Zoopla House Price Index: house sales are up as buyers negotiate lower prices

On Tuesday, property portal Zoopla released the House Price Index for the month of November, which shows that housing discounts are at a 5-year peak as the UK property adapts to elevated mortgage rates.

Zoopla’s data shows that the property sales are being settled at an average of 5.5% below the asking price.

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The 5.5% discount represents an average £18,000 and marks an increase from 3.4% in the first half of the current year.

Sarah Coles, head of personal finance at Hargreaves Lansdown, explained that “the root of the problem is a lack of buyers because higher mortgage rates are pushing potential properties out of reach.

“Demand is down 13% from this point in 2019. At the same time, we’ve seen a rebound in the number of properties for sale—up a third in a year—so any potential buyers have plenty to choose from.”

The number of homes for sale in the UK is at its highest level for six years.

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Sellers are now way more likely to accept larger discounts in response to increased housing supply and the need to attract buyers, Zoopla reports.

According to Richard Donnell, Executive Director at Zoopla“These are the best conditions for home buyers for some years, with more homes to choose from and sellers more prepared to negotiate on price to agree on a sale.

“There is a growing acceptance that what a home might have been worth a year ago is now largely academic, given current market conditions. Sellers have plenty of room to negotiate, with average house prices still £41,350 higher than the start of the pandemic.”

Putting the trend into context, the Zoopla report shows that a persistent shortage of homes for sale, especially those with three or more bedrooms, played a crucial role in driving up house prices from 2020 to 2022.

Richard Donnell further said that “it’s a positive sign that new sales continue to be agreed upon at a faster rate than a year ago and pre-pandemic. This indicates that house prices do not need to post bigger falls to get people moving, but sellers need to be ready for more negotiations on price. New sales will slow as we run up to Christmas, and some sellers will take homes off the market ready to relaunch in the new year.“

The data further highlights that estate agents are now selling the highest number of houses in six years.

Guy Gittins, CEO of Foxtons, one of the UK’s biggest estate agencies, said that “in contrast to the rest of the country, London has not experienced a sweeping decline in house prices; however, the market does experience a higher volume of price adjustments. A good agent understands where the market is trading and has the data to find the best price that will still stimulate activity.”

According to Zoopla’s report, financial markets are predicting that the Bank of England will initiate rate cuts around the summer of 2024. If this results in further drops in mortgage rates, it could lead to an uptick in demand and sales volumes later in the coming year. Nevertheless, house prices are anticipated to experience a gradual decline throughout the year.

Sarah Coles, from Hargreaves Lansdown, said, “The worst is far from over. In a market like this, an awful lot of sellers will decide now is not the time to be trying to sell and take their house off the market for now. The Office for Budget Responsibility thinks transactions will keep dropping from here and will be down an average of 6.9% in 2024.”

Adding that “this will take a toll on house prices, The OBR expects them to fall 4.7% in 2024, taking the peak-to-trough drop to 7.6%. Even then, it doesn’t think we’ll bounce back in a hurry, and it will take until the second half of 2027 to get back to their 2022 peak.”

Finally, Sarah Coles advised that “if you’re planning to postpone a purchase, it makes sense to shop around for the best possible savings account for your deposit while you wait. Higher savings rates and lower inflation mean that if you get a really competitive deal, you should be able to hang onto the buying power of your cash, even if you can’t afford to move for six months or longer.”

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