Zoopla expects demand for homes to pick up in the last months of this year

Annual UK house price growth slowed to 6.5% in the last quarter of 2022 as demand plummeted in the wake of the former chancellor’s mini-budget, according to the latest figures from Zoopla. 

house prices

Sellers saw a 50% drop in buyer demand at the end of last year, the online estate agent’s monthly index released today showed, while agreed sales in the first three weeks of January were 43% below the five year average. 

Richard Donnell, executive director of research at Zoopla, predicted it would be a slow start to 2023. 

But he added: “We expect demand to pick up in the coming months as the economic outlook becomes clearer and mortgage rates settle around 4% to 4.5%.”  

Mortgage rates went up to a 14-year high in autumn last year after the government’s disastrous mini-budget

They are likely to stay high in the first half of this year after the Bank of England raised the interest rate to 3.5% in December last year.  It is expected the Bank will raise the rate again this week to 4%. 

Zoopla’s index reflects other reports which show the housing market slowed towards the end of last year. Official stats indicated house prices fell 0.3% in November last year and the Halifax recorded that UK house prices dropped 1.5% between November and December last year

But Zoopla said the demand for homes had rebounded slightly in the first few weeks of 2023, although it remained well below the levels of January 2020 to 2022. “Current buyer interest is in line with the pre-pandemic years and 10% ahead of 2019,” Zoopla’s index said. 

Price reductions were likely over the first quarter of this year, with sellers lowering prices to meet the levels buyers would pay. 

It also noted that “one clear trend from the first few weeks of 2023 is that buyers are becoming more value-conscious in response to the hit to buying power from higher mortgage rates”. 

The agent said there was a shift in demand towards flats with a decline in buyers looking for 3-bed houses. Zoopla data showed 27% of new buyers are looking for 1- and 2-bed flats, up from 22% a year ago. This compared to demand for 3-bed houses falling 5 percentage points to 39%. 

Zoopla believed home moves would be supported this year by people looking to release equity in their homes by downsizing.