Zoopla: Buyer demand is down but house prices won't fall (yet)
Increasing numbers of transactions have fallen-through and asking price cuts are increasing but the market is still on track for almost 1.3m sales this year, Zoopla claims.
Analysis by the portal has highlighted that while there has been a “short-lived” surge in supply, buyer demand has fallen by 33% since the mini-Budget.
Its research found around 7% of homes for sale have had an asking price reduction of more than 7%.
This is an increase on recent months but still below 2018 levels, according to Zoopla.
The property website said fall-throughs are also increasing, mainly as a result of a lack of affordable finance.
However, the portal said it is too early to see any impact on pricing for the fourth quarter of 2022.
It said: “The shock to demand comes at the end of another strong year with c.293,000 sales in the pipeline, most of which we expect to complete.
“Fall-throughs are increasing, mainly a result of a lack of affordable finance but we are still on track for nearly 1.3m sales in 2022.
“We don’t expect to see any pricing impact to materialise until the first quarter of 2023. Typically, it takes several months for pricing to adjust in the face of weaker demand.”
Zoopla’s report said buyers must get used to new higher mortgage rates of 4 to 5% which are likely to become the norm.
Looking to 2023, Zoopla said it expects price reductions of up to 5%.
This would mean the average UK property would lose eight months of capital gains, rising to 13 months in London but at just six months in Wales.
Richard Donnell, executive director at Zoopla, said: “New buyer demand has dropped quickly in the face of higher borrowing costs, it’s like the Christmas slowdown has come a month early.
“We don’t expect to see any impact on pricing levels between now and December and this will only start to materialise in early 2023. It takes several months for pricing to adjust in the face of weaker demand.
“The most likely outcome for 2023 is that we see a fall in mortgage rates towards 4% with a modest decline in house prices of up to 5%. The labour market remains strong and the supply of homes for sale is below average creating a scarcity of homes for sale that will support pricing.”
Its latest report suggests house price growth stands at 8.1% annually, down from 8.2% last month, to £259,100.
By Marc Shoffman