Vendors are increasingly willing to accept a sizeable discount from the asking price in order to secure a sale, research has found.
Its latest research, property portal Zoopla found that nearly half (42%) of sellers are accepting discounts of at least 5% from the asking price, the highest level seen since 2018. Meanwhile, 15% were accepting discounts of at least 10% from the asking price.
Zoopla pointed to rising mortgage costs for this trend, noting that mortgage rates moving above 5% had meant a hit of up to 20% in the buying power of those looking to purchase using a mortgage.
The higher mortgage costs are leading to a drop in demand, with Zoopla data showing there were 14% fewer buyers active in the market over the last four weeks compared with the same period a year ago.
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However, supply is growing, with 18% more homes listed for sale in the last four weeks compared with the five-year average.
The study also found that annual house price growth has slowed to 1.2% now, with Zoopla suggesting “a return to modest quarterly house price falls” over the second half of the year as a result of rising mortgage rates and continued cost of living pressures.
House price growth was highest in Wales at 2.5%, and weakest in Northern Ireland where prices dropped 0.8%.
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Region watch
Looking at regional differences, market activity was found to be holding up better in Scotland, the North East and London. Southern England and the Midlands have performed the worst, with Zoopla noting these were places where house prices grew the most during the pandemic.
It suggested that house prices will fall by up to 5% this year, though over the longer-term house price growth will be “ a lot weaker” due to a realignment of house prices and household incomes.
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Mortgage rates testing homebuyers
Richard Donnell, executive director at Zoopla, said the resilience of the market and particularly homebuyers is being tested by rising mortgage rates.
He continued: “Modest price falls will resume in the second half of 2023 as the supply of homes increases giving buyers more choice and room for negotiation on price. We still expect house prices to be 5% lower over 2023 and there is a very substantial equity buffer to absorb price falls which are likely to be concentrated across southern England.
“Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”
By John Fitzsimons
Source: Your Money