The housing market has experienced a significant slowdown in buyer demand and sales volumes, with annual house price inflation rate dropping from 8.6% to 5.3% in the past year, according to Zoopla’s house price index for February.
Buyer demand and sales volumes were down by 20-50% compared to the same time last year. However, sales volumes are still ahead of the pre-pandemic years of 2017-2019.
Sellers are facing the reality of having to accept an average 4.5% discount to the asking price in order to achieve a sale, marking the highest figure in five years.
As a result, sellers are having to forgo an average of £14,000, or a third of their pandemic house price gains, in order to secure a sale. This indicates that a buyers’ market has taken hold, with sellers facing pressure to reprice their properties to match the current market conditions.
Zoopla said a broad-based repricing of housing is underway, with house price inflation predicted to move into low negative year-on-year by the summer.
However, despite the slowdown, the market is still on track for a soft landing, with modest price falls of up to 5% predicted and one million sales expected in 2023.
While the slowdown in buyer demand and sales volumes is notable, the market is still expected to remain stable in the coming months, with modest price falls and a healthy number of sales predicted for 2023.
Richard Donnell, executive director – research at Zoopla, said: “It is possible to take two opposing views on performance in the current sales market.
“The glass-half-empty view is to look at trends on a year-on-year basis, comparing this year to the red-hot market conditions a year ago.
“The glass-half-full view compares the current market to the pre-pandemic years (2017-2019) when activity levels and house price growth were more benign and trading conditions were tougher.
“Year-on-year comparisons are important for businesses benchmarking how they are faring compared to last year. Our data shows demand from home buyers has rebounded in the first two months of 2023 but remains at half the level recorded a year ago.
“New sales volumes in early 2023 have also recovered, tracking the usual seasonal upturn we see each year, albeit 24% lower than this time last year.
“The reality is that current market conditions are more aligned with the pre-pandemic years with demand 8% higher and sales agreed up 1%.”
Reaction
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“The property market has been tipped into the bargain bin, with buyers slashing prices by an average of £14,100. These are the biggest discounts in five years, and are a sign that prices are on their way down. However, it’s not necessarily the property market’s ‘closing down sale’, because there are still some positives.
“We’re definitely in a buyers’ market, and we can see clear signs of a slowdown. The annual increase in asking prices is now just 5.3%, and has been shrinking with each passing month. Buyer demand has fallen by half from last year, and sales volumes are down by a quarter.
“More properties on the books means those buyers who remain are able to drive a harder bargain. It means the gap between asking and selling prices isn’t just wider than we saw during the boom years – it’s wider than before the pandemic. We still expect house prices to drop during 2023, and for sales to freeze up. Zoopla says we could get year-on-year falls as early as the summer.
“Property is in the bargain bin, but it’s not necessarily heading for landfill. It’s worth bearing in mind that we’re not seeing new demand lows – we’re actually still ahead of interest levels in the two years before the pandemic. Mortgage rates have now dropped back significantly from the peaks in the autumn, and although they are still far more expensive than a year ago, the fact they’re on their way down could help rebuild some of the confidence crushed by surging rates at the end of last year. It’s unlikely to be enough to see the return of the sellers’ market, but it could help avoid catastrophic house price falls.”
Nathan Emerson, CEO of estate agent national body Propertymark:
“Estate agents have seen a lot of new property appearing, with an 80 per cent increase in new sellers entering the market. This means that sellers have a healthy appetite to get moving despite not pulling in as much cash as last year.
“This is because the market is relative, they are accepting lower offers but will go on to negotiate on their next home, there is also a steady gain having been made price wise from pre-pandemic values.
“We are most definitely out of the sellers’ market where they could be ambitious about the value they could achieve, but prices got to a pressure point that couldn’t be sustained, the cooling we are seeing now is natural curve that needed to happen.”
