Fall through rates dropped to 25% in Q2 of 2023

Quick Move Now has written an article that discusses the effect of the news that fall through rates dropped to 25% in Q2 of 2023.

Recent data shows that the number of UK property sales that fell through in the second quarter of this year dropped significantly to 24.2%. A higher percentage of sales reached completion, and property chains remained strong. But what changed to cause such a dramatic decrease in the fall through rate? As we are reaching the end of Q3 2023, we review the causes of Q2’s low fall through.

The current housing market has shrunk, with the total number of sales dropping year on year. High mortgage rates and falling house prices have put off both buyers and sellers. This has pushed casual buyers and those who are only testing the market to hold off. Only people with a true need to move are still choosing to brave the market. These dedicated buyers have a strong desire to keep their sale on track.

But what is the difference between casual and dedicated buyers? The best way to describe this difference is to rename them, to those that want to sell/buy, and those that need to sell/buy. Casual buyers want to find a bigger house or a nicer garden. They want to move out and have their own space or they want to move in with their partner. Their reasons are not dictated by time, and instead, focus on desires that can change or wait, depending on the market. Dedicated buyers do not have such luxury. They need to downsize due to bills or upsize due to requiring an additional bedroom. They need to move out as their tenancy is ending or due to getting a job in another town/country. These needs are all dictated by time. They also have something significant to lose if their sale falls through, such as missing their new job start date, or worse, not having somewhere to live. Due to this, once these buyers make an offer on a home, they are a lot more likely to stick to that decision.

A chain of casual buyers is more likely to collapse due to someone changing their minds or finding a different property they prefer, despite having put an offer down. However, a chain of dedicated buyers is far more likely to be successful. Throughout 2022, the most common reason for a failed sale was the buyer having a change of heart and pulling out of the sale. A change of heart encompasses a lot of different reasoning. It could mean a buyer found a property they preferred, they decided not to move at all, or they got scared by market conditions and decided to postpone their move. It would make sense that this natural drop off in casual buyers would result in a lower sale fall through rate.

Where the market goes next is up in the air. Will the market be flooded if interest rates fall? Will this cause the fall through rate to return to higher levels? Or will we continue to see market caution?

What we do know is that, so far, this quarter has been just as unpredictable. Interest rates have remained high, and the Bank of England has recently suggested they are likely to remain so for the next two years. As such, it seems we will have to accept that the property market is currently very reactive. Many buyers and sellers are jumping in or holding off based solely on market conditions rather than their personal desires.

Danny Luke, Quick Move Now’s managing director, says:

“The current fall through rate is the lowest we’ve seen in almost 2 years, which is good news for those hoping to buy or sell.

“However, this rate is linked to the fact that so few people are moving.

“It’s a difficult market at the moment and, as such, those who can afford to wait are choosing to do so.”

“Historically, a high percentage of our customers have come to us for a quick house sale because they have experienced a chain break.

“Now that market conditions are more challenging, buyers are more committed but there are fewer of them.

“This means we’re seeing more enquiries from homeowners who are struggling to sell on the open market and buy-to-let investors who are looking for a quick sale in order to exit the declining market.”

Kindly shared by Quick Move Now