The number of homes for sale in the UK has hit a five-year high, according to the latest data from property platform Zoopla. This sharp increase in available properties has raised concerns about the potential for further declines in house prices, as a growing supply of homes can put downward pressure on prices. The rise in the number of homes for sale comes as the property market faces uncertainty, with interest rate changes and economic challenges affecting both buyers and sellers.

Zoopla’s report shows that there are currently 20% more homes on the market compared to the same period last year. This is a notable shift in the property market, as it suggests that more homeowners are choosing to list their properties, possibly due to concerns over future price drops or changing financial circumstances. The property portal also highlighted that the current supply of homes is double what was available at the same time in 2022, marking a ‘huge increase’ in available housing stock.

Experts suggest that this surge in listings could be a response to rising mortgage costs, which may be prompting homeowners to sell while prices remain relatively stable. At the same time, the increased supply could lead to greater competition among sellers, potentially leading to further price reductions in certain areas. 

This shift in the housing market has created uncertainty for buyers and sellers alike. While some may see this as an opportunity to find a wider selection of homes, others may be concerned about purchasing in a market where prices could fall further. The coming months will likely be key in determining whether this increase in supply will lead to more significant changes in house prices.

Although more homes are entering the market, rising mortgage rates may cause some buyers to pause their purchasing plans. Higher borrowing costs could limit the number of people able to secure financing, potentially slowing down buyer activity.

Experts believe this situation could lead to a scenario where the supply of homes exceeds demand, resulting in price drops in certain areas. With more properties available but fewer buyers able to proceed, sellers might have to lower prices to attract offers.

Jonathan Hopper, chief executive of Garrington Property Finders, highlighted that falling interest rates are no longer benefiting buyers as they once did. However, the increased number of homes on the market offers more choice. Buyers now have a broader selection of properties to consider, compared to just a few months ago.

Jonathan Hopper pointed out that the balance between supply and demand is one of the biggest factors influencing house prices. In many areas, the gap between available homes and interested buyers is widening. He noted that some estate agents are seeing up to five times more homes being listed than buyers registering interest, further skewing the market.

Izabella Lubowicka, a senior property researcher at Zoopla, echoed this by stating that the spring increase in homes for sale is giving buyers more options than ever. However, she also highlighted that affordability remains a key issue for many, with budgets stretched due to rising costs.

She added that sellers need to be mindful of this when pricing their properties. If they want to achieve a sale, pricing realistically is essential given the current market conditions where supply is outpacing demand.

With more homes available, competition between sellers is increasing, and buyers are becoming more selective. Ensuring properties are attractively priced will be crucial for sellers looking to secure a deal.

Higher mortgage rates dampen demand

At the start of the year, mortgage rates seemed to be on a downward trend. However, since February, they’ve been rising again. This shift has come as financial markets revised their outlook on interest rate cuts, with many now expecting a “higher for longer” scenario. Initially, markets predicted as many as six or seven base rate cuts in 2024, but this expectation has now dropped to just two or three.

Mortgage lenders have adjusted their rates in response. Major lenders like Barclays, HSBC, NatWest, Accord, and Leeds Building Society have all increased mortgage rates. Peter Stimson, head of product at MPowered, suggests that rising mortgage rates could put downward pressure on house prices. 

Stimson pointed out that the optimism seen in January, when house prices briefly jumped, has faded. Early-year mortgage rate cuts spurred demand and supply, but with those cuts now reversing, mortgage costs remain high, dampening homebuyer demand. With more properties entering the market, buyers are becoming more selective, especially in regions where supply is outstripping demand.

This shift has created a stand-off between buyers and sellers. Stimson noted that realistically priced homes are selling quickly, but less desirable or overpriced properties are struggling to attract offers. While the increase in housing supply is important for a balanced market, prices are likely to remain under pressure until interest rates begin to decline again.

Which areas have most homes for sale?

According to Zoopla, the South West is currently experiencing the highest supply of homes for sale, with agents listing 2.5 times as many properties as they had in spring 2022. Cornwall, in particular, has seen a 159% increase in homes available on the market compared to the same period last year.

Other areas, such as North Kesteven in Lincolnshire, have also seen significant jumps, with a 155% increase in property listings. Similarly, Bournemouth, Christchurch, and Poole have experienced a 146% rise in homes available for sale. 

With this surge in supply, it’s no surprise that properties are taking longer to sell. In Cornwall, the average time to sell a home has increased by 20 days compared to spring 2022, while in Bournemouth, Christchurch, and Poole, it now takes 23 days longer to find a buyer. 

The national average time to sell a home has increased by 16 days, highlighting the challenges in these regions where the supply of homes is outpacing demand.

Surge in bigger homes hitting the market

According to Zoopla, the number of homes with four or more bedrooms available outside London has doubled compared to February 2022. There has also been a 25% increase in the availability of three-bedroom homes compared to the same period last year.

Jonathan Hopper, chief executive of Garrington Property Finders, points out that the rise in larger homes on the market is often driven by two key factors: debt and downsizing. These reasons are contributing to more sellers entering the market, particularly at the top end.

Hopper also highlights that the growing gap between supply and demand is becoming a crucial factor in determining house prices. As more homes become available, this imbalance is expected to continue influencing the market, potentially leading to further shifts in pricing dynamics.

Each month, many homeowners with large mortgages are facing significant increases in their monthly repayments when they remortgage, sometimes by hundreds or even thousands of pounds. For some, this surge in costs has become unmanageable, forcing them to downsize to smaller homes in order to maintain their current expenses.

There has also been a noticeable rise in baby boomers opting to downsize. This move is often driven by the desire to cut costs and free up savings for retirement. Many homeowners in the UK view their property as their pension, and are now beginning to tap into the equity they have built up over the years.

On the buying side, the high cost of borrowing continues to be a challenge for many. Although affording the home they want may be difficult, the increase in available properties should help stabilise the property market. It is also expected to keep prices in check as we await potential interest rate reductions in the latter half of the year.

With supply now outstripping demand in some regions, buyers are in a stronger position. Those with financing in place have more leverage in negotiations, while sellers, particularly those offering larger homes outside London, may need to adjust their pricing expectations in light of the increased competition.

Could house prices still rise from here?

It appears that house prices are more likely to decrease in the coming months, rather than increase. However, some experts argue that while the supply of homes is rising, it might only lead to a stabilization of prices, rather than a decline.

Andrew Wishart, a senior economist at Capital Economics, points out that the increase in homes for sale should be viewed in context. According to the RICS survey of surveyors, the number of homes on the market remains low compared to historical averages. With unemployment still low, the most significant increases in mortgage costs now behind us, and lenders offering support to struggling borrowers, Wishart does not anticipate a significant rise in forced sales.

He adds that if interest rates are cut later this year, it could revive the housing market in 2025, leading to increased demand and a potential 5% rise in house prices.

On the other hand, Simon Gerrard, managing director at Martyn Gerrard Estate Agents, notes that their offices are not seeing the same trends. While data may suggest increased supply in areas outside major cities, there is no substantial rise in available homes in urban areas. The current market seems to be stuck in a cycle of high demand and low supply, with the dream of homeownership remaining out of reach for many.

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