Agency stock grows but sellers must adjust expectations - Zoopla

Agents are seeing more stock coming to the market but Zoopla is warning about seller expectations.

The latest Zoopla House Price Index for January suggests the “scarcity of supply in the market is reversing,” with the average estate agent now listing 23 properties for sale - up from a low of just 14 homes in early 2022. 

Zoopla said a key risk to overall sales volumes for 2023 is unrealistic seller expectations. 

It said: “Serious sellers will need to ensure their home is competitively priced in order to secure a sale - however as the majority of homeowners have made sizeable gains in their home value over the pandemic, there is more room for realism on pricing.”

The report also highlights that the discounts to asking prices to achieve a sale widened quickly at the end of 2022 but said this gap is now holding at 3% to 4% and there is no sign of this worsening at this stage. 

Zoopla said: “This is important because if this gap widens, sellers will feel under increasing pressure to reduce asking prices putting further downward pressure on headline prices. 

“Additional modest price reductions are likely over the first quarter of 2023 as sellers continue to adjust asking prices in line with what buyers are prepared to pay.”

Zoopla’s data shows demand is up 10% on 2019 levels but remains 23% below the five-year average, while sales agreed are down 43%.

Buyers are also shifting their preference towards flats, particularly in markets adjacent to big cities, Zoopla said.

More than a quarter of new buyers are now looking for one and two-bed flats, up 5% annually.

In contrast, the share of demand for three-bed houses has fallen five percentage points to 39%, although they are still the most in-demand homes across the UK. 

Overall, the index recorded that house price growth slowed to 6.5% in 2022 from 8.3% at the end of 2021, with average prices ending the year at £261,200.

Richard Donnell, executive director at Zoopla, said:  “The first few weeks of the year have got off to a stronger start than might have been expected given how market activity stalled at the end of 2022. There has been a clear shift towards flats as the early buyers focus on value for money and adjust expectations given the hit to buying power from higher mortgage rates. 

“A proportion of existing homeowners are holding back waiting to see if sizable price falls materialise and how far mortgage rates fall back before entering the market. We believe demand for homes has room to improve further in the coming weeks. Anyone serious about selling needs to be realistic on the asking price and needs to ensure this is in line with what buyers are prepared to pay.”