The shortage of homes for sale showed signs of easing during January, while house price growth showed signs of slowing.
New listings were 5% higher than the five-year average during the month, signalling the start of a recovery in supply.
The increase in homes coming on to the market was seen across all property types, including much in demand three and four-bedroom detached family homes, according to our latest House Price Index.
But despite the rise, demand continues to outpace supply, putting further upward pressure on house prices, although that rate of increase is starting to slow.
The average UK home now costs £244,100, after increasing by around £80,000 during the past decade.
What’s happening to house prices?
House prices rose by 7.8% in the year to the end of January.
But there are signs that the rate of growth is slowing, with property values edging ahead by just 0.9% in the past three months, the slowest growth since August 2020.
There also continues to be significant variation in price growth by both region and property type.
Wales saw the highest increases for the 11th consecutive month, with property values rising by 11.7% in the past year, followed by the South West at 9.7% and the North West and East Midlands, both at 9.2%.
London continued to lag behind other regions, with the average cost of a property rising by just 3.1% during the same period.
On a more localised level, house price growth ranged from an increase of 16.6% in Powys in Wales, to a fall of 2.2% in the City of London.
Meanwhile, price rises for houses continued to significantly outstrip that of flats, with the average cost of a semi-detached home rising by 9.1% in the year to the end of January, compared with a gain of just 2.6% for flats.
How busy is the market?
Near record demand for properties has continued, with 2022 seeing the busiest January and February since 2016, while the number of sales agreed matched those seen at the start of 2021.
But the increase in supply is suggesting the market is starting to move back towards more normal conditions.
In fact, new supply is now above pre-pandemic levels for this time of year in Scotland, the East Midlands, the North East and Yorkshire, while it matches it in the North West and West Midlands.
Despite this improvement, there continues to be a significant mismatch between supply and demand, with the number of buyers looking to purchase a property in late February 70% above the five-year average, while the total number of homes for sale was 43% below it.
The net result is a very fast-moving market, with half of all homes that were sold snapped up within just three weeks, compared with a third of properties during the same period of 2021.
Family homes are in particularly high demand, with three-bedroom properties outside of London typically taking just 23 days to sell - half the time two-bedroom flats in London take to go under offer.
What could this mean for you?
If you are a first-time buyer, it may be worth looking to purchase a flat rather than a house.
Flats not only represent better value at the moment, having seen significantly slower price growth during the past year compared with houses, but they are also less in demand, meaning you do not have to move quite as quickly to snap one up.
Going forward, the current increase in supply could mean more first-time buyer properties will be coming on to the market in the coming months.
The reason for this is a lack of choice has previously been holding people back from trading up the housing ladder.
As more homes are listed for sale, this issue will ease, and as people find a property they want to buy, they will in turn list their existing home for sale.
The increase in homes coming on to the market is great news for anyone looking to trade up the property ladder, with the number of three and four-bedroom homes listed for sale now 10% higher than a year ago.
But supply continues to remain tight, and there is still a shortfall in new listings for terraced, semi-detached and detached homes compared with longer-term norms.
As a result, the market for these properties is moving extremely quickly, so you will need to be prepared to move first.
The good news is that with demand continuing to outstrip supply, you are likely to be able to sell your existing home quickly.
What’s the outlook?
The increase in supply is likely to continue going forward, as the improved level of choice encourages more people to put their home on the market.
Grainne Gilmore, head of research at Zoopla, says: “The sheer level of activity in the market in recent years eroded the stock of homes for sale. But the data indicates that more homes are now coming to the market, as movers and other owners list their properties - and this will create more choice for the many buyers active in the market.
“However, the imbalance between high demand and supply will take much longer to unwind, and this imbalance will continue to underpin pricing in the coming year.”
Even so, the rate at which house prices are rising is expected to ease during 2022 due to economic headwinds, including increases to mortgage rates and the rising cost of living.
As a result, property values across the UK are expected to end the year an average of 3.5% higher than they started it.
Looking to move? We can help
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Whether you’re thinking of buying or selling, get in touch with local estate agents for expert market advice.