As the cost of living crisis continues to take hold, Zoopla’s latest House Price index suggests whilst the housing market currently remains resilient and is performing better than anticipated, the knock on effect will start to ripple through to the property market towards the end of 2022 and into 2023.
Levels of housing market growth will return in line with the longer run average [or 5 year average] by the end of the year and will move lower in 2023.
Fears of a ‘market crash’ and double digit price falls are unwarranted as Zoopla’s insights suggest there is no sign of a significant drop off in buyer interest in response to higher mortgage rates and cost of living pressures.
Demand for homes has slowed over 2022 but remains 25% above average over the last five years and on a par with this time last year.
The average home is now worth £256,600, up £19,700 YoY.
A stronger than expected desire for households to move means that overall, housing sales are expected to reach 1.3m – 100,000 more than was originally forecast at the beginning of the year.
This also means the pace of house price growth is slowing less quickly than expected and by the end of the year, prices are expected to have risen 5% meaning the average value of a home will reach nearly £260,000 by December (average currently £256,000).
The desire to move home is still being fuelled by pandemic purchases with buyers continuing to seek homes that afford a work-life balance and the desire to move currently outweighs economic pressures faced by prospective buyers.
Nearly 2.5 years on, post-pandemic ripples are still being felt as a rapid increase in working from home reported by the ONS, supports a continued desire to move home.
A recent consumer survey by Zoopla found a strong link between expectations of working from home and strength of desire to move. Those working from home more are 5x more likely to move than those who don’t see any changes in their working patterns.
In addition, up to half a million older people have left the labour market over the pandemic with retirement a major trigger for moving home.
In some instances, the cost of living pressures may be boosting the desire to relocate to save on running costs and find better value for money, in turn supporting levels of demand and market activity.
These factors explain why demand for homes has been more resilient than might be expected given the uncertain outlook for the economy and rising mortgage rates.
Whilst growth rates are set to drop, Richard Donnell, Executive Director of Research at Zoopla, is advising would-be buyers and sellers not to panic and says:
“The ongoing impact of the pandemic continues to support a desire to move amongst home buyers. This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly priced homes, especially in more affordable areas.
“The housing market is not immune from higher mortgage rates which we are starting to see increase quickly. Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further. Whilst we don’t expect current trends to lead to a marked drop in house prices next year, buyers will become more wary and it is important sellers are realistic when pricing their homes to sell”.
According to Zoopla, the demand for homes is expected to weaken further into next year as mortgage rates increase with growth rates predicted to level out at 5% at the end of 2022. However significant price falls are not expected as although the housing market is not immune, it is in much better shape to weather the economic headwinds than in previous cycles.
London remains the UK’s most unaffordable housing market where house prices are 11.6x average earnings and prices are rising at the slowest rate of 4%.
Zoopla’s data shows demand for homes is weakest in markets that have been experiencing some of the highest price increases in areas like the South West and Wales, while demand remains strong in more affordable markets and cities outside the South East.
Comments are closed.