The property trends that emerged during the pandemic drove buyer demand and sales activity to new highs in the UK housing market.
Homeowners reassessing how and where they were living, office life changing fundamentally, and a stamp duty holiday to boot, encouraged all potential movers to get active in the market. As a result there were around 1.5 million home sales last year, levels not seen since before the financial crisis.
The supply of homes for sale hasn’t keep up with demand, and this has put upward pressure on prices, especially in the most affordable areas of the country, as shown in the map below.
However, the most recent data is starting to signal that market momentum may be beginning to recede from record highs – but it is important to stress that even with this easing, most metrics in the market are still running far ahead levels registered in 2019.
The first signal is that the time to sell a property is starting to rise. In March, the average time taken from listing a property to agreeing a sale was 20 days – less than three weeks. This is a much faster-moving process than back in pre-pandemic days when the average time taken was between 30 and 40 days. But over the last few months, this ‘time to sell’ has started to rise, creeping up to 22 days in May.
Another factor is the number of properties where asking prices are being cut. During the month of June, 1 in 25 listings across Zoopla were reduced by more than 5% of the initial asking price. For context, this figure stood at 1 in 32 at the end of Q1. This level of listings with reduced asking prices hasn’t been seen since January 2017, signalling that there is now increased buyer resistance to higher asking prices in some instances, despite stronger levels of buyer demand.
In terms of buyer demand – as can be seen from the chart below, levels remain much higher than the five-year average, but they are starting to ‘normalise’. There is an element of seasonality here, but there is also the impact of the future economic clouds on buyer sentiment.
The final sign that the momentum in the housing market is moving down a gear is the scale of price growth in May. The Zoopla index indicates that average prices rose by 0.1% during the month, the most modest rate of growth since December 2019. Even so, the annual rate of price growth is still at +8.4%.
On balance, rising base rates and the rising cost of living will start to offset the continuing demand/supply imbalance that is evident in the housing market through the second half of the year. House prices will still be rising, but at a much slower pace by the end of 2022, which we forecast to be around +3%. But for now, buyer demand is still high, and potential sellers should be moving to take advantage of this interest.
Gráinne Gilmore is head of research at Zoopla.