"We don't believe that house prices are about to increase more quickly but there is more buyer interest. Sellers need to remain realistic on where they set the asking price if they are to take advantage of improving market conditions to secure a sale and move home in 2024"
- Richard Donnell - Zoopla
The latest market analysis from property website, Zoopla, has revealed that housing market activity has improved across all key measures during the first quarter of the year. According to the data, sales activity and house price growth are both up, with the supply of homes for sale a fifth higher than last year.
Sales activity continues to build momentum
New sales agreed are 9% higher than a year ago, with 7% more home sales agreed over Q1 2024 vs Q1 2023. This trend is encouraging more sellers to list their homes for sale with 20% more homes for sale compared to this time last year.
This is also being supported by the macroeconomic environment, with mortgage rates now at 4.4% for a 75% loan to value 5-year fix rate loan, down by over 1% from a high of 5.8% in June 2023 - and UK consumers’ confidence regarding their personal finances at the highest level in more than two years.
The strongest growth in sales activity continues to be in areas with more affordable house prices such as Yorkshire and The Humber (+11%) where the average house price is £185,600 and the North West (+13%) with an average house price of £194,500. The strongest growth in new sellers listing homes is in the South West (+28%) and North East (+26%).
Discounts to asking prices achieved narrows in the first quarter of 2024
Further evidence of improving market conditions is the narrowing in the discount between the asking price and the agreed purchase price - which is now in line with the pre-pandemic average.
The average discount from asking price to agreed purchase price has narrowed from 4.5% last November to 3.9% in March 2024 - the lowest level since July 2023. This equates to a £10,000 discount compared to a £14,250 discount in November. This reflects a combination of greater realism from sellers on their asking price and growing buyer confidence.
This is a national trend but discounts remain larger in London and the South East, where there is an average discount to asking price of 4.3% or £19,500.
What’s next for interest rates and the housing market?
Greater availability of homes for sale will keep price rises in check. The average estate agent had almost 30 homes for sale in Q1 2024, a return to the pre-pandemic average. This means buyers have more choice and room to negotiate, especially where homes are failing to attract buyer interest in a timely manner.
Rising household disposable incomes are expected to be the primary driver of improved housing affordability in 2024. Disposable incomes are projected to increase by 3.5% over 2024, while house prices look set to remain broadly flat over the year.
The timing and scale of interest rate reductions over H2 are the other key factors that could boost market sentiment and reduce mortgage rates. Expectations of lower interest rates are already priced into fixed-rate mortgages today. Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling.
Mortgage rates around the 4% range would support sales volumes - but would require incomes to continue to rise faster than house prices to help reset housing affordability, especially in southern England.
Richard Donnell, Executive Director at Zoopla says: “Rising wages and falling mortgage rates have boosted consumer confidence and this is feeding into improving levels of housing market activity over the first quarter of 2024. House prices are falling at a slower rate but it remains a buyers market where there is much greater choice of homes for sale.
"We don't believe that house prices are about to increase more quickly but there is more buyer interest. Sellers need to remain realistic on where they set the asking price if they are to take advantage of improving market conditions to secure a sale and move home in 2024.”
Tom Bill, head of UK residential research at Knight Frank, said: “Demand in the UK housing market has improved but hasn’t come off the leash yet. Mortgage rates are down compared to last October but higher than in January due to stubborn inflation and Bank of England caution around rates.
"As supply grows, downward pressure on prices will increase and a wave of people rolling off sub-2% two-year mortgages from early 2022 will add to the financial pressures in the system. Despite the headwinds, which include wider political instability, there will be a recognisable spring bounce this year.”
Director of Benham and Reeves, Marc von Grundherr, commented: “While we’re yet to see interest rates fall there’s no doubt that the certainty brought about by a continued freeze has helped to improve market sentiment considerably. Despite the disappointment of the Spring Budget, buyer confidence is building and there remains a strong appetite to transact in 2024.
"Of course, the higher cost of borrowing remains an obstacle, but one that buyers are now willing to tackle with the expectation that rates will fall at some point this year. For sellers, this has resulted in an increased level of interest and we’re also seeing a strong uplift in the number of offers being submitted. Previously, the ability to find a buyer in a proceedable position was a challenge in itself and so there’s no doubt that market conditions have improved in this respect.
"Price remains the key compromise for sellers when it comes to securing a buyer in today's market, with higher mortgage rates continuing to restrict buyer purchasing power. However, the gap between this purchasing power price point and seller asking price expectation has narrowed and we’re finding that sellers are more than happy to oblige in order to make their move."
Nathan Emerson, CEO at Propertymark, said: “It is great to see house sales starting to rise again. As the housing market starts to enter a busy time in spring and summer, Propertymark would like to see the Bank of England gradually ease people’s borrowing costs and encourage more people to make their next home move by cutting interest rates.
"This would be a brilliant way to further stimulate demand in the housing market, especially as our member agents report a 120 per cent increase in the number of potential buyers registered showing a growing appetite.”
