The UK property market is witnessing a considerable shift. For the first time in five years, sellers are offering substantial discounts on their properties, presenting an unprecedented opportunity for buyers.
This change is driven by a combination of economic factors and market trends reshaping the dynamics of property negotiations.
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What is happening to the economy and market trends?
A notable trend is a decrease in house prices, driven by interest rates that remain higher than the market has been accustomed to. However, the expectation is that they will begin to fall in the not-too-distant future.
Currently, sellers are accepting an average discount of £18,000 on property sales as of November 2023. This discount is even more pronounced in regions like London and the South East, reaching up to £25,000. Buyers appear to have a particularly strong negotiating position, especially in southern England.
Jeremy Hunt’s Autumn Statement revealed a decrease in inflation from 11.1% to 4.6%. Predictions suggest it will drop to 2.8% by the end of 2024 and that it will stabilise at 2% by the end of 2025.
Richard Donnell, Zoopla’s Director of Research, anticipates the Bank of England might start cutting rates around the summer of 2024. If mortgage rates continue to fall, we could see a boost in demand. Yet, house prices are expected to face moderate downward pressure for some time.
The Introduction of the Buyer’s Market
For the first time in a long time, the UK is experiencing an increase in the supply of its most in demand property types, namely three- and four-bedroom houses.
Post-pandemic, we are seeing record numbers of properties up for sale. During the pandemic, a scarcity of homes in the market inflated prices. This situation has now reversed, with the highest number of houses available per estate agent in six years, averaging 31 homes per branch.
During the pandemic, buyers often had to pay the full asking price to secure a property. This trend has changed dramatically.
In the first half of 2023, the average discount was about 3.4% off the asking price. This figure has now risen to 5.5%, the largest discount since 2018.
The London Problem
London’s housing market has experienced slow growth over the past seven years, with only an 8% increase in prices compared to a 28% rise in the rest of the UK.
As a result, properties in London are now seen as better value for money. This is something most Londoners will likely find unbelievable.
The gradual return to office work is also supporting sales volumes and pricing levels in the capital. Interestingly, new sales in London have rebounded more than in any other UK region.
2024’s Outlook
As we approach Christmas, the number of homes for sale is likely to decrease temporarily, with some sellers planning to relist in the new year. However, 2024 is expected to remain a buyer’s market, with no significant increase in average house prices on the horizon.
According to Zoopla’s Director of Research, Richard Donnell, the adjustment in home prices is set to continue through 2024. For a more robust recovery in the housing market, mortgage rates need to fall further, encouraging more buyers to enter the market.
The current trends in the UK housing market offer a unique opportunity for potential buyers. With sellers accepting substantial discounts and a shift in economic factors, the balance of power has shifted. For buyers with access to suitable funding, it could be an ideal time to invest in property. As we move into 2024, these conditions are expected to persist and will continue to favour buyers.