People selling their homes have typically had to settle for below the asking price in recent weeks, according to Zoopla, which is predicting house prices will fall by about 5% next year.
The average price achieved in recent weeks has been 3% below a seller’s asking price, when for much of 2021 and the first half of this year it matched the asking price, the property website said. Zoopla said it expects discounts to increase further in 2023.
Since the start of September, one in nine homes have had their original asking price reduced by 5% or more, Zoopla said, and a quarter have had the price cut to some degree, according to the index covering the month of October.
Asking price reductions are greatest in southern England, where sales volumes have fallen the most, with almost one in three homes in the south-east and east of England reducing asking prices to attract demand, the report said.
Annual house price growth slowed to 7.8% last month, down from 8.1% in September and the lowest since November 2021, according to Zoopla data. Demand has fallen 44% since September’s disastrous mini-budget, which drove mortgage rates sharply higher and led to hundreds of deals being pulled from the market.
New sales have dropped by up to 50% in previous hotspots and areas where higher mortgage rates will hit buying power hardest – in southern England, east Midlands and Wales. Sales have fallen less in more affordable areas and in London where market conditions have been weaker. Zoopla expects mortgage rates to fall to about 5% at the turn of the year, from about 6% now for two-year and five-year fixed deals.
More homes are coming to the market for sale, with the total stock of homes available up 40% from this time last year – but that’s still almost 20% below pre-pandemic levels.
With the cost of living crisis squeezing people’s budgets, and the Bank of England predicting a prolonged recession, the housing market is forecast to slow further, with prices likely to dip in the first six months of 2023, Zoopla said. It expects property values to drop by up to 5% over the year as a whole, and sales volumes to fall to 1m, from 1.3m this year.
Richard Donnell, executive director at Zoopla, said: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double digit house price falls at a UK level remains low.
“While the outlook for house prices is weak, we see a shift to more needs-driven motivations to move in 2023 and beyond which will support sales volumes. Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves. Cost of living pressures will compound these trends encouraging homeowners to consider their next move.”
