The news from Zoopla that a quarter of homes for sale have reduced asking prices and that annual house price inflation is now down to 7.8% will not have come as a surprise to most agents.
It has been clear for several months that the housing market is in a state of change. How could it not be when the economy is tanking, interest rates rising, and the cost-of-living crisis eating into incomes?
Those who complained that the media were talking the market down and that a dip would become a self-fulfilling prophesy appeared to think that the laws of financial gravity do not apply to property. Well, inevitably they do and the picture may in reality be even more sobering.
As Zoopla noted, their data: “is yet to record price falls over the last 3 months across UK countries, regions or major UK cities.
“We expect price growth to dip into negative territory in H1 2023 as the market adjusts to weaker buying power and concerns over the economic outlook.”
Whenever the market turns down a proportion of vendors will resist any advice that their asking price needs to be trimmed. If the slide in demand and/or values continues over time then those vendors will suffer a double blow. By not reducing their asking price by a little at the outset they may well find they have to reduce by a much larger percentage later on.
Of more importance than pricing is the issue of transaction volumes. If agents don’t have stock they cannot sell. With Zoopla predicting transaction totals of c. 1 million for 2023, that’s around 1/5th lower than ‘normal’.
Jack Roberts, CEO of home moving platform SlothMove.com, said: “After months of seeming detached from economic realities, the housing market is finally delivering some cold hard truths.
“The question is: who will be most willing to accept them?
“Will it be the buyers having to acknowledge their mortgage rates are unlikely to dip below 5% anytime soon, or sellers needing to admit their current asking prices are overly optimistic?
“As both sides reassess the lay of the land, feeble demand is this market’s defining characteristic.
“Other than those who already have a firm mortgage offer, most house hunters will understandably be biding their time. Like shoppers following a supermarket worker with a pricing gun, they will be hopeful of big reductions around the corner.
“More supply should prevent buyers completely losing interest, and a complete collapse in prices. Yet increasingly, properties are lingering on the market for a long time, and with some new sellers spurred on by the high cost of living — it is a gloomy picture heading into Christmas.”
As usual, the picture in the capital looks a little different.
Matthew Thompson, Head of Sales at Chestertons, says: “Despite economic uncertainty, buyer demand was undeterred as our branches registered the same volume of enquiries as in October 2021. This shows that, compared to the national picture, London’s property market has its very own rhythm and remains a key destination for buyers and investors alike.”
Whilst buyers appeared highly motivated, many would-be sellers waited for more economic and political certainty before putting their properties on the market.
Chestertons noticed a 34% drop in the number of market appraisals carried out in October compared to September.
This pause for breath, warns Matthew Thompson, is “likely to cause a shortage of new properties coming onto the market in the New Year.”
Looking at the wider market, Stephen McCarron, NAEA Propertymark President, commented:
“Zoopla’s latest report reiterates what our member agents have told us about the current market. The sales market was unsustainable, and we are now starting to see it balance out to pre-pandemic levels.
“Our latest figures in our Housing Insight Report showed us for the first time that we are on the cusp of seeing the sales market handing back purchasing power to buyers which is a trend we haven’t seen in months as the market was very much in the seller’s favour.
“Signs of balance within the market is also being seen as competition for homes starts to slow which will allow the number of properties available to buy to fall back in line and a return to a more realistic market.”