Market conditions at the end of Q1 are better than many had expected and defying expectations with 500,000 home sales expected in the first half of 2023, according to the latest data released by Zoopla.
Despite weaker market conditions with house prices falling and homeowners having to forgo some of their post-pandemic price gains, buyers are still in the market and agreeing on deals with sellers at an increasing rate. Demand for homes is well down on this time last year but at its highest since October as falling mortgage rates and a strong labour market support buyer interest.
Repricing continues, but buyers and sellers are still agreeing on deals
Zoopla’s latest House Price Index shows average prices have fallen by 1% since last October. The quarterly growth rate has been negative for the last three months – the weakest level of quarterly house price growth since 2011.
New sales agreed data over the last nine months indicates that the UK is on track for half a million housing sale completions in H1 2023 - this is a third higher than the level of sales in the years following the global financial crisis (2009-2011).
Buyer choice continues to improve but sales are taking longer
Sales are being supported by greater availability of homes for sale which is 65% higher than this time last year. The average estate agent now has 25 homes available compared to a low of 14 this time last year.
Whilst levels of buyer demand are 43% lower than a year ago, the number of sales being agreed (sold ‘subject to contract’) is just 16% lower than last year. Improved choice and greater realism by sellers are supporting sales.
Sellers continue to make modest downward adjustments to their asking prices and are accepting asking price discounts averaging 4% (£14,000) as buyers have more options. Sellers have seen sizable price gains over the last three years giving them more room to be flexible on agreed prices.
Properties are also taking longer to shift with the average time to sell from a home being first listed, to going under offer and sold ‘subject to contract’, - jumping by 71% (15 days) compared to 12 months ago. Scottish properties currently have the shortest sales periods at 28 days (as homes are marketed with a survey and valuation) compared with London, which has the longest time to sell at 44 days.
Buyers are seeking better value and there has been a clear shift in sales. Year on year, there has been an increase of 5% in the share of sales in the bottom 40% of the market (by price) and conversely, a drop of 4% in the share of sales in the top 40% of the market. This indicates continued demand from first-time buyers or second-steppers.
Prices may be falling, however, demand continues to improve with the most affordable areas led by Scotland, Wales, the North East of England and London continuing to see above-average demand.
Areas with the least demand in the UK are in regions where prices jumped the most over the pandemic and where prices are higher than the national average.
Richard Donnell, Executive Director at Zoopla, says: “The housing market is arguably more balanced than it has been for more than three years. Levels of supply have recovered and buyers and sellers are not miles apart on where they see pricing and this means deals are being agreed upon at an increasing rate.
"Prices are drifting lower compared to a year ago but fears of a major downturn in prices are overdone. Falling mortgage rates and a strong labour market are supporting activity levels from committed movers who need to be realistic on price if they are serious about moving home in 2023. We expect to see levels of activity continue to steadily improve over Easter and into the summer and H2.”
Kevin Shaw, National Sales Managing Director at Leaders Romans Group, says: "Zoopla’s figures very much reflect LRG’s experience of this interesting point in the market. We cover a range of markets, geographies and brands and are finding that trading is robust: sales agreed for March 2023 are at their highest point in the past year, up 5% year on year.
“We’re also confident about the coming months: as spring has sprung, the daffodils are out and we’re entering the traditional season of house moves. Added to that, an increase of ‘sold’ signs is providing some encouragement, as is the fact that house price correction has now taken place, interest rates and mortgage rates are unlikely to go much higher and lenders are competing for borrowing so rates.
“We have an improving viewings-to-offer rate which is slightly lower than a traditionally good year but significantly higher than the depths of the market post-Brexit. Importantly, we’re seeing a few undecided sellers and buyers: those that are in the market today are serious movers.
“Furthermore, the second-hand market will also receive a boost from the end today of End of Help to Buy, which will mean many first-time buyers opting for used properties in place of brand new homes."