Cash buyers expected to account for a third of all house sales this year, as higher mortgage rates bite
House sales in December have exceeded expectations, with a 17% increase in new sales agreed this month compared to the same time last year, according to Zoopla data.
Increase in house sales at the end of 2023 expected to continue into the new year, Zoopla says
According to the latest Zoopla house price index, buyer demand is 19% higher than this time last year, when higher mortgage rates were impacting overall market activity.
The index states that an increase in available supply of homes for sale is boosting choice and increasing sales as buyers and sellers are becoming more aligned on pricing.
In addition, the index reflects a slower rate of annual price decline, which stands at -1.1%. This represents a significant decrease from the 7.2% decline reported during the same period in the previous year.
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Cash buyers are set to account for a third of all house sales in 2023, with mortgaged sales expected to be 30% lower as higher mortgage rates hit demand.
Zoopla’s report explains that the decrease in house prices this year has not been as high as projected due to high growth in average earnings and tough mortgage affordability testing for new borrowers since 2015.
Zoopla suggests that this has stopped major housing overvaluation and built resilience in the market for many households to manage the transition this year to higher mortgage rates.
The December index forecasts that the steady momentum that has developed towards the end of this year will continue into early 2024.
It adds that despite a decline in current mortgage rates, affordability remains a challenge for those dependent on mortgages for home purchases.
The report states that despite a slight decrease in house prices over the course of this year, the UK housing market still appears to be overvalued by approximately 10-15%.
Zoopla expects this overvaluation to improve in 2024 as incomes increase, and house prices fall by 2% over the year.
Sales volumes are expected to remain at 1m completions over 2024.
Commenting on the market outlook, Richard Donnell, executive director at Zoopla said: “The housing market has been more resilient than many expected over 2023 but it hasn’t been a surprise to us. Mortgage regulations introduced in 2015 have stopped an over-valuation of housing which is why the decline in house prices has been modest over the year. House price falls have been concentrated in the South and Midlands while prices are still slightly higher over the year in Scotland and Northern Ireland. UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align.“
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