Price Sensitivity Keeps a Lid on Growth
Despite the increased activity, house price inflation remains subdued. The UK average house price is up just 0.7% annually, a modest increase from the -0.3% decline recorded a year ago. Zoopla attributes this to buyers remaining price-sensitive, particularly in southern England, where affordability remains a significant hurdle.
While some regions, like Northern Ireland, are seeing stronger price growth (5.7% year-on-year), areas in the South West, South East, and East of England are still experiencing year-on-year declines. London, however, has seen a turnaround, with prices now up 0.5% compared to a 1.7% fall a year ago.
More Choice for Buyers
The report highlights a 12% increase in the number of homes available for sale compared to last year. This rise in supply is partly driven by homeowners looking to move, encouraged by the lower mortgage rates, and partly by investors and second-home owners reacting to potential tax changes.
Interestingly, almost a third of homes currently listed on Zoopla are “chain-free,” offering buyers a quicker and potentially less stressful purchasing process. This is particularly true for 2-bedroom flats outside London and 2- and 3-bedroom houses in the capital.
Tax Changes and Market Outlook
Speculation surrounding potential tax changes in the upcoming Budget also contributes to the supply increase. Investors are re-evaluating their portfolios, and councils plan to double council tax on second homes in many areas. Coastal and rural areas, including Truro, Torquay, and Bournemouth, have seen a more than 40% increase in available properties, leading to negative price growth in these locations.
Looking ahead, Zoopla predicts continued modest price growth and steady sales volumes. While lower mortgage rates are attracting buyers, they are expected to stabilise in the high 3% to low 4% range into 2025. Zoopla emphasises that sellers must be realistic with their pricing expectations to achieve a timely sale in the current market.
Key Takeaways for Homebuyers and Landlords
For homebuyers, the general advice is to seize the moment but negotiate carefully. With mortgage rates at their most attractive in over a year and a wider selection of properties to choose from, now is the perfect time to take the plunge.
But it is also advisable not to get swept away by the excitement of lower mortgage rates. While the market is more favourable than it has been in recent months, affordability remains a key concern for buyers, especially in sought-after areas of London. Be prepared to sharpen your negotiation skills, and don’t be afraid to make offers below the asking price. Remember, with more choices available, sellers are more likely to be receptive to sensible offers.
For Landlords, the advice is to take a flexible approach to this changing landscape. With many new regulations being introduced recently for landlords to comply with, it helps to learn how to adapt to the landscape, which is becoming more challenging for landlords, especially in London and the South East. Properties purchased recently with higher mortgage rates are noticeably eating into profits, and the looming threat of increased taxes adds to the pressure.
Landlords should consider diversifying their portfolio by exploring opportunities in different regions or property types. Perhaps they should look beyond traditional buy-to-let properties and explore the opportunities presented by the burgeoning short-term rental market or look to invest in Houses in Multiple Occupation (HMOs).
The key is to stay informed and be proactive. By carefully analysing market trends and adapting your investment strategy, you can navigate the challenges of the current housing market and continue to generate healthy returns on investments.
Conclusion
The latest Zoopla report paints a picture of a recovering housing market, with increased activity tempered by affordability constraints and cautious buyer behaviour. While the outlook is generally positive, buyers and sellers must be aware of the prevailing market dynamics to make informed decisions.
