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Demand from homebuyers fell 50% by the end of 2022, Zoopla says…while those who did buy sought smaller homes to keep mortgage payments low
- Home prices rose 6.5% in 2022, says Zoopla, after stagnating last months
- Buyer demand in January is 23% lower than the five-year average
- The difference between the asking price and the seller’s reached price is now about 4%
A stagnant last three months of 2022 slowed home price growth to 6.5 percent for the year, according to Zoopla, as real estate demand plunged 50 percent from October to the end of December.
It marked a slowdown compared to the 8.3 percent growth recorded in 2021, according to the real estate portal, as higher mortgage rates impacted buyers’ decisions.
Buyer demand in January this year is down 23 percent compared to the five-year average, it added.
Slowdown: House price inflation stopped at the end of 2022, driving the figure down for the year
The data suggested that buyers are negotiating harder on price, with the difference between the asking price and the seller’s reached price now standing at around 4 percent.
Zoopla warns that if the gap between the asking price and the selling price widens, sellers will feel pressured to lower their asking price further, exacerbating the downward trend.
The research is consistent with Bank of England figures showing that demand for new mortgages fell by 75 per cent by the end of 2022 as homeowners were hit by higher interest rates and a rising cost of living.
Regionally, Zoopla said demand and sales remained strong in the North East of England, Scotland and Wales, where homes are priced below the national average.
Market conditions remain weaker in the South East, South West and the East Midlands, where prices have been higher or growing rapidly over the past two years, putting further pressure on affordability.
Richard Donnell, executive director of research at Zoopla said: ‘The start of 2023 will be a slower burn than in recent years. Some of the households that hope to move in the coming year are waiting to see whether house prices will fall faster in the first quarter and how much mortgage interest rates will fall further.
Mortgage rates for new business are now generally below 5 percent and look set to remain between 4 and 5 percent in 2023. This is a much better outlook than the levels of 6 percent to 6.5 percent at the end of last year, but buyers will remain cautious in the coming weeks.
>> Latest major mortgage lenders from Santander and Barclays lower rates as more firm deals move towards 4%
Small is Beautiful: Demand for smaller properties has increased as buyers want to move back to cities and strive to find the best value for their money
The number of homes for sale has also increased, according to Zoopla.
An average of 23 homes are now for sale per broker, down from a low of just 14 homes in early 2022. However, the level remains 6 percent below the five-year average.
And data from Nationwide suggests that homes for first-time buyers are the least affordable since 2008, as average mortgage payments now eat up 39 percent of salaries.
Activity in the housing market came to a standstill at the end of 2022, but has picked up again since early 2023
At the same time, buyers are opting for smaller properties: 27 percent of new buyers are looking for one- or two-bedroom flats, up 22 percent from a year ago. However, three-bedroom homes remain the most in-demand real estate across the country.
The price differential between flats and houses is large in many areas, supporting this shift in demand as buyers at the top of the property ladder look for better value for money.
Outside London, the average two-bedroom flat is listed for sale on Zoopla for £196,000, which is almost £100,000 cheaper than an average three-bedroom house (£293,000). One-bed apartments are £150,000 cheaper.