Housing market activity has increased significantly in recent months, despite property prices remaining flat, according to the latest market figures published by Zoopla.
March’s property data from the online sales platform shows that price falls are significantly reducing, with annual house price inflation at -0.3%. This contrasts with a figure of -1.4% in October 2023.
Zoopla’s figures show this is stimulatlng market activity, with sales 9% higher in March than a year ago. In total there were 7% more home sales agreed in the first quarter of this year, compared to the same quarter in 2023.
Zoopla says this trend is encouraging more homeowners to put property on the market, with the stock of homes for sale now up by 20%. In total Zoopla says the average agent has had 11% more homes on their books in the last four weeks than at any time over the last year.
Overall Zoopla says that house prices are ‘firming’ but not set for faster growth.
While house price inflation remains negative, it points out that there are clear regional divides. Prices are falling more steeply in the South, with the homes in the East and South East seeing the biggest drop (down 2.3% and 2% respectively.) In contrast prices are rising in Northern Ireland and Scotland.
However, Zoopla points out that all areas are recording higher annual price inflation than six months ago as sales volumes recover and pricing hardens.
This is largely due to the narrowing gap between property asking prices and agreed prices, with two fifths of sales in March agreed at less that 5% below the asking price. The average (median) discount has narrowed from 4.5% last November to 3.9% in March 2024 – this is the lowest discount since July 2023 and in line with the pre-pandemic average.
In monetary terms this means that the average seller is currently agreeing a sale price that is £10,000 below the asking price — down from £14,250 in November last year.
Zoopla says that this is a positive sign for the housing market and suggests that house prices don’t need to fall further to support the continued recovery in sales. However it points out that buyers remain price sensitive and continue to negotiate on price.
Zoopla says that the greater availability of homes for sale will also keep price rises in check. In Q1 2024, the average estate agent had almost 30 homes for sale, 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.
It points out that a third of homes for sale have been on the market for more than three months and are still listed at the initial asking price.
Looking ahead, Zoopla says that rising 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.
It adds that the timing and scale of interest rate reductions widely expected in the second half of the year, could also help boost market sentiment and further reduce mortgage rates. However the property website points out that expectations of lower interest rates are already priced into fixed rate mortgages today.
Zoopla says economists are currently forecasting base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range. This 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.
