The UK housing market is seeing an influx of properties for sale, reaching a five-year high, according to the latest data from Zoopla. This rise in available homes raises questions about the potential impact on house prices, especially as mortgage rates begin to climb again.
Zoopla’s recent report highlights a significant 20% increase in the number of homes on the market compared to last year, marking a dramatic rise in housing supply. This “huge increase” represents double the listings available at the same point in 2022. Such a surge in supply suggests that buyers may soon find themselves in a stronger position to negotiate, thanks to a broader selection of properties.
Jonathan Hopper, CEO of Garrington Property Finders, notes that while falling interest rates previously aided buyers, the current scenario is different. “The jump in the number of homes for sale is now helping buyers, giving them a much wider range of stock to choose from,” he explains. The balance of supply and demand remains a critical factor, with many areas experiencing a growing mismatch that could pressurise prices downward.
Mortgage Rate Trends
The beginning of 2023 saw mortgage rates falling, sparking optimism for both buyers and sellers. However, this trend reversed in February, with predictions shifting towards a ‘higher for longer’ scenario regarding interest rates. Major lenders like Barclays and HSBC have since increased their mortgage rates in response, cooling the demand for homes as borrowing costs rise.
Peter Stimson of MPowered Mortgages believes these changes could suppress house prices until rates begin to fall again. “With thousands more properties now coming onto the market, buyers can be choosier, especially in areas where supply is exceeding demand,” he remarks.
Regional Variations in Home Supply and Demand
The increase in listings is not uniformly distributed across the UK. The South West, for instance, has seen a significant increase in homes for sale—2.5 times more than in spring 2022. Areas like Cornwall and Bournemouth have also experienced substantial jumps in available properties, resulting in longer selling times compared to national averages.
On the other hand, urban centers like London have not seen the same level of increase, pointing to a persistent high demand and low supply scenario that continues to challenge potential homeowners.
The Upsurge in Larger Homes
Zoopla’s data also reveals a notable increase in the availability of larger homes. The average agent outside London now has twice as many four-bedroom homes on the market as they did in February 2022. This trend is partly driven by homeowners needing to downsize due to rising mortgage costs and the desire to free up equity for retirement.
What’s Next for House Prices?
While there’s a consensus that the rise in listings could temper price increases, some experts believe that house prices might still rise. Andrew Wishart from Capital Economics suggests that while the number of homes for sale has increased, it remains low by historical standards. Combined with low unemployment and the expectation of interest rate cuts later this year, there could be a revitalisation of the housing market into 2025.
Simon Gerrard from Martyn Gerrard Estate Agents adds, “In major cities and urban areas, we are not seeing any sustained increase in supply. The market is trapped in a cycle of high demand and low supply, making homeownership increasingly challenging for many.”