Annual house price growth is continuing to ease up as buyer demand slows, but the likelihood of a double-digit house price crash remains low, according to property platform Zoopla.
Its latest house price data revealed that 11% of home sellers have had to cut their asking price by more than 5% since September, and one in four (25%) have had some sort of cut over this period.
It also found that demand has plummeted 44% since the disastrous mini-Budget, and sales are down 28% in a year.
Annual house price growth has now slowed to 7.8%, but prices are still up 0.7% a quarter – albeit this is the lowest quarterly rise since February 2020.
Overall the average sale is coming in at 3% below the asking price.
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 homeowners to consider their next move.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, added: “Hikes in mortgage rates mean runaway house prices have given way to runaway buyers.
“Demand has plummeted by almost half since the mini-budget, and one in four sellers are being forced to cut their prices. And this is just the beginning.
“On the face of it, house price growth is still 7.8% over the past year, which seems relatively healthy, and Zoopla says it’s not seeing price falls in any area.
“However, over the past three months, prices are up less than 1%, and 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. Meanwhile, sales are down – in some areas as much as 50%.
“Even once a sale is agreed, the proportion of sales that fall apart during the buying process is rising – and has hit 15%.
“One in four sellers have had to cut their asking price, and increasingly they’re having to accept an offer. 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%-7%, prices will be falling – and that can’t be far off now.
There’s not an awful lot to be cheerful about in the property market at the moment, but there is one bright spot. Mortgage rates are coming down, and according to Moneyfacts, five-year fixed rates have dipped below 6%.
“As times get tougher, and the threat of more rate rises starts to fade, we may well see these rates come down further. It’s highly unlikely to be enough to turn the market around, and see buyers return once we’re deeper into the recession.
“However, more manageable rates may well mean that the market correction isn’t as dire as some analysts had predicted. Zoopla is putting its money on a 5% drop, reflecting a number of analysts forecasting single-digit falls by the end of next year.”
Further reaction
Jack Roberts, CEO of home moving platform SlothMove.com:
“After months of seeming detached from economic realities, the housing market is finally delivering some cold hard truths.
“The question is: who will be most willing to accept them.
“Will it be the buyers having to acknowledge their mortgage rates are unlikely to dip below 5% anytime soon, or sellers needing to admit their current asking prices are overly optimistic?
“As both sides reassess the lay of the land, feeble demand is this market’s defining characteristic.
“Other than those who already have a firm mortgage offer, most house hunters will understandably be biding their time. Like shoppers following a supermarket worker with a pricing gun, they will be hopeful of big reductions around the corner.
“More supply should prevent buyers completely losing interest, and a complete collapse in prices. Yet increasingly, properties are lingering on the market for a long time, and with some new sellers spurred on by the high cost of living — it is a gloomy picture heading into Christmas.”
Emma Cox, MD of Real Estate at Shawbrook:
“With the UK now officially stepping into a recession, the housing market faces continued uncertainty, requiring homeowners and prospective buyers to remain vigilant of any changes to mortgage rates and house prices.
“While financial measures introduced in the mini-Budget and the Autumn statement have helped lenders to drive down mortgage rates, borrowing costs remain at an all-time high, contributing to the OBR’s anticipated 9% drop in house prices by 2024. The extension of stamp duty changes introduced in the mini-Budget should continue to incentivise prospective buyers, however further incentives will be required to support those facing increasing financial pressures.
“As a significant number of first-time buyers are making the decision to delay their purchases in this climate, it’s likely we’ll begin to see signs of the market slowing down, but this may turn around as mortgage rates and house prices become more favourable down the line, and stability returns to the market.”
