House prices: UK home sellers increase discounts to secure deals

Introduction: UK home sellers increase discounts to secure deals

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UK house sellers are cutting asking prices to persuade buyers to reach a deal, as high interest rates continue to depress the market.

A new report from Zoopla this morning shows that buyers are managing to secure reductions even as the normally busy autumn selling season begins.

The average discount to the asking price rose to 4.2% in September, the highest since 2019, which equates to a reduction of £12,125.

In London and the South East, selling prices are 4.8% below asking prices, compared to 2.8% for the rest of the UK.

One in 10 house prices dropped by more than 10 per cent before finding a buyer, reports Richard Donnell, research director at Zoopla.

NEW @Zoopla HPI out today – 12% more buyers this month, who are unwilling to compromise on what they want, house prices -0.5% yoy. Still rooted in a buyers market with 4.2% gap between asking and achieved prices. 1 in 5 sales agreed at >10% below asking. pic.twitter.com/CiKu8bz5Oz

— richard donnell (@richard_donnell) September 28, 2023

This highlights how the housing market is continuing to adjust to higher borrowing costs. The 14 increases in UK interest rates since December 2021 have left people with much less buying power.

Zoopla points out:

The more than doubling in mortgage rates since last 2021 together with increases in the cost of living represents a big adjustment for home buyers and the wider market.

Its report also found that demand for homes has risen for the first time since the Spring, with enquiries to estate agents up 12% since the August bank-holiday weekend.

Buyer demand at UK estate agents Photograph: Zoopla

But, that still leaves demand still remains a third lower than a year ago.

Nathan Emerson, CEO of Propertymark, says buyers and sellers are finding an ‘affordable middle ground’:

“This recent report reiterates what our member agents are telling us.

Last month there was a 29% rise in the number of new properties for sale which shows many people are continuing to find an affordable middle ground when coming to the market and negotiations well underway.

The agenda

8am BST: Spanish inflation data for September
9am BST: ECB Economic Bulletin
10am BST: Eurozone consumer confidence for September
1pm BST: German inflation report for September
1.30pm BST: US GDP (final estimate) for Q2

Key events

Buyers don’t feel the need to compromise on space, if waiting on either house price or rate falls. But it also doesn’t stop buyers positioning themselves, should the right property, at the right price come along – hence 12% inc in enquires since Aug bank hols @Zoopla pic.twitter.com/cgCt2KowsI

— Emma Fildes (@emmafildes) September 28, 2023

UK mortgage payers making big changes to meet higher payments

Rupert Jones

A seperate report today shows that mortgage holders are making big changes to their finances to cope with dramatically higher monthly payments.

That can includes cutting pension contributions and downsizing to a smaller property, my colleague Rupert Jones reports.

Faced with either the immediate reality of higher mortgage costs or the prospect of a sharp rise in payments once an existing deal has expired, more than 1,000 mortgage holders were asked this month by KPMG whether they had either already taken, or were considering taking, action to deal with this.

About 18% said they had raided their savings in order to reduce what they owed, while 25% said they were considering doing this.

When it came to moving at least part of the mortgage over to interest-only, so the household clears just the interest that accrues on that part, thereby cutting monthly repayments, 16% said they had already done this, and 24% said they were thinking about doing so.

Zoopla’s latest data suggests recent falls in mortgage rates – as well as price discounts – are encouraging some potential buyers back to the housing market.

Victoria Scholar, head of investment at Interactive investor, says

“Zoopla said enquiries about properties listed on its website rose by 12% over the past four weeks, suggesting that the worst could be over for the UK’s struggling housing market.

A combination of the back-to-school season, disinflation, soaring rents, cooling house prices, and an improvement in mortgage offers have prompted potential buyers to revisit the property purchase market.

With the Bank of England keeping rates on hold and dwindling demand for borrowing, mortgage brokers are having to price their rates more competitively in order to attract customers.

Year-on-year property enquiries are still down, and mortgage rates are up, but dynamics have become slightly more favourable for potential mortgage holders in recent weeks. Seasonally, September is typically seen as a good month for the property market after the end of the summer lull and before the festive season kicks in, prompting more buyers to strike while the iron is hot, particularly with house prices dropping at their fastest pace in 14 years in August, according to Halifax.”

Zoopla also reports that house prices have fallen by 0.5% over the last 12 months.

That’s a lower estimate than Nationwide, which has reported prices by 5.3% in the last year, the fastest pace in 13 years.

Zoopla say:

Many households have delayed moving while more fixed-rate loans, tougher affordability testing and a robust jobs market means there are few forced sellers in the market.

Our index has recorded a 0.5% price fall over the last year – the first annual decline for over a decade, since June 2012. House price falls are concentrated in southern England where higher mortgage rates have had a bigger impact on pricing.

Photograph: Zoopla