"There are still fewer buyers in the market than a year ago, but sales are still being agreed with more homes to choose from."
Despite weaker demand than a year ago, sales agreed have reached their highest point this year and are up 11% on the five-year average according to the latest figures from Zoopla.
Average house prices have fallen 1.3% over the last six months but the speed of falls has been slowing as buyer confidence improves and more sales are agreed.
However, there are distinct differences in the strength of demand and the number of sales across the country. Demand and sales agreed are running above the five-year average in Scotland, the North East and London, which have been the best-performing regions over the last four weeks.
In contrast, demand for housing in regions in southern England is lagging behind as these regions posted above-average house price growth in recent years, ahead of earnings.
Annual house price growth has also slowed in key cities including Oxford (+0.1%), Cambridge (+0.3%), Reading (0.8%) and Brighton (+0.8%).
Landlord sell-off continues - boosting supply of cheaper homes
A proportion of landlords continue to sell homes in the face of higher mortgage rates and rising costs. Just over one in ten (11%) homes currently listed for sale on Zoopla were previously rented out - down from a pandemic-driven peak of 14% in 2020 when rents were falling in London and other major cities.
Historically, around half of these homes listed for sale return to the rental market having been unable to find a buyer - or are bought by another investor. This proportion has fallen to a third more recently as more landlords look to cash in on capital gains to pay down debt or fund retirement.
The average price of a previously rented home is £190,000, 25% below the average value of an owned home. The increased supply of cheaper homes will be supporting sales activity from first-time buyers, who accounted for over one in three sales last year.
Has a house price crash been avoided?
The decline in house prices since last autumn has been modest in comparison to some expectations. The biggest impact of higher mortgage rates and the cost of living is on sales volumes which, while starting to rebound, are on track to be 20% lower than last year.
The latest inflation figures have increased the likelihood of further interest rate rises which would result in mortgage rates increasing once again. This would impact demand and cut short the current recovery in buyer confidence.
Richard Donnell, executive director at Zoopla, commented: “Falling mortgage rates in recent months together with the strength of the labour market has brought more buyers and sellers into the market. There are still fewer buyers in the market than a year ago, but sales are still being agreed with more homes to choose from.
"Sellers shouldn’t get carried away by more positive data on the housing market and need to price their homes realistically if they are serious about moving home in 2023. Home buyers remain price sensitive with one eye firmly on the outlook for the economy, the cost of living and the trajectory of mortgage rates which appear likely to edge higher in the coming weeks.”
