House Prices Decreasing
Housing market activity has rebounded in line with pre-pandemic levels says Zoopla’s latest House Price Report. Sellers are having to discount the asking price to achieve sales, which equates to a third of the price gains made over the pandemic. This creates an opportunity for buyers who have deposits ready or second steppers moving up.
Sellers having to accept an average 4.5% discount – the highest for 5 years as a buyers’ market takes hold. More choice for home buyers also means they now have more room to negotiate on price. It also helps reduce the upward pressure on house prices.
Soft reset in house prices underway
The transition to a buyers’ market is being accompanied by nationwide repricing as the market adjusts to the reduction in buying power resulting from higher mortgage rates adds Zoopla. Buying power is starting to recover as mortgage rates fall from their 6% highs of late 2022.
Even at 4% mortgage rates, the average home buyer has 20% less buying power than they did a year ago when mortgage rates were 2%. This will not feed straight through into house prices. Some buyers will look to buy smaller or cheaper homes. Others may inject more equity into purchases or be in position to spend more on mortgage repayments.
Housing Market outlook
The housing market is adjusting to higher mortgage rates better than many had feared and it is welcome news to see more rates for new buyers now in the 4-5% range and even lower. Mortgage rates are unlikely to get much cheaper but competition among lenders will remain strong and keep deals attractive for borrowers. Zoopla’s view is that 4% mortgage rates are manageable and consistent with very low levels of house price growth or price falls in real terms. “It is welcome to see evidence of greater realism from sellers on pricing to secure a sale.
The gains made over the last 2 years provide a buffer that can be used to unlock sales and it appears that this adjustment in pricing is uniform across the market by area and property type.
“All this points to reasonable levels of turnover in 2023 which will support business plans for agents, builders and lenders. The housing industry can manage modest price falls so long as the impetus to move remains. Working from home, increased retirement, and high immigration all continue to stimulate demand to move home. Cost-of- living pressures exacerbate those needs for some. If the market delivers 1m to 1.1m sales in 2023, as we expect, then it will be a positive result.”
