Published: 08/10/2024 By Zoopla
Key Findings:- Lowest mortgage rates for 15 months boost sales market activity
- Buyer demand and sales agreed up 25% since 2023
- Buyers remain price-sensitive, keeping price rises in check
- Average UK house price rises almost 1% in a year
- Almost a third of homes for sale are ‘chain-free’ as investors and second home owners sell in the face of recent and possible tax changes
- The outlook is for modest price growth and steady growth in sales
Home buyers are benefitting from the lowest average mortgage rates for 15 months, which is supporting double-digit growth in all key measures of sales market activity. Annual house price inflation is positive, but remains below 1%.
Nationally, home buyer demand is up 26% on this time last year, as more homes are listed for sale and sellers look for somewhere new to buy.
The average mortgage rate for a new 5-year 75% LTV loan is 4.3%, compared to 5.5% a year ago, the lowest since May 2023.
And intense competition among lenders is keeping rates attractive for buyers, especially for those with larger amounts of equity.
The number of sales agreed is now 25% higher than a year ago as households that have held off making moving decisions over the last 2 years return to the market.
Sales are up by over 10% across the UK, and more than 30% across the East Midlands and North East.
Increased Supply will keep Inflation in Check
Rising sales volumes are being supported by more homes available for sale, up 12% on this time last year. Many of these homes are new listings from home owners looking to sell and buy another home. However, not all homes are ‘brand new’ to the market and a fifth of homes currently for sale were previously on the market over the last two years. This explains why a similar proportion have had their asking price cut by 5% or more to attract buyers. These trends show buyers remain price-sensitive as choice improves and sellers need to price sensibly to agree a sale.
Tax Changes Boost Supply
Speculation over possible tax changes in the Budget is likely to support the growth in supply with investors, second home owners and others with multiple homes considering selling. Nearly a third (32%) of homes for sale on Zoopla are ‘chain-free’. Outside London, 1 and 2-bed flats are most likely to be chain-free, while in London 2 and 3-bed houses are most likely to be chain-free. Higher mortgage rates have forced some landlords into selling, with 13% of homes for sale being previously rented. Most of these (53%) are in London and the South East, where modest yields, higher mortgage rates and low house price growth impacted returns for investors over recent years.
Looking ahead, many English councils are planning to double council tax for second homes from next year.
Prices Will Continue to Rise Steadily
Rising sales volumes and modest house price inflation are positive for the housing market. There are sufficient levels of market activity to keep drawing in new buyers who are prepared to make sensible offers on competitively-priced homes. Sellers remain keen to get the best price for their home to unlock their next move, but buyers remain price-sensitive and have a greater choice of homes to buy. While sales prices have firmed, we find that almost 2 in 5 sales (37%) are agreed at more than 5% below the initial asking price. This highlights how a high proportion of buyers continue to make offers below the asking price and while this proportion has improved from a year ago, it stays at a level which suggests single-digit house price growth lies ahead.
Housing Outlook
The housing market continues to adjust to higher borrowing costs through low house price growth and a steady recovery in sales. Expectations of lower mortgage rates are a real attraction for would-be movers, with some lenders offering mortgage rates below 4%. The outlook for interest rates is far from certain though, considering global events. Today’s ‘fixed’ mortgage rates already reflect the extent to which financial markets expect UK interest rates to move lower in the next 2-5 years.
In summary, the outlook is more positive than it was a year ago, but sellers need to manage their expectations on pricing if they are serious about agreeing a sale in a timely manner.