The number of homes offered for sale in the UK has jumped over the past year in spite of falling house prices, as owners become more confident in the stability of the mortgage market and sellers show greater “realism” on prices.
There were an average of 25 homes being offered per estate agent in March, up from 14 for the same month last year — a rise of 78 per cent, according to the latest housing market report by property site Zoopla.
Though demand — measured by the site’s researchers as people making active inquiries on a property — was down 43 per cent on last year, the number of sales subject to contract fell by only 16 per cent.
That suggests transactions are on track to hit 500,000 for the first six months of this year, according to Zoopla forecasts that draw on HMRC data and the historic record of agreed sales reaching completion.
Covering one month, the positive indicators come amid a gloomy picture on house prices, with lenders such as Nationwide showing sharp price falls via their monthly indices. House prices declined by an annual rate of 3.1 per cent in March, according to Nationwide, the biggest year-on-year drop since 2009.
Richard Donnell, executive director of research at Zoopla, said nominal house price growth was likely to be broadly flat for at least the next five years. But he was optimistic about transaction levels. “There are going to be structural pressures for people to keep moving, just out of a need. That’s going to keep the market moving.”
Sellers appear more willing to be flexible on price, the data suggested, with asking price discounts averaging 4 per cent (£14,000 on average).
“The average UK homeowner has made £45,000 on the value of their home in the last three years,” said Donnell. “If people are having to give away £15,000 on a discount, as long as they’re getting that discount on the next house, it keeps the market moving. There’s a realism on the part of sellers.”
Activity was not equally distributed across the market, however, as the share of sales in the bottom 40 per cent of the market by value rose over the year by 5 percentage points, against a drop of 4 points in the top 40 per cent share of the market.
Zoopla said this represented increased demand from first-time buyers or second-steppers, as well as an uptick in sales by buy-to-let landlords. “As rents have gone up, I think a lot of renters are feeling as if they’re almost forced to buy,” Donnell said.
A more stable mortgage market following the turmoil of the “mini” Budget in September 2022 had also tempted people back into the market, Zoopla said.
Average rates on five-year fixed-rate mortgages have this week fallen to 5.03 per cent from 5.63 per cent at the start of the year. Two-year fixes dropped from 5.79 per cent to 5.33 per cent, according to finance site Moneyfacts. While average rates are far higher than a year ago, they have fallen back from the October levels of more than 6 per cent.
HSBC, TSB, NatWest, Halifax, Virgin Money are among the lenders to have cut rates on their fixes over the few days. For well-heeled buyers seeking larger loans, Barclays on Wednesday slashed the rate on its five-year fix from 5.59 per cent to 4.3 per cent — with a fee of £1,999 and a loan size of between £2mn and £10mn.
Aaron Strutt, product director at mortgage broker Trinity Financial, said: “More of the lenders have lowered their rates over the last few weeks but it is unusual to see prices come down by over 1 per cent — especially in the large loans space.”
Donnell said he expected transaction activity to continue increasing after Easter, though there remained uncertainties over the economic outlook. “The main risk is around some kind of macro deterioration, such as stickier inflation, meaning rates have to stay higher for longer than expected. And there’s a sensitivity to mortgage rates.”