More London homes sold than usual this May, data has revealed, as buyers and vendors’ price expectations reached a compromise.
Zoopla recorded a spike in agreed deals in the capital despite falling demand, wobbling prices and a stagnant economy.
Sales in London were 10 per cent higher in the four weeks to May 21 than the average level over the past five years, the property portal found.
This comes against a backdrop of dampened home-hunting activity, a 0.2 per cent year-on-year drop in prices and soaring interest rates.
At an index reading of 109.7, where 100 represents the average of all four-week periods since May 2018, the latest figure represents the highest level of sales activity since last summer.
Meanwhile demand, measured by house-hunter activity, measured 93.3 on the Zoopla index this month, showing it was below average but still at its strongest since September 2022.
Renters looking to escape
Richard Donnell, executive director at Zoopla, said lower buyer demand did not have to translate to a drop in deals, as shown by the figures.
“[The increase in] sales is supported by more supply of homes as owners and landlords list homes for sale, boosting choice at the lower price bands, which are more affordable, especially to renters looking to get away from the rapid rise in rents,” he said.
Foxtons chief executive Guy Gittins said: “Demand for London property is caused by the backlog of needs-based buyers who were looking to move following Covid-19, which was so great it has yet to be satisfied, despite the increased cost to buy.”
Gittens added: “As well, given the extreme supply and demand imbalance in the lettings market, more renters who are in a position to buy have accelerated their search.
“New buyer activity has led to consistently higher viewing numbers than we have seen at any point in the last six years.”
Low house price growth helps buyers
Seller expectations are also getting closer to buyer budgets. Of 20 UK cities tracked by Zoopla, only Aberdeen and Belfast have seen residential values fall by more than London over the past year.
The property portal said relatively low house price inflation in recent years, allied with higher-than-average wage growth, had stimulated demand in the capital.
Potential borrowers undergo strict mortgage affordability tests — where lenders check whether you can still afford your mortgage should circumstances change or repayments increase — which may have softened the impact of 12 successive interest rate hikes.
Yet “values remain sensitive to mortgage rates rising above five per cent,” warned the Zoopla report.
“The more mortgage rates move above five per cent, the greater the impact on buying power and the more house prices will come under downward pressure. Banks increasing their affordability tests further than the current levels for new borrowers will compound this pressure.”
The study added: “The build-up of market momentum this spring is likely to weaken in the second half of the year with the scale of the impact depending on how much borrowing costs increase.”
UK-wide, just over one in 10 homes for sale in May were previously rented, according to Zoopla, slightly down from a pandemic-fuelled peak in 2020. The proportion of such properties returning to the lettings market has dipped from about half in 2018 to just a third today, further restricting supply in the sector.
