Temperatures may be rising outside but the property market is also heating up with buyers making higher offers and more sales agreed.
The latest Zoopla House Price Index suggests buyers are adjusting to higher mortgage rates as asking price discounts narrow.
Buyers are now paying 96.8% of the asking price, according to Zoopla, the highest out of any point in the last 18 months, with the average discount on asking price being £16,600
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Sales agreed are now 22% above pre-pandemic levels, Zoopla said.
However, house prices increased by just 0.1% in the past 12 months to £265,600 on average, according to the index, but may rise this year.
There is a regional divide though, with most price rises in the north, while affordability remain a barrier in the south of England.
“The housing market is starting to hot up after a stone cold 2023,” says Richard Donnell, executive director at Zoopla.
“There are clear signs of growing confidence amongst buyers and sellers with many more homes for sale and buyers paying an increased proportion of the asking price."
The North-South house price divide
House price growth has been relatively flat in recent months on average across the UK.
This is reflected in Halifax and Nationwide indices and could in part be due to the market slowing down ahead of the general election.
But there are regional differences. For example, Zoopla data shows Belfast has seen a 4.3% increase in the year to June 2024 and average prices are up by 1.4% in Scotland.
In contrast, there has been a 1% drop in the South East England, a 0.7% fall in the South West and a 1.2% decline in the East of England.
Will house prices fall in 2024?
Many analysts expected house prices to drop this year due to high inflation and pricey mortgages.
But inflation has now reached the Bank of England’s 2% target, raising hopes of an interest rate cut and a drop in the cost of borrowing, which may give homebuyers a boost.
Mortgage lenders are already cutting rates in anticipation of cuts and Nationwide last week released the first sub-4% rate since earlier this year.
Labour’s general election win will also bring some political stability but Zoopla doesn’t expect its property policies, such as more housebuilding and first-time buyer support, to have an impact for the next 12 to 18 months.
Zoopla predicts that UK house prices will increase slowly but steadily over the second half of 2024, on average increasing towards around 2% by the end of the year.
Donnell says more sales are expected but suggests house price inflation will be kept in check by more supply and affordability pressures keeping a lid on buying power, especially across southern England.
Estate agency brand Knight Frank is more bullish.
“Demand and transaction volumes should increase in the second half of the year as the first rate cut since March 2020 becomes imminent,” says Tom Bill, head of UK residential research at Knight Frank.
“As more mortgages fall below the psychological threshold of 4%, we expect UK house prices to rise by 3% in 2024. One risk on the horizon is the possibility of tax rises in Labour’s first Budget, which could dampen demand, particularly in higher price brackets.
"The other is the Renter’s Reform Bill, which may result in increased supply in the sales market if the new rules are punitive for landlords.”
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