Demand for homes at its highest level since October 2022
Demand for homes is at its highest level since October 2022 as dropping mortgage rates and a strong jobs market support buyer interest, reports Zoopla.
Market conditions at the end of Q1 are better than expected, with buyers and sellers striking deals at an increasing rate, says Zoopla in its latest House Price Index.
Outlook for 2023
It reports that as we end the first quarter of 2023, the housing market is in much better shape than many had predicted at the end of 2022.
“Arguably, the market is more in balance than at any time for the last three years,” says Zoopla.
It says the housing market is experiencing a soft re-pricing with modest quarter-on-quarter price drops across all regions and countries of the UK.
“Make sure pricing aligns with buyers’ expectations”
“The onus on all sellers is to make sure pricing aligns with buyers' expectations. If you are serious about moving, you simply cannot afford to over-price your home”, says Zoopla.
It adds: “The shift towards lower mortgage rates has improved market activity. Mortgage rates are set to remain around 4% over much of 2023 and could move lower towards the end of the year.
“While mortgage rates remain 2 x higher than early last year, we still expect to see 1m sales transactions in 2023. We also anticipate ‘peak to trough’ house price falls of up to 5% in localised areas.”
Zoopla expects 500,000 sales completions in the first half of this year, meaning we’re on track for one million sales, potentially even more, in 2023.
Sales activity is being supported by 65% more homes up for sale against March 2022 figures, and falling mortgage rates.
Zoopla reports a shift in sales towards markets with better value for money, with high rental inflation continuing to support first-time buyer demand.
Buyers returning to housing market
With a return of buyers and more new sales being agreed, demand is 16% higher than this time in 2019.
Zoopla says that all areas are registering an improvement in market conditions with some areas doing better than others, and they continue to see above-average demand for housing in the most affordable areas.
Sales agreed are 16% down on this time last year (demand is 43% lower), but 11% up on 2019 levels and on an upward trajectory.
Last year there was a chronic undersupply of homes up for sale, which caused higher prices but resulted in a drag on sales completions.
With 65% more homes for sale than a year ago, the average estate agent has 25 homes available against a low of 14 homes this time last year. This is a positive change which improves buyer choice, meaning sellers have to price sensibly if they are serious about moving.
Zoopla reports that sellers continue to make modest downward adjustments to their asking prices. This ensures that prices match what buyers are prepared to pay. Sellers are accepting discounts to the asking price which average 4%, or £14,000.
The scale of price gains seen over the pandemic allows sellers to adjust pricing while continuing to agree sales, which allows them to move and supports sales.
Time to sell
The time it takes to sell a home; from first being listed to being under offer, has risen by 71% (15 days) from this time last year when the market was very buoyant.
However, the time to sell is still below 2019 levels in more areas.
Buyers seeking better value
There has been a clear shift in the price band showing the greatest increase in sales, driven by buyers seeking better value.
Mortgage rates may have fallen back towards 4% for new loans, but the average homebuyer has 20% less buying power than a year ago, says Zoopla.
This means that buyers are seeking out better value-for-money areas, smaller homes or supporting any purchases with bigger deposits.
House price growth slows
The Zoopla House Price Index shows that annual house price growth continues to slow to 4.1%, which is down from 9% a year ago. The index has dropped by just 1% since last October.
The rapid increase of rental inflation – up 11% over the last year, is keeping pressure on would-be first-time buyers in the rental market to become owners. Zoopla reports that first-time buyers accounted for one in three sales in 2022.
“We believe that first-time buyer numbers will continue to hold up this year as would-be buyers seek smaller homes and better value for money,” reports Zoopla.
“Mortgage repayments are below rental costs in many regions at 4% mortgage rates so getting a deposit will remain the big hurdle.”
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