House prices across the UK have risen 1.9% over the past year, with a contrasting 0.2% decrease in London, according to the May house price index by property website Zoopla.
Despite this growth, overall prices have seen a 1.3% decrease in the last six months. Zoopla anticipates this trend to stabilise for the remainder of 2023.
While property sales are at their highest point this year, up 11% on the five-year average, they are projected to be 20% lower in 2023 compared to the previous year. Similarly, demand for housing remains lower than in 2022.
Zoopla’s latest figures also reveal that 18% of properties currently listed have seen their asking prices reduced by more than 5%, a significant decrease from 28% in February. Of the properties available for sale, landlords selling homes constitute 11%.
Sarah Coles, head of personal dinance at Hargreaves Lansdown, said: “Zoopla’s sunny optimism about property has dimmed slightly, as the risk of rising rates casts a shadow over the market.”
However, she acknowledged that there are positives, such as higher sales and fewer price reductions.
While the strong labour market and gradually falling mortgage rates, until last week, have painted a positive picture, the future of the property market largely depends on the Bank of England’s decisions.
“The rise in core inflation saw the market price in rate rises to around 5.5%,” Coles pointed out. While there’s a chance that this might be an overreaction, a global slowdown could help cool the swaps market and lower expectations.
“Higher mortgage rates would make it more difficult for new buyers to get an affordable mortgage, which could dampen demand and bring prices down,” Coles warned. These developments could lead to increased supply if remortgagers are forced to sell, potentially impacting house prices.
The impact will also depend on how long the higher rates persist. If core inflation starts to move in the right direction, it may ease concerns about further rate hikes, thereby making mortgage deals cheaper. However, if inflation remains stubbornly high, it could spell trouble for the housing market.
