Homebuyers are trying to take advantage of the sluggish real estate market to lower home prices, but sellers are reluctant to budge.
A report from one of the UK’s leading estate agents, Hamptons, has revealed a snapshot of the UK housing market this spring and how buyers and sellers are faring.
It paints a picture of a deadlock between buyers and sellers, with the former expecting price cuts to reflect much higher mortgage rates than in years past, but the latter holding out if they’re not in a desperate need to sell.
While sellers have lost some power compared to last year when the market was red hot, they are managing to get their homes closer to their asking price than they were in pre-pandemic April, Hamptons said.
This suggests house prices may not be falling as much as previously thought, the broker said, adding to signs of a mild recovery in the property market in recent weeks.
More homebuyers are trying to take advantage of a market slowdown to ask for price cuts
There are signs that the real estate market, after a slowdown caused by a dramatic mortgage spike, is gaining traction as mortgage rates level off at around 4 to 5 percent. This is still much higher than the average of 2 to 2.5 percent early last year, before rates started to rise.
Home prices ended a seven-month decline, rising 0.5 percent in April, according to the most recent Nationwide Building Society.
Meanwhile, data published last week by the Bank of England showed a ‘significant’ rise in mortgage approvals.
Mortgage rates are down from the highs of over 6 percent they reached late last year – after the mini-budget panicked financial markets – although they are still much more expensive than they were in early 2022, which continues to hamper demand.
Low bids are more common, but not often accepted
More potential buyers called for major price cuts last month, with 20 percent of all offers more than 10 percent below the asking price, up from 12 percent this time last year.
However, only about a third of these discounted offers – or just 7 percent of all offers at any level – were accepted by sellers, according to Hamptons, which analyzed data from some 550 estate agents across Britain.
More modest offers of at least 5 percent off also increased significantly, almost back to April 2019 levels.
About 39 percent of buyers are hoping for discounts of at least 5 percent below the asking price, up from 22 percent a year ago.
More potential buyers called for big price cuts last month, but only a few agreed
Aneisha Beveridge, head of research at Hamptons, said: ‘A single-digit annual increase in the number of new homes coming on the market has not been enough to push inventory levels to tip the scales in favor of buyers.
Although there are more buyers making bold offers than a year ago, the majority are unsuccessful.
“Sellers are more likely to hold on to their guns and aim for a figure closer to their asking price than they were in April before 2021.”
A quarter of the homes were sold above the asking price
Sellers have lost some power compared to last year, but they continue to get closer to their asking prices than they were before Covid.
The average house sold in England and Wales in April achieved 99 per cent of its asking price – this is lower than in April last year, but higher than the 98.1 per cent in April 2019.
Meanwhile, amazingly, just over a quarter of homes sold in England and Wales last month went for above their asking price, up from 17 per cent in April 2019.
Hamptons said the rise in realized prices was driven by new buyers and investors, who acted as mortgage rates have fallen after their peak.
Last month, the average investor paid 100.1 percent of the asking price for a home in England & Wales.
A quarter of the homes were sold above the asking price last month
Price cuts are rising in the north, but falling in the south
While homes in the south, where affordability is under pressure, are still more likely to sell after a price cut, it was the northern regions that saw the biggest increase in sellers agreeing to lower their price tags.
The share of homes sold after a price cut in the northeast, northwest and Yorkshire & the Humber rose from 41 percent in March to 45 percent in April.
In the four southern regions, half of the homes were sold after completion last month, a slight improvement compared to 51 percent in March.
A record one in four homes priced over £1 million sold within two weeks
Houses take longer to sell… except those over £1 million
The average home in Britain took 49 days to sell in April, up from 28 days in April last year, but overall sellers have found a buyer fairly quickly this year, Hamptons said.
Nearly a quarter (23 percent) of all homes on the market so far this year sold within two weeks, in line with pre-pandemic standards.
This is particularly true for homes over £1 million, with a record one in four sales within two weeks, up from 23 per cent in April 2022.
“The £1m plus market has held up a little better,” said Beveridge.
Cash has become increasingly important in this part of the market, shielding buyers from rate hikes not seen in nearly two decades.
“This all points to a major price correction that looks increasingly unlikely in 2023. Rather, we expect activity to follow 2019 levels for the rest of the year as the market moves on a more sustainable path.”
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