Zoopla’s latest House Price Index reveals that the housing market is gradually recovering from the impact of higher mortgage rates. According to the report, house prices are showing a slow but steady increase. This recovery follows a period of significant downturn due to elevated borrowing costs. Despite the positive trend, Zoopla has issued a warning to landlords and potential sellers: it’s crucial not to overprice properties when setting asking prices.
Historically, house prices have experienced declines in only three quarters over the past decade. These drops occurred in Q4 2022 and Q3 and Q4 2023, primarily as a reaction to sudden spikes in mortgage rates. This pattern highlights the sensitivity of the housing market to changes in borrowing costs. As a result, price adjustments have typically been linked to shifts in interest rates, which directly affect buyer affordability and market dynamics.
Looking ahead to 2024, the market appears to be stabilising with a return to modest price growth. Demand is on the rise, and more sales are being agreed upon, suggesting a rebound in housing activity. This is a sign that the market is adjusting well to the current economic environment, with buyers and sellers beginning to find their footing after a period of uncertainty.
While the housing market shows signs of improvement, sellers should be cautious with their pricing strategies. Overpricing could deter potential buyers and disrupt the market recovery. Therefore, it’s important to set realistic prices that reflect current market conditions to attract buyers and facilitate successful transactions.
Average house prices in the UK have seen a notable increase of 1.4% over the seven months leading up to July 2024. If this positive trend continues, prices are projected to rise by approximately 2.5% throughout the entire year. However, when considering the annual growth rate, which accounts for fluctuations over the past 12 months, the increase is more modest at +0.5%. This lower figure reflects the price declines experienced during the latter part of 2023.
The recovery in house prices is not uniform but rather varies across different regions of the country. Annual price changes range from a decrease of -0.9% in the East of England to a significant increase of +5.1% in Northern Ireland. In London, price inflation has turned slightly positive at +0.2%, indicating a rebound from previous declines. Meanwhile, other regions such as the South East (-0.7%), South West (-0.6%), and East Midlands (-0.1%) are still experiencing minor price falls.
In terms of market activity, the average estate agent listing on Zoopla now features 33 unsold homes, marking the highest level of unsold inventory since 2017. This increase in unsold properties can be attributed in part to sellers also being buyers, which has led to a backlog in transactions. Despite this, the number of sales agreed has surged by 23% compared to the previous year, indicating a strong recovery in buyer activity and a shift towards more successful property transactions.
The property portal notes that house prices are still adjusting to the effects of higher borrowing costs in certain local areas. As a result, some regions are experiencing small declines in house prices on both a quarterly and annual basis. Notable examples include Taunton (TA) with a -2.0% year-on-year drop, Dartford (DT) at -1.3%, Enfield (EN) with a -1.1% decrease, and Harrogate (HG) showing a -1% decline.
In contrast, house prices are increasing at a faster rate than the national average in more affordable housing markets, particularly near larger cities in England. Areas such as Wolverhampton (WV) have seen a 3% rise, Oldham (OL) a 2.8% increase, and Wakefield (WF) a 2.7% growth.
Similarly, the Scottish Borders are seeing even greater price increases. For instance, Dumfries and Galloway (DG) has experienced a 4.4% rise, while Galashiels (TD) and Falkirk (FK) have seen increases of 3.1%. These areas are benefiting from a strong market performance compared to the broader trend.
Homes that require a price reduction to attract buyers take more than twice as long to sell compared to those priced correctly from the start.Â
According to Zoopla, properties that are priced correctly typically take about 28 days to agree on a sale. In contrast, homes that have had their asking price reduced by 5% or more take an average of 73 days to sell. Additionally, a significant number of homes with substantial price cuts end up not selling at all.
As more sellers enter the market, particularly as we move into the autumn season following the holidays, setting the right asking price from the beginning becomes crucial for a quick sale. Zoopla advises consulting with local estate agents to ensure the asking price is appropriate.
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