House price inflation remained down against the year in March despite improving consumer sentiment, the latest Zoopla House Prices Index (HPI) has found.
Average property prices were 0.2% lower year-on-year, the property listing website reported - a similar fall to the one recorded in the previous month’s HPI. But they could be set for a rebound as the number of agreed sales grew 12% in the four weeks to 21 April compared to the same period in 2023.
Zoopla’s findings echo the recent HPIs from Rightmove and RICS, which both showed an apparent spring boost to market confidence. However, while sales volumes appear to be strengthening, property values remain subdued year-on-year with Zoopla saying sellers are having to “remain realistic” when it comes to asking prices.
Start your trial of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
It comes as mortgage rates have started to climb again. Lenders are upping rates due to ongoing uncertainty about the Bank of England’s interest rate-cutting cycle, and fears inflation could rise again as it is doing in the US.
Latest Videos FromMoneyWeek
North-South house price inflation split ‘set to continue’, Zoopla says
According to the latest house prices element of Zoopla’s HPI, the UK’s average house price sits at £264,500 - 0.2% down compared to March 2023. Prices continued to grow in northern parts of the country, while properties in the South of England continued to shed value against the year - albeit at a slower rate than before.
Northern Ireland topped the charts once again, with annual growth of 4.4% (up from 4.1% in the previous month). Scotland saw the second highest rate of growth, with an average 1.9% year-on-year increase recorded. This was a slight slowdown on the 2.1% seen in February.
But in southern parts of England, which also tend to boast the most expensive homes in the country, prices dipped again. The East of England registered a 1.7% average annual fall (-2.3% last month), with the South East down by 1.6% (an improvement on last month’s 2% fall).
Zoopla said it did not expect to see property price inflation “accelerating” at any point in 2024. It added that the North-South divergence in prices was “expected to continue” - although it said a lot depends on Bank of England interest rate decisions.
Richard Donnell, executive director at the property website, said: “There is clear evidence that house prices are firming and the pace of price falls is slowing. We dont believe that prices will start to rise as buyers face much higher mortgage repayments than in the recent past.
“The market is adjusting to higher borrowing costs and what we need is continued price stability which will create the environment for continued growth in sales and home moves. It’s important sellers remain realistic on what they can achieve for their home.”
Although prices look set to remain in the doldrums for some time yet, there was more positive news for buyers in Zoopla’s latest HPI. Over the four weeks to 21 April, the number of homes available was a fifth higher than in the same period in 2023 while demand only grew 4% year-on-year.
The 12% annual increase in the number of sales being agreed was also a sign of “renewed confidence” among prospective buyers, the property website said. Zoopla added that it expects completions to grow 10% over the course of 2024 to 1.1 million.
Richard Donnell said it means 100,000 more people could move home this year than in 2023. He said: “The rebound in sales being agreed continues for a fourth month as mortgage rates have fallen, consumer confidence improves and home buyers have much greater choice of homes for sale.”
Given completions data tends to lag four to six months behind agreed sales, Zoopla said it did not expect to see improving sentiment represented in UK sold prices for several months yet. But it said a 32% year-on-year rise in mortgage approvals recorded in February was a sign that the recovery is taking place.
While sentiment is improving, Zoopla’s figures have also thrown into sharp relief how much mortgage costs have soared since interest rates began to rise in 2021. It said annual mortgage repayments have jumped by an average of 61% (£4,300, or £358 a month), with two-thirds of the rise down to higher rates and a third coming as a result of a 13% rise in house prices since March 2021.
The hikes were most pronounced in cash terms London and the South. Annual payments have soared £7,530 a year (48%) to £23,110 in the capital, and £6,070 (57%) to £16,630 in the South East. Other parts of the country saw smaller hikes, with the North East recording a £2,350 (62%) rise to £6,090 a year and Scotland not far behind on £2,660 - a 61% rise to £7,050.
Zoopla said this situation was helping to maintain prices in cheaper areas. Its consumer research had found a third of households were willing to move out of their local area to secure their desired property, suggesting people are moving into these less expensive areas.
