Sellers will have to cut prices as buyers ‘wait-and-see’

Home buyers are holding off from entering the market and are now waiting to see if house prices and mortgage rates start to fall, Zoopla’s latest House Price Index reveals.

The platform says that demand for homes has rebounded in the first weeks of January – and is now in line with pre-pandemic levels.

However, more people are putting their homes on the market which is helping to reduce the pressure on prices.

Zoopla says that value-conscious buyers have shifted their buying preferences towards flats – with 27% of buyers now looking for 1- and 2-bed flats.

The biggest rise in demand for flats is in towns close to major cities including Slough, Watford, Huddersfield and Stockport.

Scarcity of supply in the market

The scarcity of supply in the market is also reversing with the average estate agent now having 23 properties for sale – up from just 14 homes in early 2022.

However, the report makes clear that a big risk to overall sales volumes for 2023 is unrealistic seller expectations – serious sellers will need to consider ‘competitive pricing’ to secure a sale.

Zoopla says that most homeowners have made sizable gains in their home’s value over the pandemic, so there is more room for ‘realism on pricing’.

Demand for 3-bed houses has fallen to 39%, although they are still the most in-demand homes across the UK.

‘First few weeks of the year have got off to a stronger start’

Richard Donnell, Zoopla’s executive director, said: “The first few weeks of the year have got off to a stronger start than might have been expected.

“There has been a clear shift towards flats as the early buyers focus on value for money and adjust expectations given the hit to buying power from higher mortgage rates.”

He adds: “A proportion of existing homeowners are holding back waiting to see if sizable price falls materialise and how far mortgage rates fall back before entering the market.

“We believe demand for homes has room to improve further in the coming weeks.

“Anyone serious about selling needs to be realistic on the asking price and needs to ensure this is in line with what buyers are prepared to pay.”

‘Wait-and-see buyers will force sellers to wake up’

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “Wait-and-see buyers will force sellers to wake up, smell the coffee, and cut their prices.

“It says sellers are going to have to cut their prices to shift their homes. However, it’s more optimistic about the future.”

She adds: “After the 50% collapse in demand at the end of the year, it recovered a little in January.

“Demand for flats has grown in every region, and especially in commuter towns like Slough and Watford.

“They’re far cheaper on average – the average 2-bed flat outside London is almost £100,000 cheaper than the average 3-bed home. They’re also more cost-effective to run – and to heat.”

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