The housing market in the UK has long been characterised by a significant supply-demand
imbalance, resulting in soaring prices and limited affordability for many
prospective buyers.
However, in recent years, there have been indications that the
dynamics of supply and demand are gradually shifting. The question arises: Is
housing supply and demand starting to level out in the UK?
Signs of recovery
According to Zoopla’s latest House Price Index, pricing is showing
a sustained recovery in demand as the number of new sales
agreed continues to grow into 2023. House price inflation has slowed but the
property search portal affirms that a ‘major price re-correction’ remains
highly unlikely.
Demand for homes reached its highest level this year after the
Easter break and is 14% higher than 2019 levels, indicating a return to a more
normal market and a positive outlook for the remainder of the year.
The good news for first time buyers and prospective
movers alike is that the supply of homes for sale appears to be improving.
According to Zoopla, the stock of homes has expanded and is now 66% higher than
a year ago.
This boost in availability is opening up choices for buyers, which
has led to the number of sales agreed to jump by 6% when compared to a more
normal market of 2019.
Number of sales agreed is strengthening
The market remains on track for 500,000 sales in the first half of
2023, according to Zoopla. A rising number of sales agreed – or homes sold
‘subject to contract’ – is an
important indicator of market health as house prices continue to rise but
buyers remain undeterred.
The property search portal found that sales
agreed are 11% higher than 2019 levels and on an upward trajectory.
House price growth underpinned by demand
House prices in London and the South East are continuing to climb,
signalling that buyer demand in these regions is yet to slow down and
sellers are pricing accordingly.
House prices in Reading have increased by an average of over £2,000 in the month of
February, according to figures from the Land Registry.
The latest data from the government department reveals that in
February 2023, average house prices in Reading reached £334,745.
This was up from £331,853 in January, representing a 0.9% leap. This
marks a 10.4% increase in the last 12 months.
Motivations for home moves continue to support activity
The positive outlook for 2023’s housing market is likely shaped by
several factors supporting the desire to sell and move:
Hybrid and remote working
This has played a substantial role in market activity
since the pandemic, as working from home a few days a week is becoming common
for many office-based workers. This is granting many people the freedom to
search further afield for a home in their desired location, which might not
have been an option before.
More people retiring
It’s also worth noting that the pandemic induced a spike in
retirement, and this may well have triggered a great deal of home moves.
Increases in the cost of living
On top of this, cost-of-living pressures are set to encourage
downsizing and selling up larger homes that cost more to run.
Executive Director of Research at Zoopla, Richard Donnell says: “Last year saw a chronic undersupply of homes for sale, which
pushed prices higher but acted as a drag on sales completions.
There are 65% more homes for sale than a year ago. The average
estate agent has 25 homes available compared to a low of 14 homes this time
last year. This is a positive change and improves buyer choice, meaning sellers
need to price sensibly if they are serious about moving.
Sellers continue to make modest downward adjustments to asking
prices. This ensures pricing matches what buyers are prepared to pay. At the
same time, they are accepting discounts to the asking price averaging 4% or
£14,000. The scale of price gains over the pandemic enables sellers to adjust
pricing while continuing to agree sales, unlocking their desire to move and
supporting sales.”
