The housing market appears to be defying predictions of a severe slowdown in 2023, The demand for homes is at its highest level since last October according to Zoopla’s latest house price index. But, asking prices are being slashed by as much as 4% (around £14,000 on average).
The number of new sales being agreed are 16% lower than this time last year, but 11% higher than 2019 levels and on an upward trajectory, Zoopla said.
There are also 65% more homes for sale than a year ago, which is good news for buyers, but sellers are still having to accept discounts of around 4% to secure sales. This was the case last month too, where the average property price was also discounted by around £14k.
And despite the rebound in demand house price growth has slowed to 4.1%, down from 9% a year ago.
Last month, Nationwide reported house prices declined at their fastest pace since 2009 in March as buyers reconsidered their moving plans due to higher mortgage rates and the increased cost of living.
House price falls are driving the market
“The market is going through a soft re-pricing process with modest quarter-on-quarter price falls across all regions and countries of the UK,” said the report. “The positive news is that buyers and sellers are agreeing deals which are supporting sales activity.”
“There is no evidence of a major mismatch between buyers and sellers that would suggest house prices and transaction volumes are going to suddenly drop lower.”
Affordable markets will continue to be the ones to see above-average levels of sales, making sellers serious about moving responsible for appropriately pricing their homes.
Additionally mortgage rates have begun to shift lower. They look set to remain around 4% over much of 2023, and could drop towards the end of the year.
Rising interest rates have been driving mortgage rates higher. The Bank of England (BoE) hiked interest rates to 4.25% in late March, and though further hikes are expected shifts in the base rate have been priced into mortgage rates meaning they are unlikely to be seriously affected by any future moves from the BoE.
Mortgage rates are currently more than double what they were early last year, but Zoopla still expects to see one million sales transactions in 2023. “We expect to see levels of activity continue to steadily improve over Easter and into the summer [and the second half of 2023],” said Donnell.
Buyers seeking better value have also boosted the market. Sales in the cheapest 40% of the market have increased as first-time buyers and second steppers look to get more for their money.
On average, there has been a 5% increase in the share of sales at the lower end of the market and a 4% fall at the top-end.
Meanwhile first-time buyers accounted for one in three sales in 2023, and the numbers should hold up throughout the year. However record high rents are still making it hard to save for a deposit.
Where next for the property market?
Zoopla expects 500,000 sales completions in the first half of 2023, and one million sales or more by the end of the year.
This could be possible thanks to the increased number of homes for sale, coupled with falling mortgage rates.
But the Office for Budget Responsibility expects house prices will fall 10% in 2024.
Despite a strong labour market, wages are still failing to keep up with inflation. And while inflation is expected to fall to 2.9% by the end of the year, the headline figure remains high and will add pressure onto household budgets.
The market’s re-pricing appears to be far gentler than expected, according to Zoopla, but a return to the boom seen throughout the pandemic is unlikely.
House prices grew by 20.4%, or £48,620, over the last three years, thanks to ultra-low borrowing costs, stamp duty cuts and the race for space throughout the pandemic.
But prices now appear to be returning to the levels of growth seen in the years before the pandemic, and could have further to go as inflation and rising rates deter buyers from entering the market.