Buyer and seller activity in the housing market rose in February, leading to an anticipated 10% bump in home sales for the year, according to recent data from Zoopla.
Compared to February of the previous year, all markers of market activity improved, with completed sales up by 15% and buyer interest climbing by 11%.
Zoopla predicts the market is on track for 1.1 million sales over the year, an increase from the 1 million transactions in 2023.
The newest Zoopla House Price Index indicates that the housing inventory has grown by 21% from last year, signaling more confidence among buyers and more reasonable pricing by sellers. The North East and London are leading the increase in sales, with 17% and 16% growth respectively.
The UK’s house price inflation rate has dropped by 0.5%, which is a smaller decline compared to the 1.4% decrease seen in October 2023.
Across the UK, the deceleration in house price declines is a common trend. While five English regions still see price drops up to -2.1%, the remaining regions of England, along with Wales, Scotland, and Northern Ireland, are experiencing positive price growth, with Northern Ireland leading at 4.3% annual inflation.
The stabilization of home prices demonstrates that reductions are not necessary to support sales, evidenced by estate agents currently making an average of six new sales monthly, compared to 5.2 the year before.
Zoopla notes that housing costs vary widely based on location, contributing to a ‘three-speed’ housing market across the UK:
1) Southern England regions are experiencing the most significant annual price drops, affected by rising mortgage rates and decreased purchasing power. Here, the average home cost is £344,000, which is 30%, or £80,800, over the UK average.
2) London’s housing market is distinct from the rest of Southern England, remaining the priciest with average home costs of £534,000. However, the capital has seen comparatively low house price inflation in the past seven years, creating better affordability for more buyers. The market’s demand rebound and modest increase in supply (only 7% compared to 21% for the UK) is why its annual price inflation is recovering more swiftly.
3) In the rest of the UK, where house prices are at or below the national average, the slowdown in price growth has been sharp over the last year, but actual decreases have been minimal due to less impact from higher mortgage rates.
Source: Zoopla House Price Index
Mortgage rate drops have helped revive market activity, along with increasing household incomes. Mortgage rates are now similar to those a year ago, but lenders are starting to withdraw deals priced below 4% as the cost to fund these mortgages has risen lately. Buyers should expect that mortgage rates will hover around 4-5% throughout much of 2024, with such rates being consistent with stable to modest single-digit price hikes.
Richard Donnell, Executive Director at Zoopla, stated, “The housing market has remained steadfast against the backdrop of higher mortgage rates and cost of living challenges. An increase in both sales and sellers indicates a growing confidence among households and shows that mortgage rates between 4-5% are not deterring market recovery. The trend of new sales over the past five months suggests that the sales market is on track for 1.1 million sales in 2024, supported by new sellers entering the market. While we expect sales to rise, we don’t foresee house price growth accelerating further in 2024.”
