Buyer demand for homes now half the level seen last year

Buyer demand for new homes was 47% below the level seen last year in the four weeks to November 20, according to the latest update from online property portal Zoopla.

The service’s latest house price index said demand had fallen since the September mini-budget to levels normally associated with the Christmas holiday period, and that a quarter of all sellers on its site had reduced the price of their home.

In addition, it said annual house price growth in the UK fell to 7.8% in November, the lowest it has been for a year, in a significant transition period for the market. 

Figures released by the property company today showed one in 10 sellers had dropped the price of homes by at least 5% since September 2022. 

The property service predicted UK house prices will see year-on-year falls next year, although the figures are unlikely to drop by double digits. 

It said: “The housing market is transitioning from an unsustainably strong market to one more balanced, albeit with affordability challenges for homebuyers most reliant on mortgage finance and a weaker economic outlook for 2023.” 

Richard Donnell, executive director at Zoopla, added: “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.” 

The economic turmoil following the mini-budget in September saw mortgage rates rise to a 14 year high but have since dropped back, with five-year mortgages falling below 6% again this month.

Buyer demand has fallen by 44% since the mini budget, Zoopla said, and was now “almost half the level a year ago”, with a more modest decline in sales - down 28%, which the service said brought sales back to pre-pandemic levels. 

It said: “Falling demand and sales means new and current sellers are being forced to set asking prices at more realistic levels to help secure buyer interest.”

But Donnell believed the market would be upheld by “more needs driven motivations”. He suggested: “The rapid growth in rents, which shows little signs of slowing, will add to cost of living pressures and add continued impetus to first time buyer demand.” A RICS survey this month showed a net balance of +46% in rising tenants demand for lettings. 

Donnell also said: “Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves. Cost of living pressures will compound these trends encouraging home owners to consider their next move.”

While market sales have fallen by up to 50% in “previous market hotspots”, sales were still being agreed by those with low rate mortgage offers and buyers less reliant on mortgages, Zoopla pointed out.

Wales appears to be bucking the trend with annual house price growth at 9.9%, the index, which relies on data samples from 20 cities gathered by company property information service Hometrack, found. 

Homes are still coming onto the market for sale - with total stocks up 40% in November compared to 2021, giving more choice to customers, Zoopla said. Although, this was still about 20% less than pre pandemic levels, the index stated. 

The data service’s calculations from November last year showed house UK house price growth rose 7.1% year-on-year, down from 7.6% in August that year. In March this year the figure was at a high of 9.6%.  

Jack Roberts, chief executive of home moving platform SlothMove.com, said: “After months of seeming detached from economic realities, the housing market is finally delivering some cold hard truths.

“Other than those who already have a firm mortgage offer, most house hunters will understandably be biding their time. Like shoppers following a supermarket worker with a pricing gun, they will be hopeful of big reductions around the corner.”