Zoopla House Prices Index: Latest UK sold prices data and forecast for housing market amid mortgage rate rises

House price inflation has continued to slow down compared to last year but may now be stable for the rest of 2023, figures from property listing website Zoopla have suggested.

Its house price index - one of several NationalWorld covers on a monthly basis - showed average prices were 1.9% above those seen in May 2022, having fallen 1.3% since Liz Truss’s Mini Budget. Although this marked a deceleration in the rate of inflationary decline seen in Zoopla’s estimates over the last six months, it warned prices could yet plummet as a result of the mortgage market turmoil seen in the wake of the release of April’s inflation figures.

The headline rate of the CPI failed to fall by as much as economists had forecasted, with rocketing food prices keeping the rate above expectations. An unexpected increase in core inflation, a metric the Bank of England follows closely when setting interest rates, has added to fears that cost of living pressures will not abate as quickly as had been hoped.

It means it is likely that the Bank of England will increase its interest rate - the main tool it uses to control inflation - at least once more before the end of 2023. Markets are already pricing in an increase to 5.5% by the end of the year, with mortgage rates rising accordingly.

So, what else did Zoopla find in its latest HPI - and what does it think will happen in 2023?

What does the latest Zoopla House Price Index show?

The latest Zoopla HPI for the four weeks to 21 May 2023 showed yet another dip in the rate of UK house price growth. Annual inflation fell to 1.9% - although the property listing website said the rate of decreases had slowed due to improving buyer confidence.

The average price of a UK home now sits at £260,700, Zoopla says - 1.3% lower than it was six months ago - as prospective buyers continue to grapple with higher mortgage costs and the cost of living crisis. But agreed sales actually increased 11% compared to the five-year average for the period, which suggests market confidence has improved.

The situation has been helped by an increase in the number of properties available for purchase. Listings are 16% up against the five-year average, with 11% of the homes on offer having formerly been rented properties. It comes as landlords have abandoned the lettings market en masse due in large part to higher mortgage costs.

But Zoopla warned that anyone putting their property on the market should be realistic about their price expectations. It said 18% of the homes currently listed for sale on its site have had their asking prices cut by 5% or more. These cuts tend to come eight weeks after a property has first been listed in a bid to drive up buyer interest, the website said.

Looking ahead, the property listing website said it expects prices to remain broadly static throughout the rest of 2023. However, it added that any move to increase interest rates - which are widely expected to go up after April’s worse-than-expected inflation data - could serve to bring prices down further off the back of reduced demand in the second half of the year as potential buyers get hit by pricier mortgages.

Richard Donnell, executive director at Zoopla, said: “Falling mortgage rates in recent months together with the strength of the labour market has brought more buyers and sellers into the market. There are still fewer buyers in the market than a year ago, but sales are still being agreed with more homes to choose from.

“Sellers shouldn’t get carried away by more positive data on the housing market and need to price their homes realistically if they are serious about moving home in 2023. Home buyers remain price sensitive with one eye firmly on the outlook for the economy, the cost of living and the trajectory of mortgage rates, which appear likely to edge higher in the coming weeks.”

Zoopla said mortgage rates of between 4% and 5% tend to see house price growth of between +2% and -2%, and the sale of around a million homes per year. If rates begin to edge above 5%, it warned that “more house prices will come under downward pressure”.

It added that the only reason why there hadn’t been a major drop in house prices since the Liz Truss Mini Budget was down to Bank of England mortgage regulations. With legally-required stress testing meaning households have had to show they can afford rates of 6.5% to 7%, Zoopla says current higher rates have had a “less pronounced” impact on lending levels in the market than they would have had in the past.

How do house prices compare across the country?

Zoopla’s research has continued to find that people are now favouring the most affordable areas over those that have seen the biggest price increases over the last seven years.

While earnings have grown 30% over this period, according to Zoopla analysis, most nations and regions have seen house price inflation outpace this rate. Wales in particular has led the way, with prices growing 47% since 2016. At the other end of the scale is London, where prices have gone up 12% (albeit from a much higher base). Scotland, the South East and North East have also grown at a pace that has been slower than wage growth.

According to the latest monthly figures, the strongest annual house price growth has been seen in Wales (+3.6%) followed closely by the West Midlands (+3.5%) and Yorkshire and the Humber (+3%). London was the only area to post a decline, with prices deflating 0.2%. Northern Ireland was the next weakest in the UK, with a rate of +0.5%.

Biggest annual growth increases (%)

• Nottingham: average price is £202,100 (+3.9%)
• Birmingham: £206,800 (+3.8%)
• Manchester: £219,900 (+3.6%)
• Leeds: £209,600 (+3.4%)
• Sheffield: £171,600 (+3.4%)

Weakest annual price changes (%)

• Aberdeen: £136,400 (-2.4%)
• Belfast: £166,500 (-0.6%)
• London: £523,100 (-0.2%)
• Oxford: £452,200 (+0.1%)
• Glasgow: £142,400 (+0.7%)