Published: 16/08/2022 By Musgrove & Co
It’s been a turbulent time for the country recently as the cost-of-living continues to put pressure on households throughout the UK, but the latest house price index from Zoopla bears some good news for sellers as it states that the housing market remains resilient.The property website said that the market is currently performing better than anticipated, despite external pressures. It found that the average home is now worth £256,600, up £19,700 from the same time last year.
However, it warned that the knock-on effect from the cost-of-living crisis will start to ripple through the property market towards the end of the year and will likely leak into the start of 2023.
Even then, any slowdown is expected to be modest and house prices certainly remain buoyant.
The Nationwide Building Society, in its latest House Price Index, recently reported double digit growth in house prices.
As of March 2022, the average UK property was worth £279,000 – that is some £48,000, or 21% higher than in February 2020 – a figure that translates into ‘real’ price growth when adjusted for wider inflation of 8%, compared to a rise of only 1.2% in real gross domestic product (GDP) over the same period.
Additionally, according to data provided by HMRC, the provisional non-seasonally adjusted estimate of UK residential transactions stood at 11,990 in March 2022, 18.2% higher than February.
It has also been confirmed that the provisional non-seasonally adjusted total of residential UK transactions during 2021 to 2022, at 1,370,870, was the highest financial year total since 2007 to 2008.
The current cost-of-living crisis, explained
British households haven’t had it easy this year and are facing the highest rates of inflation since the early 1980s, suffering the biggest hit to their incomes since modern records began.
The NIESR estimates that total bills – including for non-essentials – will remain at 130% of disposable income for the poorest households in 2023-24, if current trends for earnings, consumer spending, and inflation are maintained.
Adam Corlett, the principal economist at the Resolution Foundation, said that no one is immune: “Inflation hitting its highest level in four decades is the main cause of the cost-of-living squeeze, causing pay packets and families’ household incomes to fall in real terms.”
“The current crisis is painful for households, but it should start to ease next year. The bigger problem is that it sits in the wider context of over a decade of weak economic growth and stagnating living standards that leaves households far more exposed to economic shocks. Ultimately, stronger, shared growth is the only sustainable route out of this.”
Buyer interest remains high
In the above research, Zoopla said fears of a ‘market crash’ and double-digit price falls are unfounded. In fact, the website insists there is no sign of a significant fall in buyer interest in response to higher mortgage rates and cost of living pressures.
Although demand for homes has slowed so far in 2022, compared to the record highs of the last few years, it still remains 25% above average over the last five years. It’s also broadly on a par with the same period last year.
The firm said a ‘stronger than expected desire for households to move’ means that housing sales are, in total, expected to hit 1.3 million by the end of 2022 - some 100,000 more than was originally forecast at the start of this year.
As a result of this, the rate of house price growth is slowing less quickly than had been anticipated. So much so, that by the end of the year, prices are expected to have risen 5%, sending the average value of a home to almost £260,000 by December.
The Zoopla research also found that the pandemic is still playing its part when it comes to moving habits, with buyers continuing to seek homes that offer a good work-life balance. The desire to move is currently outstripping the economic headwinds faced by prospective purchasers, Zoopla said.
The rapid rise in working from home is supporting a continued desire to move home, with a consumer survey recently carried out by Zoopla uncovering a strong link between expectations of working from home and strength of desire to move. It found that those working from home were 5x more likely to move than those who don’t see any changes in their working patterns.
Forecast for 2023
Richard Donnell, executive director of research at Zoopla, is advising prospective buyers and seller not to panic despite the expected drop in growth rates.
“The ongoing impact of the pandemic continues to support a desire to move amongst home buyers. This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly priced homes, especially in more affordable areas,” he said.
“The housing market is not immune from higher mortgage rates which we are starting to see increase quickly. Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further.”
He added: “Whilst we don’t expect current trends to lead to a marked drop in house prices next year, buyers will become more wary, and it is important sellers are realistic when pricing their homes to sell.”
Here atMusgrove & Co, we are an independent estate agent providing local market expertise in Norfolk. Our goal is to offer a seamless property selling journey, while adding value wherever we can.
For more information, please contact us today at either or Norwich or North Walsham office.
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