Annual UK house price growth has slowed to 7.8%, bringing the average house price to £261,600.
The last 3 months has been the slowest rate of quarterly price growth (0.7%) since February 2020 as fewer people look to move.
At this stage, there have been no price falls in major cities or regions in the last three months.
But we expect this to change, and we’ll soon see quarterly growth of 0% and then house prices falling in 2023.
“We still expect house price falls of up to 5% next year with 1 million sales and mortgage rates dipping below 5%,” says Richard Donnell, Director of Research and Insight at Zoopla.
“But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors.”
More sellers are reducing their asking prices
A widespread repricing of homes for sale is already happening.
1 in 4 sellers have reduced the price on their home since 1 September while 11% have reduced their price by 5%+.
However, they’re relatively modest price reductions compared to historic data and there are still fewer price reductions than in 2018.
This signals a return to normal pre-pandemic market conditions rather than giving cause for concern about a housing market crash.
Price reductions have been the greatest in the south of England where the number of sales has also fallen the most.
In the South East and East of England, almost 1 in 3 homes for sale have had their asking price reduced since the start of September.
Scotland’s market operates differently, with homes marketed with a survey and valuation and asking prices set on the basis of ‘offers over’.
Sellers are less likely to achieve asking price in the final sale
Homes for sale are being reduced in price – but what’s happening to the prices people actually sell for?
Buyers are starting to get bigger discounts from sellers, with the average discount widening to 3% in recent weeks.
Whereas sellers could expect to achieve 100%+ of their asking price in 2021 and 2022, the tide is turning in favour of buyers.
We expect discounts to increase further but, after exceptionally strong house price growth since the pandemic, most sellers will have a little room to reduce their price and achieve a sale.
The outlook for the housing market in 2023 really depends on how willing and able sellers are to adjust their asking prices to what buyers are prepared to buy.
House price growth slows down in major UK cities
The rate of quarterly house price growth has slowed across major cities in the UK.
Comparably affordable house prices in cities like Nottingham, Birmingham and Manchester have encouraged demand and seen them enjoy above-average price growth over the last year.
More affordable markets can also expect to weather the turn in the market better than areas in the south. Below-average house prices will continue to support home moves while more expensive markets will be more impacted by higher mortgage rates.