UK Homes for Sale Hit Eight-Year High, But Buyers Stay Cautious

Economic

Summary:

Seller confidence jumps with 20% more houses on market in May. Supply is outpacing agreed sales as borrowing costs stay high.

Houses for sale in Britain hit an eight-year high in May in another sign the UK property market is recovering from last year’s slump, even as prospective buyers remained cautious due to high finance costs.

New housing supply is growing faster than agreed sales on improved optimism, according to a report by property portal Zoopla. The average UK estate agent had 31 homes for sale in the four weeks through May 19, the most since the firm started collecting such data in 2017 and a 20% increase from the same period a year earlier. That suggests homeowners are regaining confidence after last year’s interest-rate increases prompted many to delay listings.

Sales of family homes are recovering quickly after a chronic supply crunch during the pandemic, the Zoopla report showed. A rebound in sales of houses with more than three bedrooms boosted the total value of property on the market to £230 billion ($293 billion) in May, Zoopla said. That’s £45 billion more from a year ago.

UK Homes for Sale Hit Eight-Year High, But Buyers Stay Cautious_1

However, while a much-needed increase in supply is likely to keep house price inflation stable, buyers are still treading carefully as mortgage costs remain near the highest in four decades. The number of sales agreed in May increased 13% year-on-year, but across most regions buyer confidence seems to be lagging behind those with a property to sell. Almost a third of homes currently available for sale were also listed for sale in 2023 but failed to find a buyer.

Persistent problems with affordability are holding back buyer demand. The average UK house cost around nine-times average earnings in late 2022, the highest since 1876.

With the latest British inflation reading coming in stronger than expected, the prospects of a cut in interest rates in June have faded. That means the cost of borrowing remains an obstacle for many aspiring home buyers despite a slight drop in mortgage rates from last year’s highs. Some big lenders have also increased mortgage rates recently in response to rising swap rates, which are used to set the bulk of mortgage products.

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Though national elections, set for July 4, are set to slow the pace of new home sales in coming weeks, the impact of the earlier-than-expected polls is likely to be less influential than previous election periods, Zoopla said, citing the lack of a significant policy divide over housing between the UK’s two main political parties. Sales completions over 2024 may now fall slightly short of the 1.1 million previously forecast for 2024, the platform said, with UK house price inflation expected to stay flat this year.

Tom Bill, the head of UK residential research at Knight Frank, said that those looking for clues about property prices should track the next inflation data rather than campaign promises of political parties.

“Growing supply is one reason that UK house price growth this year will be limited to low single digits,” Bill said. “However, the main obstacle for buyers is stubborn services inflation, which is keeping mortgage rates high.”

Source：Bloomberg

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UK Homes for Sale Hit Eight-Year High, But Buyers Stay Cautious

Source：Bloomberg

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