Property prices record lowest monthly growth for nearly three years as economic outlook ‘drags on activity’ according to Zoopla
Property prices increased at the lowest monthly rate since 2019 in May, according to Zoopla, as the economic outlook and base rate rises began to ‘drag on sentiment and activity’.
Prices rose 0.1 per cent during the month, the smallest monthly increase since December 2019, according to the property portal’s house price index.
In the year to May, home values increased 8.4 per cent, compared to 9.2 per cent in the year to April.
Year-on-year growth: Zoopla said house prices increased 8.4% in the 12 months to May
On a quarterly basis prices increased by 1.4 per cent, the slowest since March 2021. The typical home is now sold for £251,550.
Zoopla predicted that, while levels of property price growth would reduce for the rest of the year, house prices would not go down.
It estimated that prices would grow 3 per cent in the year to December 2022.
‘We expect price growth to start to fall back, reflecting the fact that buyer demand is starting to normalise from record peaks, although it is crucial to highlight that demand levels are still more than 30 per cent higher than the five-year average,’ it said.
‘The economic outlook, and multiple base rate rises, will act as a drag on sentiment and activity as we move through the rest of the year.’
While Zoopla said demand for properties was still high compared to the five-year average, it said it was beginning to recede to ‘more normal levels’.
It reported that the average time to sell a home, from listing to sale agreed, was rising having gone 20 days in March to 22 days in May.
Demand dip: While buyer appetite remains higher than the five-year average, it is declining
The easing off of demand, Zoopla said, was due in part to increasing mortgage rates following the successive rises in the Bank of England’s base rate.
Buyers are now facing average rates of 3.37 per cent for a five-year fixed-rate loan, according to Moneyfacts, compared to 2.64 per cent in December 2021.
This, Zoopla said, would increase the annual cost of a loan for an average priced home (£250,000) with a 25 per cent deposit and 25-year term by £870.
Gráinne Gilmore, head of research at Zoopla, said: ‘Buyer demand is still strong in the housing market, but signals are emerging that the impetus may be easing, so those who want to make a move should investigate their options sooner rather than later.
‘In addition, mortgage rates are likely to continue to climb, so locking into a rate shortly could save hundreds over the longer-term.’
Table topper: Wales saw the biggest growth in house prices at 11.4%, Zoopla said
Wales leads price growth while London lags
Wales had the most marked price growth, according to Zoopla, with prices up 11.4 per cent on the year, while London saw the least growth at 3.9 per cent. This was similar to the Nationwide report yesterday.
Of the UK’s largest cities, Nottingham had the highest price growth in the year to May at 10.4 per cent, taking the average home value to £190,300.
This was followed by Bournemouth at 10.2 per cent. The Dorset town toppled Hastings as the southern coastal area with the most rapid rate of house price growth.
The fastest-moving market was the South West, Zoopla said, with the average length of time taken between listing a home and agreeing a sale sitting at less than three weeks (19 days).
Nick Leeming, chairman of estate agent chain Jackson-Stops, said: ‘It’s unsurprising to see the South West market going against the cooling tide.
‘Our Exeter office saw a near 40 per cent uplift in buyer enquiries in May, heavily outpacing the level of instructions there. This allowed some sellers to be more bullish in their requests – pushing up competitive bids and testing the agility of buyers for a quick move.’
But Zoopla also said buyer demand for houses in the South West had seen the sharpest decline over the last month, falling by 14 per cent – though it remains 37 per cent above the five-year average.
Homes in London are staying on the market longest, with an average of 35 days between listing and a sale being agreed.
Zoopla has predicted that house prices will, on average, grow by 3% in the year to December
Leeming added: ‘I think we’ll look back and note the first quarter of 2022 as the absolute pinnacle of post-pandemic related enthusiasm, with an incredible amount of pent-up momentum.
‘But the trampling on shoulders amongst buyers that we’ve seen is unlikely to sustain. It’s now apparent that April will be looked back on as an inflection point of the market.
‘We are already seeing many over-ambitious sellers coming back down to the realms of reality.
‘The summer market will likely be characteristic of a steadier future. What we are seeing is more supply coming to the market in most regions, partly in the belief that house prices are peaking, but also to lock in the best mortgage rates as the era of ultra-cheap money comes to an end.’
Best mortgage rates and how to find them
Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.
If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal.
To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.
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