Zoopla: House prices are rising but it’s still a buyer’s market

House prices have risen by 1.4% so far this year, according to the latest Zoopla house price index. 

The figures, released today, cover the first seven months of the year. On an annual basis, house prices are up 0.5% compared to this time last year.

Zoopla said increased market activity has contributed to the rise. Sellers are bringing homes to the market at an above-average rate, and buyers are returning to the market after being kept out by high borrowing costs.

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Although mortgage rates remain high compared to pre-2022 levels, they have been falling significantly in recent months and some sub-4% deals are now available. 

“While measures of market activity are higher and price inflation is positive, it’s important that sellers remain realistic on pricing, especially if they are serious about moving home,” Zoopla warns. 

The property site says the stock of homes for sale continues to increase and is now at a seven-year high of 33 homes per agent. This suggests it is still a buyer’s market, meaning buyers have some flexibility on the price they are willing to pay.

“We’ve found that 1 in 5 homes that were listed for sale in August have had an asking price reduction of 5% or more to attract buyer interest,” Zoopla adds. “This is above average, but lower than the 23% high recorded last autumn, when higher mortgage rates hit demand and house prices fell.” 

Zoopla found that homes which were priced realistically the first time round took 28 days to sell, on average, while those which required a 5% reduction or more took 73 days.

The average cost of UK properties

The average UK house price is £266,400 as of July 2024. This is 1.4% higher than at the start of the year – and prices are expected to continue to rise over the remaining five months of the year. Zoopla expects house price growth to hit 2.5% by the end of the year, with 1.1 million sales.

There is some regional variation between the strongest and weakest areas of house price growth. Prices have risen by 5.1% on an annual basis in Northern Ireland, while prices are down 0.9% in the east of England. 

Smaller pockets of the country have seen larger falls still. On an annual basis, prices are down 2% in Taunton, 1.3% in Dartford and 1.1% in Enfield. Meanwhile, Zoopla says that more affordable areas are seeing “above-average annual gains”, particularly those in close proximity to larger cities. This includes Wolverhampton (+3%), Oldham (+2.8%) and Wakefield (+2.7%). 

London homeowners will be pleased to see that price inflation has now turned positive (+0.2%) after being in negative territory earlier this year.

What impact will interest rate cuts have on the housing market?

The impact of the first interest rate cut cannot be seen in the latest Zoopla data, covering the first seven months of the year, as the decision from the Bank of England was announced on 1 August. 

However, Zoopla comments that, so far, it has had “no material impact on levels of buyer demand compared to the underlying trend over recent weeks”. 

“The real reason buyer demand for homes is 20% higher than last year is down to a fall in demand over summer 2023, which was in response to the spike in mortgage rates,” the property website adds.

The increase in buyer demand also reflects the fact that mortgage rates have gradually been coming down for several months, even before the MPC cut rates on 1 August. This was largely in anticipation of the Bank of England’s decision. 

Mortgage rates have fallen further since 1 August, continuing the trend, and a mortgage pricing war this month has added to downward pressure. 

The average two-year fixed-rate mortgage now costs 5.58%, while the average five-year mortgage costs 5.22%. Buyers can find a better deal still by shopping around and taking advantage of the sub-4% deals currently on the market.