Home prices are stagnating as the number of homes on the market reaches an eight-year high

The number of homes on the market has reached its highest level in eight years, according to Zoopla, as sellers return to the market in growing numbers.

According to the report, homebuyer choice helped keep house prices in check, falling 0.1 percent in the 12 months to April.

According to the real estate portal, the average real estate agent has 31 homes for sale, an increase of 20 percent compared to this time last year.

This is driven by a glut of three and four-bedroom family homes for sale, following a chronic shortage of these types of properties during the pandemic.

In terms of value, Zoopla says there is £230 billion worth of homes for sale, which is 25 percent more than a year ago.

It is believed that many homeowners postponed their moving decisions last year due to high and erratic mortgage rates and concerns about home prices.

But now that mortgage rates have dropped slightly and the market appears more stable, more and more homeowners who previously postponed are now taking action.

Most homes for sale are new to the market. However, almost a third of the homes currently for sale were also for sale in 2023, but did not find a buyer.

Zoopla says that 43 percent of these homes on the market in 2023 have had their asking price reduced by more than 5 percent to attract buyers.

What does this mean for the housing market?

More homes on the market means more potential buyers, as most sellers do this to move to another property.

However, the number of homes for sale has generally grown faster than the agreed sales increase.

The number of homes for which a sales agreement has been concluded is only 13 percent higher than this time last year, although this does depend on location.

For example, agreed sales increased by 22 percent in the North East of England, but by only 1 percent in Wales.

Zoopla says tax changes for holiday lets and the prospect of double council tax for second homes are likely to encourage some owners to sell.

This exacerbates the expansion of the number of homes for sale in the South West, where the highest concentration of holiday homes is located.

According to Zoopla, the number of homes for sale in the South West of England has increased by 33 percent compared to last year.

This means buyers have more choice to choose from, which can help them negotiate bigger discounts.

According to Richard Donnell, executive director of research at Zoopla, the increasing number of available homes is likely to keep house prices lower.

He said: ‘The growth in available supply is welcome news, after several years in which supply shortages limited sales volumes and pushed up house prices.

“We expect this expansion of supply to keep house price inflation in check through the remainder of 2024.”

But Donnell doesn’t expect home prices to drop.

“Prices are actually determined more by demand and affordability than by supply,” says Donnell.

‘Increasing supply would keep prices static and if we saw a rise in forced sellers it would be more likely that prices would fall, but this is unlikely.’

House prices are rising in Northern England

According to Zoopla, house prices are virtually flat year-on-year, falling by just 0.1 percent in the 12 months to April.

However, there appears to be somewhat of a north-south divide, with prices continuing to fall in southern England and rising in more northern locations.

This is best demonstrated at the town and city level, where house prices vary annually from a 3 percent fall in Ipswich to a 3 percent increase in Belfast.

Two other cities that showed modest year-on-year house price growth are Burnley, up 2.5 percent, and Bolton, up 2.4 percent.

Meanwhile, house prices in Norwich have fallen by 2.4 per cent and in Hastings by 2.7 per cent.

“This variation stems from the absolute level of house prices and affordability in the face of higher mortgage rates,” says Donnell.

“Cities in coastal areas – and those that have attracted an influx of demand in the ‘race for space’ during the pandemic – are recording above-average price declines as demand weakens and these one-time pandemic factors fade.

‘We expect the current variation in house price inflation to continue into 2024 as incomes and house prices realign with the largest adjustment in London and southern England.’

According to Donnell, the north-south split could even persist for the next two years.

‘Much depends on how fast incomes grow – the relationship between prices and incomes is most out of balance in London and the south of England – we need incomes to grow faster than prices to reset this – it won’t return to previous lows, but some further reset is needed; Much depends on the path for the base interest rate and the impact on mortgage interest rates.’

Will the general election have an impact on house prices?

The announcement of the general election on July 4, 2024 comes sooner than many expected.

Elections normally lead to greater uncertainty and some slowdown in market activity.

Donnell expects there will be a modest impact, although not as large as in the past, because both parties have similar policies.

‘The election announcement is likely to slow the pace at which new sales are agreed in the coming weeks as we move towards the start of the summer slowdown.

‘Most buyers who are well into the home buying process and are close to agreeing a sale will ideally now want to press ahead and come to an agreement on the sale.

“Those who are earlier in the process will decide to postpone decisions until the fall after the election is over.”