Reality bites for sellers trying to tempt wait-and-see buyers
House price growth slowed to 6.5% at the end of 2022. Supply is rising: the average agent has 23 properties for sale, up from a low of 14 in early 2022. Demand rose slightly at the start of 2023.
The average discount on the asking price is holding at between 3% and 4%, and buyers are expected to keep accepting offers. 3-bed houses remain most popular, but demand for flats is growing: 27% of buyers are now looking for 1-and-2 bedroom flats – up five percentage points in a year.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “Wait-and-see buyers will force sellers to wake up, smell the coffee, and cut their prices.
“The Zoopla House Price Index found that house price growth slowed again at the end of 2022, and the number of properties on estate agents’ books started to build, as buyers sat on their hands. It says sellers are going to have to cut their prices to shift their homes. However, it’s more optimistic about the future.
“After the 50% collapse in demand at the end of the year, it recovered a little in January. However, buyers are trimming their expectations, and turning their attention to flats. Demand for flats has grown in every region, and especially in commuter towns like Slough and Watford. They’re far cheaper on average – the average 2-bed flat outside London is almost £100,000 cheaper than the average 3-bed home. They’re also more cost effective to run – and to heat.
“Sellers are more resistant. It’s going to take a few weeks of quiet desperation and a dearth of viewings before they’re prepared to accept reality, so Zoopla is expecting more price cuts for properties that are already on the market in the first three months of the year – and into the spring.
“It’s hopeful that things will improve from the spring. It expects falling mortgage rates to bring buyers back, especially if they stay between 4% and 5% in 2023. It’s also hoping we’ve staved off a technical recession for now, and that more economic optimism will mean house price falls stick to low single digits in the first half of this year.
“The jury is out. Some buyers will find that property comes back within the realms of affordability as mortgage rates drop, and if they can negotiate a decent price cut, they’ll be prepared to take the plunge. However, others will still want to steer clear in a falling market. The most recent Building Societies’ Association Property Tracker in December found that just one in seven people thought now was a good time to buy – which doesn’t sound like a market on the brink of a boom. There remains a real risk that even without a technical recession in the first half of the year, economic woes could lead to job cuts, which would mean even more reluctance among buyers.”