Propertymark: ‘House price drops were inevitable’

Cooling house prices are providing an opportunity for buyers even with higher borrowing costs, Propertymark claims.

The agency trade body said it was inevitable that prices would drop from the “drastic” and “unrealistic levels” seen since the pandemic.

Nathan Emerson, chief executive of Propertymark, said: “This is providing an opportunity for some buyers as although they are financially forced to take the hit on high interest rates, they can now negotiate on a property and secure it at a more reasonable sale price.

“Buyers continue to make a gain on their property, meaning the wheels of the property chain remain steadily turning.”

It comes as Zoopla warns the recent spike in mortgage rates has reduced buying power once again.

Its latest House Price Index for July showed buyer demand has fallen by 18% over the past 2 months off the back of rising mortgage pricing.
Demand is down 40% annually and is 6% below 2019 levels.

Sales agreed are 17% lower, Zoopla said, adding that it is seeing more committed sellers and buyers in the market.

The portal’s analysis suggests higher mortgage rates are having a greater impact on buying power in southern England, where house prices are highest. 

Price falls of up to 2.2% are concentrated in southern England and markets with an average price over £300,000, Zoopla claims, while more affordable markets in economically active areas are still registering annual house price inflation of more than 3.5%.

Average house prices across the country are up 0.6% annually, according to Zoopla.

The proportion of homes with a price cut of 5% or more is also back to levels seen at the end of 2022, at 6.5%.

Richard Donnell, executive director of research for Zoopla, said: “Weaker buyer demand will push down prices over the first half of 2023. We expect modest price falls over the coming months, with UK house prices expected to fall by up to 5% over 2023. 

“This would mean that prices are still 15% higher than at the start of the pandemic. 

“Even if mortgage rates fall back into the 4-5% window later this year and into the first half of 2024, we expect house price growth to remain very low for the next one to two years.”

Donnell said house prices are likely to lag behind the growth in price inflation and earnings as they adjust to a higher level of mortgage rates. 

He added: “Southern England and the Midlands are where house prices and incomes need to realign the most through very low nominal growth or modest price falls.

“We expect sales volumes to remain in the region of 1 million to 1.15 million this year, with demographic, social and cost-of-living factors continuing to drive the motivation to move home.”