Guernsey Property Market Shows Signs of Recovery Amid Housing Shortages

The Q3 2024 residential property prices bulletin released by the States suggests early recovery signs in the housing market after a period of decline, according to the Institute of Directors Guernsey.

Richard Hemans, IoD Guernsey's lead on economics, expressed cautious optimism, stating, “It may be too early and brave to identify the bottom of the latest housing market cycle, but the latest property statistics suggest that it may be starting to recover after reaching its trough in Q2 2024, with both prices and transactions increasing quarter on quarter.

“However, the most insightful element of the latest bulletin is the inclusion of new data on the supply of housing in the island, which shows that simply not enough housing is being created to meet demand.”

In a year-on-year comparison, local market property prices decreased by 6% in Q3 2024, contrasting with a quarter-on-quarter increase that suggests the market may be starting to recover from its lowest point in Q2 2024.

Prices are still 40% higher than they were five years ago, indicating sustained long-term value growth despite recent dips.

The rental market continues to tighten, with a 7.6% increase in rental prices, pushing the average monthly cost beyond £2,000 for the first time.

This surge reflects a nearly 48% increase over the past five years, driven by strong demand and a lack of property availability, significantly outstripping the price growth of purchasing properties.

High levels of immigration have exacerbated the demand, resulting in rentals consuming 55% of average earnings, making them unaffordable for many and leaving little for other expenses.

However, there is "good news" regarding affordability for buyers as the ratio of house purchases to earnings improved to 14.1 times from last year's 15.4 times, thanks to increasing earnings and falling house prices.

The property market's dynamics show sellers accepting lower discounts and the average loan to value over the last 12 months remains consistent with the prior year at 76%, indicating a cautious but stabilising market.

The supply of new housing remains a critical issue, with only 61 new housing units created over the last 12 months, a stark shortfall against the States' target of 300 units per year.

This shortage is expected to continue driving prices up, straining the economy, keeping inflation high, and making life challenging for Guernsey's residents.