THE first sign that Jersey’s once booming housing market had finally started to cool emerged last month when figures revealed the average cost of a home during the spring was £666,000 – down £20,000 against the same period in 2022.
The figure was still eye-wateringly high, and well out of the reach of many would-be homeowners. But it did at least remind Islanders that even in Jersey, property prices can go down, as well as up.
The price tag, however, only told half the story. Perhaps the more interesting figure was that of ‘market activity’, which showed that the number of sales was down 42% on the same period in 2022.
At the time, Housing Minister David Warr described it as the biggest slowdown in the sector since the 2008 financial crash, which saw tens of thousand of pounds wiped off the value of properties and homes sitting unsold for months.
Few analysts are suggesting that Jersey, or the wider world, is on the brink of a similar implosion. But the events of the last few months do bear some similarity to the early days of the housing slump all those years ago – and will undoubtedly once again result in a distinct set of winners and losers.
For potential buyers, the delight of seeing tens of thousands slashed off property prices has been tempered by the fact that interest rates are still relatively high, pushing mortgages out of the reach of many.
It is a conundrum which has frustrated both buyers and sellers.
One Islander recently told the JEP that his property had been on the market for the last 12 months.
‘In the end we lowered the price below the recommended market price, but we were still unable to sell it due to mortgage-repayment costs being too high for potential buyers,’ he said.
‘I also found the standard of the majority of estate agents was shocking – they must have been so used to selling houses with ease over the past few years, that they have forgotten how to work to even a minimum standard.’
Another said that they lost thousands of pounds in fees when a buyer from whom they had accepted an offer pulled out – after failing to complete the sale of their own property.
Estate agent and director at Broadlands, Harry Trower – who last month revealed that transactions had ‘fallen off a cliff’ – said the market remained ‘slow’.
‘People are looking to buy, but there is still an affordability issue. We are seeing people make offers, but most of those are being turned down – hopefully that will start to change in the next few months,’ he added.
And Margaret Thompson, the chief executive of Thompson Estates, warned that vendors who bought their properties when prices peaked last year could ‘suffer a loss’ and urged them to be realistic when looking to sell.
‘With inflation and higher interest rates, the market has slowed,’ she explained – although she added that the sector ‘will recover’.
‘All property markets – whether it’s Jersey or elsewhere – go through cycles.
‘Estate agents also need to not overvalue properties and make vendors aware that they need to be realistic,’ she continued.
‘We must be sensible about prices.
‘Those who bought at the height of the market will definitely be suffering a loss.
‘Vendors need to listen to the reputable estate agents in the industry to achieve the best possible price based on market conditions.’
And it is not just individual vendors who appear to be trying harder to get their properties off the market.
Dandara – one of the Island’s biggest developers – recently advertised a ‘first-time-buyer offer’, where it would cover the cost of a mortgage for 12 months to anyone who reserves a property before 31 December.
Ms Thompson commended Dandara for ‘taking the initiative’ with an offer aimed at first-time buyers, describing the incentive as ‘fantastic’.
However, Deputy Warr said it was ‘basically a recognition that people are hesitant to buy a home’.
He added: ‘What we will find is the private sector are going to become increasingly creative in how they market properties – that is inevitably going to happen.’
Le Masurier managing director Brian McCarthy said: ‘There is very clear evidence that the market has not just slowed down, but virtually stopped. Transactions are significantly down year on year as people struggle with mortgage affordability.’
He also said the business had ‘always prioritised Jersey first-time-buyers and owner-occupiers’.
‘With future sales, we will certainly be offering a suite of options to assist getting Islanders onto the property ladder.’
The independent Fiscal Policy Panel – a group of economists who advise government ministers – have also predicted that housing transactions will halve this year compared to last.
And the Treasury Department now expects to collect £40m in stamp duty next year, whereas the estimate in last year’s Government Plan for 2024 was £57.5m – reflecting how housing market activity has dropped in the past ten months.
Peter Seymour, of the Mortgage Shop, agreed that the ‘innovative offers’ being advertised by some vendors were ‘an indication that the market has slowed’.
‘There has been no change, from our point of view, over the last few months,’ he said.
‘The market is likely to remain slow until vendors drop their asking prices dramatically,’ he added.
Royal Court statistics also show that transactions are lower than usual, with the average number of contracts dealt with during last month’s sittings standing at 24, compared to 41 for the same month last year.
Deputy Warr continued: ‘I’ll give you an example. As of yesterday, around 1,500 homes were advertised for sale. If you go back 18 months it was between 200 and 300, so they are stacking up.’
The Bank of England this week froze interest rates – at 5.25% – for the first time in almost two years, following 14 consecutive hikes the base rate.
The rises have left those coming off fixed-rates battling a sharp increase in their monthly mortgage repayments – a marked departure from the low rates that buyers were able to benefit from in the wake of the 2008 financial crash.
The lending market is, however, showing signs of stabilising. Until recent weeks, banks – fearful of many more hikes in the base rate – were offering a plethora of unattractive mortgage deals. But with renewed confidence that, following a drop in inflation, the Bank of England will hold off on further rises, competition has set in between lenders, leading to better offers for those looking to fix.
The market slowdown has not impacted all developers equally.
Jersey Development Company chief executive Lee Henry said the States-owned firm had managed to pre-sell 274 units out of 280 within its new Horizon development at the Waterfront.