House prices| House prices
According to Zoopla, people selling their homes have often had to settle for less than the asking price in recent weeks. The company predicts that house prices will drop by about 5% next fiscal year.
The average price achieved in recent weeks has been 3% below a seller’s asking price, when for much of 2021 and the first half of this year it matched the asking price, the property website said. Zoopla expects that discounts will increase in 2023.
One in nine homes saw their asking prices drop by at least 5% between September and October, Zoopla reported. Another quarter experienced price reductions to some degree according to the October index.
The report found that asking price drops are most common in southern England. There, sales volumes have plummeted the most. Nearly one third of homes in the south-east or the south-east reduced their asking prices to attract customers.
According to Zoopla data, annual house price growth fell to 7.8% in October, a decrease of 8.1% in September, and the lowest level since November 2021. Demand has fallen 44% since September’s disastrous mini-budget, which drove mortgage rates sharply higher and led to hundreds of deals being pulled from the market.
New sales have dropped by up to 50% in previous hotspots and areas where higher mortgage rates will hit buying power hardest – in southern England, east Midlands and Wales. The sales have dropped less in areas that are more affordable and in London, where the market is generally weaker. Zoopla predicts that mortgage rates for fixed two-year or five-year loans will drop to around 5% by year’s end, from approximately 6% currently.
More homes are coming to the market for sale, with the total stock of homes available up 40% from this time last year – but that’s still almost 20% below pre-pandemic levels.
With the cost of living crisis squeezing people’s budgets, and the Bank of England predicting a prolonged recession, the housing market is forecast to slow further, with prices likely to dip in the first six months of 2023, Zoopla said. The Bank of England expects that property values will drop by as much as 5% in the entire year, while sales volumes will plummet to 1m from 1.3m.
Richard Donnell, executive director at Zoopla, said: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double digit house price falls at a UK level remains low.
“While the outlook for house prices is weak, we see a shift to more needs-driven motivations to move in 2023 and beyond which will support sales volumes. Despite ongoing pandemic effects, more flexibility in the labour market and more retirements will encourage people to move. Cost of living pressures will compound these trends encouraging homeowners to consider their next move.”