest quarterly figures are somewhat concerning because they indicate the local property market is slowing faster and further than expected. This is evidenced by the lowest number of transactions in at least 25 years and also by house prices starting to fall. These figures may, however, reflect the aftershocks of the UK’s poorly received mini-Budget at the end of September 2022. They will certainly have been affected by the continuing increase in the cost of borrowing, which may rise further still.
“It is perhaps safer and more meaningful to look at rolling four-quarter averages. On this basis, local market property prices are still increasing by 14% year on year, although they are starting to slow. Transaction volumes are definitely slowing, falling by more than 25% year on year. Volumes are lower across every price level. Meanwhile, open market prices have risen by 21% year on year, but transaction volumes have also decreased by 36%.
“These latest quarterly figures do suggest the market may be at a turning point – and the Q2 2023 data will be critical in understanding whether Q1 was just an anomaly, or the start of sustained weakness.
“Most of the indicators in the bulletin predict a softer period for the Guernsey property market. Affordability remains stretched and exceeds any level recorded in the last decade. It is taking longer to sell a property than a year ago. The discount sellers are having to accept is steepening, reaching 7% versus 3% a year ago.
“Turning to the rental market, the four-quarter rolling average for rental price growth also continues to slow, increasing by 8% year on year. Rental prices are rising more slowly than inflation and affordability has stabilised, although they still remain elevated and consume a staggering 54% of median earnings. This is one of the main problems that makes it difficult for the island to attract key workers to the island and contributes to the tight labour market and inflationary pressure.
“Local estate agents and any forced sellers will be concerned by the Q1 2023 residential property statistics, which suggest the market is weakening. 2023 could see the lowest number of transactions for many years, even pre-COVID. Whilst the four quarter averages remain positive for the time being, and conclusions should not be drawn from quarterly figures in isolation, the outlook for the market is finely balanced. The shortage of housing supply, strong economy, low number of forced sellers and small growth in population continue to support the local property market. However, these are being counterbalanced by rising interest rates, the knocks to household incomes from inflation and higher taxation, and the higher number of properties sold than normal during the COVID years, which may have saturated the market. We are likely to see further declines in transactions and price growth this year.”