House Price Index - February 2023
Housing market rebounds to pre-pandemic levels, but sellers face pricing challenges.
The housing market has shown remarkable resilience, bouncing back to pre-pandemic activity levels. However, sellers are now encountering a new reality, as they are required to offer discounts to secure sales, an amount equivalent to a third of the price gains observed during the pandemic.
Two contrasting perspectives on market performance have emerged. The glass-half-empty view compares the current year's trends with the red-hot conditions of the housing market a year ago. Conversely, the glass-half-full view examines the present market in comparison to the more subdued pre-pandemic years of 2017-2019, characterised by tougher trading conditions and more moderate house price growth.
Year-on-year comparisons are essential for businesses seeking to gauge their progress compared to the previous year. Data indicates that homebuyer demand has rebounded in the first two months of 2023, but it remains at around half the level recorded a year ago. Similarly, new sales volumes in early 2023 have recovered in line with the usual seasonal upturn, although they still stand 24% lower than the same period last year.
In reality, the current market conditions are more aligned with the pre-pandemic years, showing a demand 8% higher and sales agreed up 1%. This comparison serves as a more valuable benchmark for businesses as they plan strategies and investment decisions now that the exuberant market conditions of the pandemic years are a thing of the past.
Executive Summary:
Annual house price inflation has slowed to 5.3%, down from 8.6% in the previous year.
Buyer demand and sales volumes are 20-50% lower than a year ago but slightly exceed the levels observed in the pre-pandemic years (2017-2019).
To achieve a sale, sellers are now having to accept an average discount of 4.5% to the asking price, marking the highest figure in five years as a buyers' market emerges.
This average discount translates to around £14,000, requiring sellers to relinquish a portion of the price gains they experienced during the pandemic.
The housing market is currently experiencing a broad-based repricing phenomenon, and experts predict that UK house price inflation will move into low negative year-on-year territory by the summer.
The market remains on track for a soft landing, with modest price falls projected to reach up to 5% and an estimated 1 million sales expected in 2023.
