There were signs of renewed activity in the last few weeks as sales and buyer demand improved annually, data from Zoopla showed.
The Zoopla house price index indicated a 17% annual rise in new agreed sales during the final quarter of the year, which the firm said was driven by lower mortgage rates and higher incomes. Zoopla also suggested that an increase in property supply was supporting sales and buyer choice.
Compared to 2019 before the pandemic, there were 6% more agreed sales.
In the month to 17 December, Zoopla recorded a 25% annual rise in the stock of homes for sale. This was also 4% higher than the same period in 2019.
Buyer demand jumped by 19% compared to last year but was 11% down on pre-pandemic levels.
House prices slide 1.1%
Zoopla’s house price index recorded a 1.1% decline in average house prices in November, significantly down from a growth of 7.2% last year.
The firm said house price falls had moderated across all regions in the UK.
Zoopla said the jump in average mortgage rates from 2% to 5% should have caused a larger drop in house prices, but the strong labour market, wage growth and lender forbearance had helped to prevent forced sellers.
It also said the mortgage affordability stress tests capped buying power and currently, new buyers were being stressed at 9%. Zoopla suggested that these restrictions would stop house prices from going up next year even if the base rate falls.
Zoopla predicted that cash buyers would account for a third of property sales this year and said they were an “important source of pricing evidence”.
On average, cash buyers pay 10% less for a home than mortgaged buyers and Zoopla said modest price reductions were required to attract this demand.
Mortgaged house sales for this year are on track to be 30% down on last year due to higher mortgage rates.
First-time buyers to dominate 2024
Zoopla said first-time buyers were set to be the largest buyer group next year, and according to its survey 40% of people looking to purchase in the next two years are prospective homeowners.
It said this buyer group was motivated by rising rents.
Upsizers are expected to account for a third of the market over the next two years and Zoopla said this buyer group was waiting for a clearer outlook regarding the economy and mortgage rates.
Zoopla said the “steady momentum” of sales would continue next year with a typical rebound in activity in Q1. It said affordability would still be impacting buyers, particularly those due a refinance.
It said the modest decline in house prices meant properties in the UK were still overvalued by around 10 to 15%, leaving room for house prices to fall by 2% in 2024.
Zoopla predicted that there would be one million sales next year.
Zoopla: ‘Housing market more resilient’
Richard Donnell, executive director at Zoopla, said: “The housing market has been more resilient than many expected over 2023 but it hasn’t been a surprise to us. Mortgage regulations introduced in 2015 have stopped an over-valuation of housing which is why the decline in house prices has been modest over the year.
“House price falls have been concentrated in the South and Midlands, while prices are still slightly higher over the year in Scotland and Northern Ireland. UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further two per cent over 2024 as prices and incomes realign.”
