According to Zoopla’s house price index for June, the market has remained resilient, and the year is forecast to end with 1.3 million property sales – topping the firm’s original predictions. Year to date sales agreed are just 10 per cent lower than last year, leading the firm to expect the market to outperform its initial forecasts.
Demand for residential homes has slowed down over the year but was operating from a high base and is still 25 per cent above average levels seen in the last five years. Demand has fallen since spring but is on par with activity seen this time last year, particularly in regions where homes are more affordable.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Our love of property remains undimmed even in the face of a cost-of-living crisis that has given our finances a pounding in recent months.”
While demand remains stable for now, Morrissey said rate rises could cause people to reconsider house moves and take some heat off the market.
“Despite the outlook for weaker growth going forward, a full-blown housing market crash looks very unlikely. Instead, the outlook is for a continued slowdown in the market,” she added.
Amid the uncertain economic outlook, Zoopla said buyers continued to look for homes which enabled a work-life balance. It also noted that the 500,000 older people who retired and left the labour market during the pandemic looked to move to reduce costs.
Richard Davies, MD of Chestertons, gave another view. He said: “After many house hunters put their search on hold or changed priorities over the past two years, we have since been registering enquiries from families wanting to finally make their move a reality as well as international students, international buyers and office workers who require a pied-à-terre closer to work again.”
House prices up £19k
The average price of a house in the UK is now £256,000, the firm said, up £19,000 or 8.3 per cent year-on-year.
The pace of house price growth is not slowing as much as expected and by the end of the year, Zoopla has predicted values will rise a further five per cent to reach £260,000. This is following a 3.6 per cent increase for the first half of the year.
Richard Donnell, executive director of research at Zoopla, said: “The ongoing impact of the pandemic continues to support a desire to move amongst home buyers. This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly priced homes, especially in more affordable areas.”
He also said a lack of “major over-valuation” due to mortgage regulation meant the market was in “much better shape” to weather any economic challenges ahead, but noted it was not fully resistant.
Mortgage rates have ticked up to around 3.5 per cent and Zoopla said average rates of four per cent would result in zero annual house price growth. The report said if rates were to go higher, house prices would fall modestly and it would become a buyers market.
Donnell added: “The housing market is not immune from higher mortgage rates which we are starting to see increase quickly. Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further. Whilst we don’t expect current trends to lead to a marked drop in house prices next year, buyers will become more wary and it is important sellers are realistic when pricing their homes to sell.”
