‘Potential tipping point’ for housing market as buyers’ purchasing power is hit

Price sensitivity is showing signs of returning to the housing market as house hunters’ buying power takes a hit, according to a property website.

Zoopla said 6% of homes listed for sale have seen the asking price adjusted downwards by 5% or more, marking the highest level since before the coronavirus pandemic.

The website said that, given the economic backdrop and factors including rising energy prices and rising interest rates, this is a clear sign of a return to more of a buyers’ market, after two years of a market that favoured sellers.

The findings were released in a week when a slew of mortgage products have been pulled from the market and rates have been hiked, amid turmoil after the mini-budget last Friday.

Stamp duty cuts were made in the mini-budget, but the potential savings for buyers may be overshadowed by the prospect of higher monthly mortgage bills.

Richard Donnell, executive director at Zoopla, said: “A surge in home values over the pandemic and the rise of mortgage rates means we face a sizable hit to household buying power over the rest of 2022 and into 2023.

“While the recent changes to stamp duty are welcome, supporting activity in regional markets and the first-time buyer market in southern England, the increase in mortgage rates will erode much of the gains.

“Homeowners that want to sell their home this year need to price realistically and seek the advice of an agent on local market trends.”

Zoopla said price adjustments are to be expected as the market shifts from conditions where demand greatly exceeds supply.

Its report said: “We do not believe that this is a precursor for big price falls but an indication that the rate of price growth will start to slow more rapidly in (quarter four of 2022) and into 2023 as buyers react to the rising cost of borrowing.”

Marc von Grundherr, director of estate agent Benham and Reeves, said: “Higher mortgage rates are just one factor contributing to the cost-of-living crisis, but they’re certainly the most influential factor when it comes to the purchasing power of the nation’s homebuyers.

“The market is now at a bit of a tipping point where house prices have continued to increase rapidly, but the reality for many buyers is that they are no longer able to stretch themselves financially.

“This should be an important consideration for those looking to sell and a consideration that must be made when setting your asking price.

“Entering the market with over-ambitious asking price expectations is likely to see a property languish with little to no attention from prospective buyers.

“Yes, the latest stamp duty cuts will leave buyers a little extra in their back pocket when it comes to negotiating, but don’t be fooled into thinking this marginal saving will spur them into paying way over the odds for your home. It won’t.”