According to the report, activity has rebounded back to pre-pandemic levels, along with a rise in demand for homes, as annual house price inflation begins to slow.
The UK House Price Index reported that annual house price inflation has slowed from 8.6% in 2022 to 5.6%, however, sales volumes and buyer demand is around 20%-50% lower than last year. Despite this, they are still ahead of pre-pandemic levels.
In the current economic climate, discounts of around 4.5% of asking prices are being accepted by sellers, widening the asking price gap to it’s largest point in five years. That’s a £14,000 discount on average, meaning sellers are having to relinquish their pandemic house price gains by about a third.
By summer, the report stated that UK house price inflation is expected to “move into a low negative year on year” with the market still headed for one million sales and up to a 5% fall in price.
Are supply levels back to normal?
It was revealed that there has been a 60% boost in the number of houses for sale, thanks to a consistent flow of new supply, with estate agents listing 24 residential properties for sale on average - in comparison to just 15 last year.
This is great news for sellers as new supply has started to create more room for financial negotiations, also generating more choice for property buyers. Overall, the UK House Price Index has seen reduced pressure on house prices.
Last month saw an 8% increase in housing demand compared to pre-pandemic reports. However, more than 40% of homes on Zoopla still had to reduce their asking prices to remain attractive to cost-sensitive buyers.
What about activity levels?
Sales volumes are still ahead of pre-pandemic rates despite being lower year on year. This is particularly obvious in more affordable housing regions such as Scotland and the North East where activity levels are holding up.
Areas that are in high demand, such as the Midlands and London, continue to be affected by increasing mortgage rates. These two regions in have had 9% lower sales volumes than anywhere else in the UK since 2016.
However, London sales are still above their pre-pandemic rates at 4%, which makes the capital appears to be good value for money but demand levels from prospective buyers continue to be impacted by increasing house prices.
"Gap widens to largest in five years"
Whilst sales volumes have recovered, data taken over the past five months from valuation and risk business, Hometrack, revealed that an average discount of about 4.5%, equating to roughly £14,000, has been necessary to make a sale.
The current discounts on asking prices are significantly larger than those proposed before 2020, and comparative to 2021 and 2022 when buyers were required to pay the asking price or above, making this the largest asking price gap in five years.
With these figures in mind, the average value of a UK home grew £42,000 since 2020, but now it has been implied that sellers will need to relinquish around 33% of their pandemic house price gains to make a sale today.
Nationwide repricing is underway as the UK grapples with changing buying powers, a consequence of high mortgage rates. Home buyers have 20% less buying powers than they did last year despite mortgage rates currently sitting at 4%.
However, mortgage rates have begun to fall, down 6% from 2022 Q4, meaning buying powers are starting to recover.
The UK House Price Index said they are now recording modest monthly reduction fees, lowering their annual rate of inflation to 5.3% and are anticipating this trend to continue in slight month on month reductions as we move into 2023 Q2.
The UK House Price Index are expecting to see annual price reductions of either 2% or 3% by summer 2023. Additionally, it is predicted that the market will deliver 1.1m in sales this year, the best possible outcome in their opinion.
Who are we?
Our team of Chartered Building Surveyors are working closely with property owners, lenders, and estate agents across London and the South Coast to proactively navigate a changing horizon. From ensuring new builds and conversions are delivered on time and in budget, to delivering EPC and MEES upgrades on behalf of landlords.
Read more about our solutions here:
Alternatively, email us at email@example.com or call our Southampton team on 02380 014786 or London at 020 3143 2128