While house prices have been sliding, homebuyers are securing an average of £18,000 off the asking price of a property as discounts hit a five-year high, research reveals.
The property market has slowed in recent months as high mortgage rates and the cost of living crisis hits buyer budgets.
This is now feeding into property pricing as sellers become more realistic and are willing to take lower offers to achieve a sale.
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Property website Zoopla’s latest House Price Index shows the discount to asking price for achieved sales is now at a five-year high.
It has grown to 5.5% for sales over the first half of November compared with an 3.4% average discount in the first half of 2023.
Asking prices are also dropping as more homes are being put up for sale.
The number of homes available for sale reached a six-year high in October, according to Zoopla, up 34% compared with a year ago.
This provides more choice and creates a buyers' market, meaning sellers can no longer get away with the high prices charged during the pandemic-boom.
Zoopla’s research found house prices were down 1.2% annually in October to £264,600, reflecting a slower market.
“These are the best conditions for home buyers for some years with more homes to choose from and with sellers more prepared to negotiate on price to agree a sale,” says Richard Donnell, executive director at Zoopla.
“There is a growing acceptance that what a home might have been worth a year ago is now largely academic given current market conditions. Sellers have plenty of room to negotiate with average house prices still £41,350 higher than the start of the pandemic.”
Where are homebuyers getting the largest discounts?
Buyers seem to have most bargaining power in southern England.
The Zoopla research shows the average discount to the asking price for sales is 6.1% across London and the South East.
This represents an average £25,000 reduction off the asking price.
The discount is smaller across the rest of the UK at 4.8%, or £11,000.
But this is still the highest level in recent years.
Some sellers are accepting even bigger discounts to these averages, with one in four sales agreed at more than 10% below asking price.
Zoopla’s House Price Index shows prices are down in most of the UK’s main cities.
The largest annual fall during October was in Bournemouth, with a 2.6% decline.
Leicester, Portsmouth, Cambridge, Southampton and Aberdeen have all seen drops of more than 2%.
Six cities have bucked the trend though, with a 2.3% annual rise in Belfast and increases in Glasgow, Edinburgh, Newcastle, Liverpool and Leeds.
Will house prices fall further?
House prices have been falling on a yearly basis for much of this year and Zoopla expects this to run into 2024 as high interest and mortgage rates continue to deter buyers.
Zoopla said mortgage rates need to fall further to bring more buyers back into the market.
Prices could drop to attract interest until then, especially if supply rises.
However, Zoopla also suggests the number of homes for sale will start declining as some sellers take their property off the market with a view to relaunching in the new year.
This could then push prices up, although sellers will still have to be competitive.
Homebuyers also have to consider the cost of waiting as mortgage pricing may change and there may also be more competition if property market sentiment improves.
“Financial markets expect the Bank of England to start cutting rates around the summer of 2024,” says Zoopla.
“If mortgage rates start to fall further, this will support an improvement in demand and sales volumes later in 2024 but prices will remain under modest downward pressure. “
Tom Bill, head of UK residential research at estate agency brand Knight Frank, says the property market outlook has begun to improve as the Bank of England’s job appears closer to completion and inflation has fallen below 5%.
“The story of this slowdown hasn’t been falling prices but low sales volumes as buyers and sellers both hesitated,” he says.
“As confidence and activity levels rise, the market will re-price and a spring bounce in 2024 becomes more likely after a largely non-existent autumn market this year.”
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