Asking prices are being lowered to ‘more realistic levels’ as demand for moving home falls along with house price growth.
That’s according to the latest data from Zoopla, which is now forecasting house prices will fall in 2023 and mortgage rates will drop to an average of 5% at the start of the New Year.
The new report revealed house prices had climbed by 7.8% over the last year – this is the lowest rate of annual growth since February 2020 – just before the pandemic.
Meanwhile, more homes are coming onto the market for sale – with stock up 40% compared to 2021. But buyer demand is lower – in fact Zoopla said this was down 44% compared to this time last year and sales were down 28%.
Zoopla predicts house price growth will descend into ‘negative territory’ in 2023.
Richard Donnell, executive director at Zoopla said: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double-digit house price falls at a UK level remains low.
“While the outlook for house prices is weak, we see a shift to more needs driven motivations to move in 2023 and beyond which will support sales volumes.
“Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves. Cost of living pressures will compound these trends encouraging home owners to consider their next move.
“The rapid growth in rents, which shows little signs of slowing, will add to cost of living pressures and add continued impetus to first-time buyer demand. “
Sales of homes in market ‘hotspots’ drop
The report also revealed more detail about various regions of the UK. Previous market hotspots such as Southern England, the East Midlands and Wales had seen new sales fall by 50% on more expensive properties which would require higher mortgage rates.
Meanwhile, falling demand has already meant new and current sellers were being forced to lower asking prices to what Zoopla described as ‘more realistic levels’.
It said one in 10 homes had recorded a price reduction of 5% (although this remains below 2018 levels) and one in four had experienced a price reduction of any size since 1 September 2022.
In the South East and East of England these asking price reductions had fallen amongst one in three homes.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “This is just the beginning.” And added: “All the signs point to a market that’s starting to struggle. Demand has collapsed since the mini-budget unleashed chaos on the mortgage market.”
Sarah added: “For most of the past two years, sellers have on average achieved their asking prices. However, in recent months, a gap has opened up, so they’re having to accept offers 3% below the asking price. Zoopla estimates that when this discount hits 5% to 7%, prices will be falling – and that can’t be far off now.”
