As the housing market starts to slow, if you’re looking to sell your home, now’s a good time to do it.

The average UK property price has remained broadly unchanged this month, rising by just 0.1% since May, according to our latest House Price Index.

That’s the lowest rate of monthly price growth since December 2019, while the quarterly growth of 1.4% is the slowest since March 2021.

Year on year, property prices are up 8.4%, down from +9.2% in April and the rapid house price growth seen across the UK since the start of the pandemic has finally peaked.

Demand for properties still remains strong at 40% above the five year average, but that demand is beginning to decline week on week, as the market returns to more ‘normal’ conditions.

With that in mind, sellers looking to capitalise on gains made during the pandemic-driven property boom should act sooner rather than later.

The proportion of listings where asking prices have been reduced is also rising.

One in 20 properties (or 5.1%) showed a reduction of 5% or more in May. That’s up from 4.7% in April.

The average price reduction is 9%, which, when applied to the average property price, equates to a discount of around £22,500.

That said, the number of new sales agreed is 21% above the five year average, showing there is still plenty of appetite among buyers, so now is still a good time to sell.

Gráinne Gilmore, Head of Research at Zoopla says: “Buyer demand is still strong in the housing market, but signals are emerging that the impetus may be easing, so those who want to make a move should investigate their options sooner rather than later.

“In addition, mortgage rates are likely to continue to climb, so locking into a rate shortly could save hundreds over the longer-term.

“There are many factors supporting the price growth seen since the start of the pandemic, not least the continued imbalance between demand and supply, but the increasing cost of living, increasing mortgage rates for buyers  and cloudier economic outlook will act as a brake on house price growth through the rest of the year.”

Where properties are being snapped up right now

Wales continues to be the hottest UK property destination, registering the highest price growth yet again at +11.4% year on year.

While this is down from a high of 13.4% in February, homes in Wales have risen by an average of £32,000 in the last 24 months, taking the typical house price to £192,500.

Homes are also selling like hotcakes in the South West, where properties are taking just 19 days to sell, subject to contract, from first being listed.

The South West has been basking in high levels of demand since the pandemic began, as  buyers swiftly prioritised rural and coastal settings as their places of preference.

A similar picture is emerging in Bournemouth, where price growth is up 10.2%, making it one of the cities with the highest levels of growth in the year leading up to May 2022.

That said, these speedy sales are expected to slow this year, as buyer demand for homes in the South West is seeing one of the sharpest declines over the last month, down 16%, despite demand for houses remaining 37% above the 5-year average.

Across the UK, the average time to sell (that’s the time between when a property’s first listed and when it becomes sold, subject to contract) is rising.

It’s now 22 days for May compared with 20 days in March, while the time it takes to get to the point of exchange is now averaging around 170 days – around five and a half months.

All of this suggests that buyers who want to move this year should consider putting their home on the market now.

Demand for holiday homes on the up

The holiday lettings industry has also played its part in boosting buyer demand since the pandemic began.

Around one in five purchases in the South West in 2020-21 were additional dwellings.

In the North of England, this figure was 26%, while in the capital it was 29%.

Where the property market’s a little cooler…

London continues to show the slowest price growth, with average property prices up +3.9% year on year, rising £30,000 over the last 24 months to £516,100.

Homes in London are currently taking the longest time to sell at 35 days.

The London market has been lagging behind the rest of the UK since the pandemic began, with the capital showing the humblest levels of house price growth since February 2020.

However, the tide is turning for the city. Buyer demand remains higher than the 5-year average – and 35 days to sell is significantly lower than the five year average of 50 days for May.

Meanwhile, prices in Aberdeen are down 2% on the year, a decrease of £6,400 over the last 24 months, meaning the average house price is now £140,200.

What do higher interest rates mean for house prices?

As the cost of living continues to bite, mortgage rates are rising as the Bank of England increases interest rates in an attempt to combat rising inflation.

Buyers are facing average rates of 3.37% for a five-year fixed-rate £250,000 loan now (with a 25% deposit), compared to 2.64% in December.

That means the annual cost of a £250,000 loan has increased by £870.

If five-year mortgage rates continue to rise by more than another basis point, taking them to around 4.62% (levels last seen in April 2010), the annual cost of a mortgage repayment would climb by £2,500, compared to December 2021.

If you’re a homeowner looking to move in the next two years

The rate of house price growth is expected to slow to 3% through the rest of the year, with prices rising at less than half the rate registered last year, where they were up 8.4%.

However, property prices are unlikely to decline as demand for housing remains high, despite falling back from record levels.

And the stress-testing for mortgages introduced since the global financial crisis means that many homeowners have proved their income can withstand rising interest rates.

That means the number of forced sales, which have a negative impact on pricing, is likely to remain limited.

The recent announcement that stress testing rules will be adjusted for borrowers, so they’ll no longer have to prove they can afford repayments at the Standard Variable Rate +3%, will mean some additional borrowers will be able to access loans, especially first-time buyers.

Mortgage affordability rules relaxed by Bank of England

However, the move is unlikely to make a significant change to lending levels, as the general rule for lending to be limited to 4.5 times a borrower’s income remains in place.

Plus, the majority of homeowners are also locked into a fixed-rate mortgage, meaning they are protected from the current interest rate moves.

Fortunately, the UK is currently enjoying a buoyant employment market, helping to offset the more challenging inflation environment for now.

Where is the market going in the next 3-6 months?

House price growth remains strong by any measure. The levels of annual growth seen over the last couple of months are the highest since late 2016.

However, there are now signs that the market is beginning to ease, despite demand levels remaining 30% above the five year average, as that demand is beginning to fall back from record peaks.

The market is still moving very quickly, but the time between listing a home for sale and that sale being agreed is starting to creep up, as the market returns to more normal conditions.

The economic outlook, and multiple base rate rises, are expected to lead to slower activity throughout the rest of this year.

That said, 1.2 million homes are expected to change hands across the UK in 2022.

Should I delay buying a home?

If you’re looking to buy a home, it’s best not to delay. House prices will continue to rise this year, albeit at a slower pace than we’ve seen over the past two years.

And Interest rates are likely to continue to increase, as the Bank of England tries to combat rising inflation, making borrowing more expensive.

If you’re looking to get a new mortgage or to remortgage, it’s best to choose a fixed rate option with the lowest possible interest.

Key takeaways

  • House price growth is starting to slow with property prices remaining broadly unchanged since last month
  • As the cost of inflation continues to bite, property prices are showing the lowest monthly price growth since December 2019
  • Buyer demand is still 40% up on the five year average, but is starting to gradually decline, so sellers should act quickly to capitalise on recent gains