House prices have risen 4% over the past year, Zoopla says, but they have fallen over the past three months
- Prices have fallen by 1% since October as affordability is under pressure
- In the first three months of 2023, quarterly house price growth was the lowest since 2011
- Zoopla says the market is experiencing a “soft repricing.”
House prices rose 4.1 percent last year according to Zoopla’s latest house price index, but have fallen 1 percent since October, highlighting the impact of higher mortgage rates on the market.
Over the past three months, prices have fallen by 0.7 percent each — the biggest drop in a single three-month period since 2011.
However, the real estate portal said demand for buying a house was 16 percent higher than at the same time in 2019 – the last comparable period before Covid.
The number of new sales agreed has also increased, it said, by 11 percent compared to 2019.
Despite continued pressure on affordability, the housing market will remain resilient in the first half of 2023
Zoopla expects to have 1 million completed real estate sales by 2023 – more than last year.
The executive director – research Richard Donnell says the housing market continues to experience a ‘soft repricing’, but market conditions are better than many had expected.
There is also more supply of homes on the market, 65 percent more than a year ago, as the average broker has 25 properties for sale compared to 14 in 2022.
This could be good news for buyers, as an undersupply of real estate was one of the factors driving prices up last year.
Zoopla says sellers should be prepared to price their properties fairly and possibly offer modest discounts if they’re serious about moving.
On average, sellers are currently accepting discounts off the asking price of 4 per cent – about £14,000 on average, it said.
Yet buying a house is still less affordable for many due to the sharp rise in mortgage interest rates at the end of last year.
The average homebuyer has 20 percent less purchasing power than a year ago, meaning they’re looking for better value for money by opting for cheaper areas, smaller homes or opting for larger down payments to lower their mortgage payments, Zoopla said.
On average, Zoopla has a 5 percent increase in sales share at the bottom end of the market and a 4 percent drop at the top end of the market.
In October 2022, the average fixed mortgage rate peaked at 6.65 for a five-year period and 6.52 for a two-year period. Five-year fixed rate agreements now average 5.04 percent, according to Moneyfacts. The average two-year fixed interest rate is now 5.35 percent.
Urban house price growth has slowed from double digits to just 6% over the past year
It means that someone who takes out a new £200,000 mortgage today, with a two-year fixed deal for 25 years, will typically pay £143 less per month compared to someone who takes out a mortgage in October.
Prior to then-Chancellor Kwasi Kwarteng’s mini-budget on Friday, September 23, the average two-year fixed rate was 4.74 percent and the five-year fixed rate was 4.75 percent.
“This is clear evidence of the continued demand from start-ups or second steps. It also signals more caution on the part of existing homeowners,” Donnell said.
“Upgrading to a bigger home will cost a lot more mortgage costs and homeowners may be waiting to see what happens to the economy before entering the market.”
House price growth has also fallen sharply in major cities, from double digits last year to just 6 percent now.
The weakest year-over-year growth is in London, where higher mortgage rates weighed more on demand in higher-value markets.