Following a period of high prices, the property market has cooled, leaving those wishing to sell having to cut their asking prices by an average of £14,100 to secure an offer, according to online property portal Zoopla.
Zoopla’s House Price Index, released on 28 February 2023, found that house price inflation had dropped from 8.5% to 5.3%.
While sales volumes are still healthy, higher interest rates and pressure on budgets has reduced the eagerness of buyers.
The number of properties for sale is currently up more than 60% compared to the same time last year. Estate agents have an average of 24 homes for sale at present, compared to 15 one year ago.
This gives buyers the opportunity to be choosier and drive a harder bargain.
Reduction in demand
Following a slump in demand for homes in January and February 2023, demand has increased somewhat. However, it still remains at only half of what it was one year ago.
Zoopla reports that over 40% of the properties it has listed have had a price reduction. The average discount applied to achieve a sale is 4.5%, which equates to £14,100. This follows growth in the average UK house price over the pandemic period of £42,000, meaning that one-third of those gains have now been lost.
During 2021 and 2022, most buyers were required to pay the asking price of properties. Discounts are now larger than they were prior to this period.
Buyers are also reducing the amount they are spending in response to higher mortgage rates.
Regional variations
In less expensive regions, including the North East and Scotland, high mortgage rates have had less of an impact. Conversely, sales in pricier areas including the Midlands and the south are down by as much as 9% compared to pre-2021 figures.
London has performed poorly compared to other areas in the past few years, with the growth in annual house prices standing at 2.5%, compared to 7.1% in Wales. High house prices in the south have meant lower house price growth here as well.
Affordable towns near large urban centres have seen the highest house price growth, including Oldham, Dudley, Wolverhampton and Worcester. House price inflation here is more than 8%.
Richard Donnell, Executive Director at Zoopla, said: “Greater realism on the part of sellers is supporting housing market activity in the face of higher borrowing costs. Many homeowners are sitting on sizable house price gains made over recent years and have more room to be flexible accepting offers below the asking price.
“Discounts to asking price have widened and while 4-5% discounts are manageable, if these were to widen further then this would point to a greater likelihood of larger house price falls. We believe the market remains on track for a soft landing in 2023 with modest price falls of up to 5% and one million housing sales.”
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