Zoopla forecasts that price growth will slow from here, and at this rate, growth will fall to 3% by the end of the year. With price reductions are on the rise: 1 in 20 properties had price cuts of 5% or more in April (1 in 22 in March). The length of time is takes to sell has also started rising.
Zoopla figures for April show average house prices are still up 8.4% in a year – down from 9% in March, and prices are still at a record high of £250,200.
“Reality is starting to dawn in the housing market, as overly- optimistic sellers are being forced to knock tens of thousands of pounds off their asking prices. It’s one of three key signs that we’ve reached the peak of price rises, and when added to the fact it’s taking longer to sell and we’re seeing more down-valuations from mortgage valuers, it means that price rises are highly likely to slow from this point. Zoopla points out that at this rate, growth will be at 3% by the end of the year.
It also highlighted that sales are taking slightly longer. When you exclude London, it takes an average of 18 days from listing to sale – up two days in a month. Within London the average is 21 days – up four days in a month. It’s hardly an agonising wait at this stage, but it may well be a sign of things to come.
The brokers I’ve spoken to say another key sign of a slowdown in price rises is the number of mortgage valuations that are coming in under the asking price. The mortgage company has to carry the can for any overpricing, so they’re the ones with a keen eye on the objective value of a property. If an estate agent, buyer and seller are all getting carried away, it’s the valuer who brings reality crashing down on them. Valuers have been thinking that houses are over-priced for a while.
We’ve been expecting a sustained slowdown in price rises. The question was always ‘when’, rather than ‘if’. Rising prices and increasing mortgage rates have pushed mortgage payments up significantly. At a time when the cost of everything is rising through the roof, this has forced some buyers to reconsider what they can realistically afford. At the same time, mortgage lenders have factored higher prices into their affordability calculations, making it more difficult to borrow.
We’re not predicting price drops at this stage, because demand is still vastly outweighing the number of properties on the books. Zoopla says that demand is well above the 5-year average, while supply is well below it, so well-priced, popular houses are still attracting bidding wars. However, over the coming months, we can expect price growth to slow, houses to hang around for longer, and after two years of a scalding hot property market, some of our enthusiasm for a new home will start to cool”. Said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.