Zoopla: Property demand is returning to the housing market - is now the time to buy?

High mortgage rates have deterred buyers from the property market for much of the year but there are signs of a seasonal recovery

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High mortgage rates and the cost of living crisis have deterred many buyers from purchasing property throughout 2023 but there are signs of a turnaround as the new year approaches.

Analysis by property website Zoopla has found that the number of sales agreed in the four weeks to 17 December was up 17% annually, which may make many weigh up whether 2024 is the right time to buy a home or even sell a property.

Its latest House Price Index for November suggests sellers are finally cutting asking prices to recognise that buyer affordability has been hit by higher mortgage rates.

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Buyers are also looking further afield to more affordable areas, according to the report.

The average distance buyers look to move is 4.3 miles, while almost half of would-be movers in southern regions are looking 10 or more miles in the search of their next home.

Demand is now up 19%, Zoopla said, while buyers are also benefiting from more property stock in the market, which is up 25%.

Zoopla said these factors pushed average house prices down by 1.1% in November to £264,500, compared with a 7.2% rise a year ago.

It has predicted that cash purchases will account for a third of all sales in 2023, highlighting that the value of debt-free deals are 10% lower than the average mortgage funded sale, while mortgaged sales are on track to be 30% lower due to higher pricing on home loans.

Zoopla adds that tough mortgage stress tests and affordability assessments used since 2015 have stopped house prices falling further, while high wage growth has also supported the market. 

These are trends it predicts will continue into 2024 and push pricing down across the house price indices.

Richard Donnell, executive director at Zoopla, says the market has performed better than many expected this year.

“Mortgage regulations introduced in 2015 have stopped an over-valuation of housing which is why the decline in house prices has been modest over the year,” he says.

What will happen to the housing market in 2024?

Zoopla predicts that first-time buyers will be the largest cohort purchasing property next year.

Its latest consumer survey found that 40% of people looking to buy a home in the next two years are first-time buyers. 

This is attributed to many being deterred by record high rents, while lower mortgage rates may make it easier to finally get on the property ladder.

Upsizers account for a third of would-be buyers in the next two years but may be waiting for mortgage rates to drop further as they may usually need larger home loans, Zoopla said.

The property website is anticipating the usual seasonal rebound in demand during the first quarter as people often use the festive season to consider their living arrangements and priorities for the new year.

It still expects house prices to drop next year though.

“House price falls have been concentrated in the south and midlands while prices are still slightly higher over the year in Scotland and Northern Ireland. UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align,” adds Donnell.

Tom Bill, head of UK residential research at Knight Frank, says confidence is returning as inflation slows and hopefully feeds into interest rates.

“The final weeks of 2022 were marked by the fallout from the mini-Budget, when the property market effectively closed three months early for Christmas,” he says.

“This year, it is stirring into life after a subdued summer and all the indications are that there will be a seasonal bounce next spring provided a general election is not called in the first half of 2024.”

Marc Shoffman

Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and The i newspaper. He also co-presents the In For A Penny financial planning podcast.