The housing market continues to rebalance as buyer demand for homes reached its highest level so far this year, after Easter.
The latest report from Zoopla shows that simultaneously, the stock of homes for sale continues to expand, boosting choice for homebuyers – now two thirds (66%) higher than this time last year.
Buyer demand for property remains 14% higher than 2019, but still 42% lower than levels seen this time last year, which was unusually high thanks to a chronic shortfall of homes available on the market. But with greater availability of houses to buy, prospective buyers now have more choice. As a result, this is having a tangible effect on new sales agreed, which are up 6% on 2019 and 10% ahead of the five year average after Easter.
Regionally, Scotland and the North East are seeing high levels of new sales agreed thanks to more attractive affordability levels. In London it’s a similar story, with a sustained period of weak price inflation over the last six years also helping to improve affordability.
According to Zoopla, the residential property price growth in the UK has slowed to 3% as the market continues to register small quarter on quarter price reductions across the entire UK. Set against the lowest annual rate of house price growth since July 2020, house price growth varies from region to region with annual growth recorded at +4.8% in Wales and +0.5% in London – approximately less than a third of the levels recorded this time last year.
House price growth is also strong in areas that provide easy access to urban cities. For example, house price growth remains above average (over 5%) in areas such as Oldham in the North West, which is accessible to Manchester, Wolverhampton in the Midlands, near to Birmingham, and Selby in Yorkshire which is close to Leeds.
If current trends continue, UK house price growth is expected to reach -1% by the end of the year as the ongoing repricing of housing continues. Greater realism amongst sellers is supporting improving sales numbers – one in four homes (24%) available to buy in 2023 registered an asking price reduction, a level that is much lower than earlier this year and more evidence of a soft landing for house prices.
With deals to be done, first-time buyers (FTBs) continue to remain an important buyer group for the housing market as FTBs using a mortgage accounted for over one in three sales last year (34%). This made them the largest group of home buyers after existing owners buying with a mortgage (31%) and cash buyers (25%).
With rental costs up 11% or £1,120 over the last year, as well as a third fewer homes available to rent than the long run average, it’s no surprise that many are considering home ownership, provided they have the necessary deposit. However, FTBs now need an extra £7,350 on their gross household income to buy a three bed house (a total of £55,900) versus an additional £4,900 required (a total of £51,000) to buy a two bedroom home. According to ONS figures, the average income has only increased by £4,800 since early 2020.
Naturally, the income needed is even higher in areas such as London and the South East, where first time buyers need an additional £12,150 on their gross household income for a three bed property, or an additional £7,300 for a two bed property.
Richard Donnell, executive director at Zoopla, commented: “Housing market conditions continue to improve as buyers return to the market and more sales are agreed. House prices are posting very modest falls and are expected to be just 1% lower by the end of the year. The worst of the pricing adjustment appears to be behind us.
We expect first time buyers to have another strong year in 2023 having been the largest buyer group last year. They need more income to buy but are starting to look for smaller homes and get away from rapid growth in rents. “
