Zoopla House Price Index: the worst may be over

Sarah Coles, Head of personal finance at Hargreaves Lansdown, comments on the publication of the Zoopla House Price Index for April 2023, showing the worst may be over.

Key points from publication:

• • Annual house price growth slowed to 3%.
  • It expects prices to fall just 1% during the rest of 2023, and says the worst of the falls are behind us.
  • The proportion of properties on the market seeing price cuts has dropped to 24%.
  • Buyer demand reached its highest level so far this year after Easter. It’s now 14% higher than 2019.
  • The number of new sales was 10% ahead of the five-year average at Easter.
  • First-time buyers with a mortgage made up one in three sales (34%) in 2022. This was ahead of home movers buying with a mortgage – at 31%.

Sarah Coles says:

“The property market could be emerging from the bargain basement: Zoopla is predicting that the worst of the price falls are behind us.

“First-time buyers are helping to prop the market up, and with house prices rising more slowly than wages, they could remain key to the health of the market for the rest of this year too.

“Annual house price growth is just 3%, but Zoopla figures found that spring has worked wonders on our enthusiasm for homeownership.

“It says buyer demand has hit a 2023 high, 66% more new properties have hit the market, and sales are ahead of the five-year average.

“Buyer demand is lower than this time last year, but at that point there was an awful lot of frustrated demand because of the property drought.

“A better balance of supply and demand means would-be buyers are more likely to be able to find something they want.

“It’s why Zoopla sales were 10% ahead of the five-year average after Easter.

“A healthy dose of realism is also easing the sales process.

“Sellers are being more pragmatic about pricing from the outset, with just under a quarter needing to cut the price after coming to the market with too much optimism. 

“Buyers are also prepared to compromise. Although three-bedroom properties remain the most commonly bought property among first-time buyers, we’ve seen a real growth in sales of two-bedroom properties too.

“However, it’s worth putting this in the context of other measures.

“Annual price rises are similar to yesterday’s Nationwide figures for April, but figures for demand are strikingly different to the RICS survey for March. That one showed buyer demand, sales and house prices were down yet again.

“And while we don’t yet know whether this turned around in April – it would be a massive reversal of trends that have settled in for months.

“It may mean these positive signs aren’t replicated across the market.”

First-time buyers:

“First-time buyers are helping to prop up the market.

“Runaway rents are up 11% in a year, and the number of rental properties has collapsed, so rent hikes are far from over.

The prospect of rents becoming an ever-increasing burden is pushing people into becoming first-time buyers.

“Renters are also likely to place higher value on being able to fix a mortgage, so they’ll know what they’ll pay over the next few years.

“Where they’ve been forced to move by a landlord who is putting the house up for sale, they’ll also be drawn by the prospect of being in control of deciding when they next move home.

“Taking the first step onto the property ladder is by no means easy.

“Buyers need an average income of £55,900 to buy a three-bedroom home – which is up £7,350 since 2020.

“In the South East and London, it’s even more of a stretch, because first time buyers need an additional £12,150 of income to buy the same property.

“It’s not just the deposit that’s a difficult stretch for buyers, because when you add in the impact of rising mortgage rates, they have enormous ongoing monthly costs too.

“Fortunately, they’ve had a leg up in this department, because wages are currently rising faster than house prices – up 6.6% in the year to February excluding bonuses.

“It makes saving for a deposit and paying bigger mortgages at least marginally more feasible.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay