While prices continue to rise, the latest HPI found that signs of a slowdown are emerging as homeowners face increasing pressure on their finances due to the surge in cost of living.
Hargreaves Lansdown senior personal finance analyst Sarah Coles says: “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,” Coles adds.
Data showed that the cost of repayments for a new mortgage for an average UK home has risen by £71 a month, equating to £852 a year since the pandemic started in 2020.
Properties in Wales remain popular with buyers showing the strongest house price growth rates for the 15th consecutive month at 11.6%.
London is experiencing the slowest growth rate at 3.6%.
While house prices are up by an average of 8.4% year-on-year for April, the index suggests that the rate of house price growth is set to fall to +3% by the end of 2022.
Sales are taking longer with nearly all types of property taking a few days more to achieve a sale agreed compared to the month prior.
Outside of London, the average time between listing and sale agreed for a three-bed house is up from 16 days in March to 18 days in April.
The index found that the average time in London has increased from 17 days in March to 21 days in April.
Price reductions are also rising with an increased number of properties listed w. sellers have cut the asking price by 5%.
Since the second half of April, 5.1% of properties listed for sale had a price reduction compared with 4.7% in the previous 28 days, a pattern that Zoopla highlighted has been seen in every region.
An average reduction of 9% has been seen and when applied to the average home value, this equals a price reduction of around £22,500, the index found.
Regionally, one in 16 properties in the North East has been reduced in price by 5% or more in the four weeks to 15 May, while in the West Midlands, around 4.5% of listings have registered price cuts of 5%+.
Elsew., the index highlights that the market continues to see an imbalance in supply and demand with limited numbers of properties still coming to market.
Current demand sits at +61% based on the five-year average compared with the total supply of homes for sale -37% and driving market competition.
London has the smallest shortfall in stock, at -19% below the five-year average, while demand still remains strong at +55% above the long-term average.
Meanwhile, buyer demand is strongest in the East Midlands, with the market hugely competitive at +81% above the five-year average, while stock levels remain -32% down.
Zoopla head of research Gráinne Gilmore says: “High levels of buyer demand mean that the market is still moving quickly, but the time to sell – the time taken between listing a property and agreeing a sale – is starting to rise across most property types in most locations.”
“We expect that this measure will continue to rise during the rest of the year as buyer demand levels start to fall, punctured by changing sentiment around the cost of living and personal finances.”
“Another signal that the market is starting to soften is the number of properties w. asking prices are being cut by more than 5%. Someone in twenty properties has been re-priced this month, with the average new asking prices some 9% below the original.”
“The annual rate of price growth will ease this year, on a monthly basis, price growth has already moderated. A continuation of this trend, even with some small monthly declines, means price growth will reach +3% by the end of the year,” Gilmore adds.
Hargreaves Lansdown’s Coles explains: “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,” she comments.