Momentum is gaining pace in the housing market, as sellers get ever closer to achieving their asking prices.
The number of sales agreed is rising, with 9% more homes going under offer compared with this time last year.
And this is encouraging more sellers to come to market, with the average estate agent now having 30 properties for sale, 11% more than in spring 2023.
All in all across the UK, there are 20% more homes for buyers to choose from right now than there were a year ago.
Why are more sellers coming to market?
The UK currently has a healthy jobs market and wages are rising, which is boosting consumer confidence.
Meanwhile, the average mortgage rate for a 75% loan-to-value mortgage has fallen to 4.4%, down from a high of 5.8% in June 2023.
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Affordable areas remain popular with buyers
The North West and Yorkshire and The Humber have seen the fastest growth in the number of homes going under offer, with sales agreed rising by 13% and 11% year-on-year.
But when it comes to the number of sellers entering the market, the South West takes the lead, with a 28% increase in the number of homes going up for sale. It’s hotly followed by the North East, where 26% more homes are now available to buyers, compared with spring 2023.
In London however, supply is more limited, with only 8% more homes available year-on-year. This is keeping pricing in London competitive, as demand outstrips supply.
No further house price falls expected in 2024
For the rest of this year, we expect house prices to remain broadly flat. But in good news for sellers, we’re not predicting any further price falls.
Our Executive Director of Research, Richard Donnell, says: ‘The fact that buyers and sellers are agreeing more sales is positive and evidence that house prices don't need to fall further to support the continued recovery in sales.
‘Buyers remain price sensitive, however, and continue to negotiate on price. Our view is that a greater availability of homes for sale will also keep price rises in check.
‘We find that a third of homes for sale have been on the market for more than 3 months and are still listed at the original asking price. These are potential candidates for a possible reduction in the asking price to attract more buyer interest.
‘This is purely at the discretion of the seller and the sales price they require to unlock their next home move.’
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Seller discounts start to shrink in 2024
At the end of 2023, half the number of homes sold had a discount of 5% or more. Today, that figure has shrunk to two-fifths.
Back in November, the average asking price discount was 4.5% (or £14,250). Today, that figure has gone down to 3.9% (or £10,000).
‘This is the smallest level of discounting we’ve seen since July 2023,’ says Donnell. ‘And it puts the UK housing market back in line with pre-pandemic levels.
‘It reflects a combination of greater realism by sellers on where to set asking prices, and growing buyer confidence.’
Across the UK, the average discount is 3.4%. However, in the capital and the South East, where homes are more expensive and require bigger mortgages, discounts are larger, averaging 4.3%.
What impact will lower interest rates have this year?
Even if inflation and the Base Rate fall, mortgage rates are unlikely to go below 4% in 2024.
‘Expectations of lower interest rates are already priced into fixed rate mortgages today,’ says Donnell.
‘Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling.
‘Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.’
The key, instead, to buyer affordability improving, lies in wages growing as house prices hold steady, improving buyer confidence.
‘Incomes will need to continue to rise faster than house prices to help reset housing affordability, especially in southern England,’ says Donnell.
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