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(Bloomberg) — UK homebuyers are starting to get property discounts in the latest sign of turmoil in the country’s housing market.
According to a report by property portal Zoopla, for the first time in 18 months, agreed prices fell below asking prices last month. The average discount rose to 2.4% in the week ending November 19, the highest since January 2021.
Zooplan expects the discount to widen further as buyers benefit over sellers dealing with the threat of falling home prices. According to Zoopla, one in 10 homes for sale have reduced their asking price by more than 5% since September, with the biggest drop in southern England where sales activity has fallen the most, according to Zoopla.
Transaction volumes currently include offers that were agreed ahead of then-Prime Minister Liz Truss’ mini-budget on September 23 and as mortgage rates rose, sales could fall and discounts could widen further. According to broker Hamptons International, it takes an average of 129 days this year to go from accepting an offer on a home to completion.
Anisha Beveridge, head of research at broker Hamptons International, said, “The majority of completions showing up in data sources such as HMRC and Land Registry at the moment are from buyers who locked in lower mortgage rates some time ago.”
Most mortgage offers made this summer will be for six months, meaning many issued before the mini-budget are still working their way through the system. Once this lag closes, downward pressure on house prices will increase, according to broker Knight Frank.
“We don’t expect the kind of cliff-edge moment we saw during the global financial crisis,” said Tom Bill, head of residential research at Knight Frank. “But as a new credit landscape emerges after 13 years of ultra-low rates, we believe prices will fall by around 10% over the next two years.”
A positive for sellers is that strong home price growth due to the pandemic should give them more wiggle room when it comes to negotiating price. The prospects for 2023 depend on how sellers are willing to adjust values in line with what buyers are willing to pay, Zoopla said in its report.
“The housing market is adjusting to the reset in mortgage rate levels,” said Richard Donnell, Zoopla’s executive director. “While the outlook for house prices remains weak, we see a shift to more demand-driven incentives to support sales volumes in 2023 and beyond.”
©2022 Bloomberg LP
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