Buyers' market continues as discounts to achieve a sale remain high
The drop in homebuyer demand over the summer months due to high mortgage rates has started to reverse as both buyer demand and the number of sales agreed has improved in the last four weeks, according to property listing platform Zoopla.
Demand for homes increased for the first time since spring, as enquiries to estate agents went up by 12% since the August bank holiday weekend, although demand still remains a third lower than a year ago.
Zoopla said the uptick in enquiries, while partly seasonal, also reflects improved consumer confidence, which is at a two-year high, and homeowner expectations of lower mortgage rates which are currently on track to fall below 5%.
The number of new sales agreed has also gone up and is closely tracking 2019 levels, supported by homebuyers having a much greater choice as levels of inventory return to pre-pandemic levels.
UK home-buyer demand inches up as mortgage rates fall: Zoopla https://t.co/PbE7RerFdF pic.twitter.com/KDtb1XVtEX
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Despite the increase in buyer demand, a buyers’ market continues, with the discount to the asking price for newly agreed sales averaging 4.2%, or £12,125 below the asking price.
The latest Zoopla House Price Index also revealed a house price fall of 0.5% over the last year – the first annual decline since June 2012.
More decreases in house prices are expected over the coming months to end the year at 2% to 3% lower than 2022. However, this reduction in house prices is not sufficient to boost affordability and support a recovery in sales volumes, even if mortgage rates were to dip below 5%, Zoopla pointed out.
“House price falls have been modest with the average house still 17% more expensive than before the start of the pandemic,” Richard Donnell, executive director at Zoopla, commented. “Forbearance by lenders, tougher mortgage regulations over recent years and a strong labour market appear to have moderated the stress in the market compared to previous cycles that would have driven larger price reductions.
“House prices will continue to drift lower, especially in southern England, ending the year 2% to 3% lower, meaning falling mortgage rates are required to boost activity and attract buyers back into the market.
“Better news on inflation and the end of base rate increases has provided scope for lenders to start reducing mortgage rates which has supported a modest uptick in demand for homes this September. Buyers continue to remain cautious, and many are waiting for better value for money and improved affordability from lower house prices or further falls in mortgage rates before returning to the market.”
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