Zoopla reveals the latest
UK house price inflation slowed to 6.5% in the fourth quarter of 2022, from 8.3% at the end of 2021, according to property listing platform Zoopla.
Its latest house price index has revealed that house price growth stalled in the last three months of the past year, in response to a 50% drop in buyer demand in the latter part of 2022.
Zoopla predicted that there would be a rapid slowdown in the annual rate of price growth in the coming months as most areas recorded price falls in Q4 2022 as buyers negotiated harder on price, in addition to discounts to asking prices widening quickly to achieve a sale at the end of 2022.
The Zoopla report also stated that additional modest price reductions are likely to happen over the first quarter of 2023 as sellers continue to adjust asking prices in line with what buyers are prepared to pay.
“The start to 2023 will be more of a slow burn than in recent years,” Richard Donnell, executive director of research at Zoopla, commented. “A portion of households hoping to move in the coming year will be waiting to see whether house prices start to fall more quickly in Q1, as well as how much further mortgage rates are likely to fall back.
“Mortgage rates for new business are now generally below 5% and look set to remain in the 4% to 5% range in 2023. This is a much better prospect than the 6% to 6.5% levels at the end of last year but buyers will remain cautious in the next few weeks.
“As the outlook becomes clearer after Easter, we believe that demand is likely to pick up further. How much depends on the economic outlook and the strength of the labour market, as well as the trajectory of consumer price inflation and what this means for interest rates.”
Simon Gerrard, a former president of the National Association of Estate Agents, said that the reported fall in house prices at the back end of last year confirms that the ripples of September’s mini budget and the wider economic pressures are still felt today.
“I don’t think demand has necessarily disappeared, as we have had a busier than expected return after Christmas,” Gerrard, who is now the managing director at Martyn Gerrard estate agents, noted.
“However, some people are choosing to remain patient, hold steady, and wait to see if there are any further changes to interest rates or whether the wider economy improves in the near future. This dip in demand that is likely behind the price drop should only be temporary, and I am hopeful for a return to growth.”
The other notable change in recent months has been the continued growth in the number of homes for sale as the scarcity of supply has been a key feature of the market in 2022 This is now reversing, according to Donnell, although the number of homes for sale remains 6% below the five-year average, with an average of 23 homes for sale per estate agent, up from a low of just 14 homes in early 2022.
“It’s early days to get a clear read on the market outlook for 2023,” Donnell pointed out. “The economic outlook has improved slightly in recent weeks, but the squeeze on household disposable incomes is very real with a direct impact on sales activity.
“That said, the pressure on incomes combined with the costs of running homes is likely to drive a certain amount of movement in the market in 2023.”
The Zoopla house price index is a repeat sales-based price index, using sold prices, mortgage valuations and data for agreed sales.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter.
