Buyers and sellers cautiously re-enter the market
Agreed sales have reached their highest point this year despite weaker demand than a year ago, according to property listing platform Zoopla.
The number of sales agreed has also gone up 11% on the five-year average as buyer confidence continues to improve.
Zoopla noted that there were distinct differences in the strength of demand and the number of sales across the country. Demand and sales went above the five-year average in Scotland, the North East and London, which have been the best-performing regions over the last four weeks. By contrast, demand for housing in regions in southern England was lagging behind. Zoopla said that this has added to affordability challenges.
“Falling mortgage rates in recent months, together with the strength of the labour market, has brought more buyers and sellers into the market,” Richard Donnell, research executive director at Zoopla, commented. “There are still fewer buyers in the market than a year ago, but sales are still being agreed with more homes to choose from.”
Donnell, however, pointed out that despite more sales, sellers need to remain realistic with asking prices to attract sufficient buyer interest, adding that 18% of homes currently listed for sale on Zoopla have had the asking price cut by more than 5%, down from 28% in February.
“Sellers shouldn’t get carried away by more positive data on the housing market and need to price their homes realistically if they are serious about moving home in 2023,” he said. “Home buyers remain price sensitive with one eye firmly on the outlook for the economy, the cost-of-living, and the trajectory of mortgage rates which appear likely to edge higher in the coming weeks.”
Guy Gittins, chief executive at Foxtons Estate Agents, added that market dynamic for sales rebounded much stronger than many had forecast at the start of the year, after a period of inactivity following the government’s mini budget.
“This demand for London property is caused by the backlog of needs-based buyers who were looking to move following COVID-19, which was so great it has yet to be satisfied, despite the increased cost to buy. As well, given the extreme supply and demand imbalance in the lettings market, more renters who are in a position to buy have accelerated their search,” Gittins said.
“New buyer activity has led to consistently higher viewing numbers than we have seen at any point in the last six years. In fact, our buyer numbers year to date are tracking very closely with the buyer numbers this time last year, which most people would refer to as the most buoyant market we’ve seen since 2016. Our growing pipeline of business gives us every expectation that the rest of this year will continue along this positive track.”
House prices fall, but pace is slowing
The latest Zoopla House Price Index also revealed the slowing pace of house price falls with buyer confidence returning.
Average house prices have fallen 1.3% over the last six months, with annual house price growth slowing in key cities, including Oxford at 0.1%, Cambridge at 0.3%, Reading at 0.8%, and Brighton at 0.8%.
The decline in house prices since last autumn has been modest in comparison to some expectations, Zoopla noted. The biggest impact of higher mortgage rates and the cost-of-living crisis is on sales volumes which, while starting to rebound, are on track to be 20% lower than last year.
Zoopla said the impact of mortgage rates on house prices has been tempered by mortgage regulations that require all new borrowers to prove to their bank that they can afford 6% to 7% mortgage rates even though they might have been paying 1% or 2%.
It added that the latest inflation figures have increased the likelihood of further interest rate rises which would result in mortgage rates increasing once again, impacting demand and cutting short the current recovery in buyer confidence. The further interest rates edge above 5%, Zoopla said, the greater the impact would be on house prices.
Landlord sell-off boosts supply of cheaper homes
Zoopla also reported that a proportion of landlords continue to sell homes in the face of higher mortgage rates and rising costs. Just over one in 10, or 11%, of homes currently listed for sale on the platform were previously rented out, down from a pandemic-driven peak of 14% in 2020 when rents were falling in London and other major cities.
Historically, around half of these homes listed for sale return to the rental market, having been unable to find a buyer, or are bought by another investor, but this proportion has fallen to a third more recently as landlords look to cash in on capital gains to pay down debt or fund retirement.
The average price of a previously rented home is £190,000, around 25% below the average value of an owned home.
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