19:01 PM, 27th September 2023, About A year ago
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House prices in the UK have fallen by 0.5% over the last 12 months and are on track to be 2-3% lower by the year-end, according to the latest house price index from Zoopla.
However, the average house is still 17% more expensive than before the start of the pandemic, but buyers are returning to the market.
Zoopla’s report also reveals an uptick in the number of sales agreed over September, as consumer confidence improves, and mortgage rates start to fall.
Buyer demand has risen by 12% in September across all regions, with the strongest growth in southern England where enquiries for homes have been weakest throughout 2023.
Richard Donnell, Zoopla’s executive director, said: “The housing market continues to adjust to a higher mortgage rate environment.
“Better news on inflation and the end of base rate increases has provided scope for lenders to start reducing mortgage rates which has supported a modest uptick in demand for homes this September.
“Buyers continue to remain cautious and many are waiting for better value for money and improved affordability from lower house prices or further falls in mortgage rates before returning to the market.”
He added: “House price falls have been modest with the average house still 17% more expensive than before the start of the pandemic.”
Zoopla’s house price index also shows that the number of new sales agreed has increased and is closely tracking 2019 levels, despite mortgage rates being over 5% – which has left buyers with a 20% in their buying power compared to early 2022.
Zoopla expects mortgage rates to fall below 5% in the coming months, which could boost activity and attract more buyers back into the market.
However, buyers appear unwilling to compromise on the size of the property they are looking for, despite having less buying power.
The share of buyer demand by property type and size is virtually the same as a year ago, with many buyers holding out for either a fall in property prices or mortgage rates.
The buyers’ market continues to prevail with 80% more homes available for sale in comparison to September 2021.
And the average discount to the asking price for a newly agreed sale now stands at 4.2% or £12,125.
However, this number is being skewed by London and the South East where discounts are greater at 4.8%.
Mr Donnell said: “Forbearance by lenders, tougher mortgage regulations over recent years and a strong labour market appear to have moderated the stress in the market compared to previous cycles that would have driven larger price reductions.
“House prices will continue to drift lower, especially in southern England, ending the year 2-3% lower meaning falling mortgage rates are required to boost activity and attract buyers back into the market.”
Matt Thompson, the head of sales at Chestertons, said: “Since the Bank of England’s announcement of interest rates remaining at 5.25% for the time being, we have seen a positive response from buyers in September who felt more secure to make financial decisions and resume their property search.
“Understandably, buyers who are now entering the market are particularly careful about their budget and factor in any future rate hikes as well as the cost of living.”
He added: “As demand for properties in the capital continues to outstrip supply, the market remains competitive.”
