Zoopla’s Three-Tier Housing Market: Key Insights

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Zoopla’s most recent market snapshot reveals the emergence of a three-tier housing market, marking a significant shift in capital appreciation dynamics. Over the past 18 months, distinct variations in house price inflation have manifested across different regions. This phenomenon can be attributed to the impact of factors like elevated mortgage rates and the growing burden of living costs, reshaping the affordability landscape.

As the property market undergoes these transformations, landlords and stakeholders need to navigate the nuanced dynamics within each tier. Understanding the localized influences on housing demand and pricing becomes crucial, allowing for more informed investment decisions amidst the evolving economic and financial landscape.

In Southern England, encompassing the East of England, South East, and South West, there has been a notable decline in house prices over the past year. The average home in these regions is £344,000, reflecting a 30% premium above the UK average. The impact of rising mortgage rates and diminished purchasing power has been more pronounced in these higher-priced markets compared to more affordable areas. Nevertheless, the rate of price reduction in these regions is gradually stabilizing as the market adjusts to the effects of elevated mortgage rates.
London’s housing market stands apart from the rest of Southern England, representing the most expensive location to purchase a house in the country, with an average price of £523,400—nearly double the UK average. Despite weak house price growth over the past seven years, this trend has contributed to improved affordability, making the market more accessible to a broader range of buyers. London’s house prices are rebounding at a faster pace than the wider Southern regions, driven by increased demand and a more restrained growth in the supply of homes for sale in the capital (seven per cent in London compared to 21 per cent in the South).
Across the rest of the UK, house price growth has seen a significant deceleration over the past year, although instances of falling house prices have been relatively rare. With average house prices standing at 28% below the UK average, these regions have experienced less pronounced effects from high mortgage rates compared to the South of England and London. As a result, market activity and house prices have been relatively resilient in these areas, despite the broader economic challenges.

Southern England Regions:

The housing markets in the East of England, South East, and South West have witnessed significant price falls in the last year. With an average home price of £344,000, 30% above the UK average, these regions have been impacted by rising mortgage rates and reduced buying power. However, signs of moderation in price falls are emerging as the market adapts to higher mortgage rates.

London:

London’s housing market stands apart with an average price of £523,400, nearly double the UK average. Despite weak house price growth over the past seven years, London is experiencing a rebound, driven by increased demand and a slower growth in the supply of homes for sale compared to the broader Southern regions.

The Rest of the UK:

While house price growth has slowed across the rest of the UK in the past 12 months, instances of falling prices are relatively scarce. Average house prices, 28% below the UK average, have demonstrated resilience to high mortgage rates compared to Southern England and London.

Outlook and Advice for Sellers:

Richard Donnell, Zoopla’s Research Director, suggests sellers remain realistic on pricing, recognizing that homes are likely to attract more buyer interest than the previous year. This increased interest enhances the likelihood of a successful sale.

Outlook and Advice for Buyers:

Prospective homebuyers are advised to anticipate mortgage rates remaining within the four to five per cent range. While there might be a slight possibility of lower rates over the year, this is contingent on the Bank Rate and any potential cuts later in the year. Donnell notes a building momentum in the sales market over the past five months and predicts a 10% increase in sales for 2024 compared to 2023, reaching a total of 1.1 million transactions, driven by increased supply and the potential for more transactions.