Any landlord quitting the market and selling up may find demand from buyers muted until Easter.
That’s the warning from Zoopla which says that while demand in early 2023 so far has been in line with pre-pandemic levels, a portion of buyers are holding off entering the market and waiting to see if house prices and mortgage rates start to fall more quickly.
In its latest market snapshot the portal says demand for homes has rebounded in the first weeks of January but is more of a slow burn than in recent years.
The scarcity of supply in the sales market is also reversing - the average estate agent now has 23 properties for sale, up from a low of just 14 homes in early 2022. This will not only provide more choice for would-be buyers, but it will also reduce the pressure on prices.
Zoopla warns that a key risk to overall sales volumes for 2023 is unrealistic seller expectations. Serious sellers will need to ensure their home is competitively priced in order to secure a sale - however as the majority of homeowners have made sizeable gains in their home value over the pandemic, there is more room for realism on pricing.
Value-conscious early buyers have apparently shifted their buying preferences towards flats with over a quarter of new buyers (27%) now looking for one and two-bed flats, up five per cent in comparison to a year ago.
In contrast, the share of demand for three-bed houses has fallen five percentage points to 39 per cent, although they are still the most in-demand homes across the UK. This is a trend we are seeing across all areas of the UK in the first few weeks of the year as early buyers seek better value for money. In London, one- and two-bed flats account for 49 per cent of demand, up from 42 per cent a year ago.
The snapshot reports: “Buyers will remain cautious in the next few weeks before an anticipated pick-up in demand after Easter when a clearer picture emerges. However, much depends on the economic outlook, the strength of the labour market and the trajectory for consumer price inflation.
“The pressure on incomes, combined with the costs of running homes is also likely to drive a certain amount of movement in the market in 2023. Sizeable amounts of embedded equity in millions of homes may also encourage more down-trading to release equity and cut running costs - further supporting home moves in 2023.
“In the short term, low single-digit price falls in H1 2023 are anticipated, but the housing market is in better shape to deal with the headwinds than in previous economic cycles.”
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