House price growth falls 4.1% year on year but demand rises to six-month high
Annual house prices in February contracted by 4.1% in February, compared to 9% annual growth last year as the market continues a “soft repricing”. However, demand is on the increase.
According to the latest Zoopla figures, the quarterly growth rate has been negative for the last three months and is the weakest rate of quarterly growth since 2011.
The firm added that the annual rate of growth had fallen in major cities, with growth coming to 6% now compared to double digit growth a year ago.
The company noted that there had been a 1% contraction in house prices since October last year.
Zoopla said that coming to the end of the first quarter of this year, the housing market was “in better shape” than predicted at the end of last year, and the market was “more in balance” now than it had been in the last three years.
Demand rebounds but sales agreed fall
Zoopla said that demand for new homes had reached its highest level since October last year, which was negatively impacted by the mini Budget. The firm said demand was 16% higher than this time in 2019.
It said all areas were registering an improvement but there was above-average demand in Scotland, Wales, North East and London.
Demand is weakest where prices increased the most over the pandemic, i.e. where house prices are higher than the national average. This includes part of Southern England and the Midlands.
Sales agreed were 16% lower than this time last year, but is 11% up on 2019 levels and on an “upward trajectory”.
The firm said the supply had improved, with 65% more homes for sale than a year ago.
The average estate agent has 25 homes available compared to a low of 14 homes last year.
“This is a positive change and improves buyer choice meaning sellers need to price sensibly if they are serious about moving,” Zoopla noted.
Asking prices down, time to sell up
The company added that sellers were making “modest downward adjustments” to asking prices, with the average discount coming to four per cent or £14,000.
The time to sell a home, from being listed to going under offer, has increased by nearly three quarters to 15 days since this time last year.
The time to sell remains beneath 2019 levels. Scotland has the shortest sales period at 28 days and London has the longest at 44 days.
Average homebuyer’s buying power 20% down
The firm said that while mortgage rates had fallen, the average homebuyer had 20% less buying power than a year ago.
“This doesn’t mean average house prices need to fall by this much. However, it does mean buyers are seeking out better value-for-money areas, smaller homes or supporting their purchases with larger deposits,” it said.
It noted that there had been an increase in the share of sales in the cheapest 40% of the market by price, and there had been a fall at the higher priced end of the market.
Around a million transactions expected this year
Zoopla noted that it expected to see one million in sales transactions this year, with half a million taking place in the first half of this year. The firm said this was above the years following the global financial crisis.
Zoopla continued that there was “no evidence of a major mismatch” between buyers and sellers, so it was less likely house prices and transaction volumes would suddenly fall. It added that markets with the “best affordability” will “continue to attract demand” and “above-average sales”.
“The onus on all sellers is to make sure pricing aligns with buyers’ expectations. If you are serious about moving, you simply cannot afford to overprice your home,” it noted.