Committed buyers are holding firm

The UK housing market is seeing steady levels of sales activity despite rising uncertainty linked to events in the Middle East.

According to property portal Zoopla’s latest House Price Index, tensions are pushing up mortgage rates and reducing buyer demand, but the market remains active.

As some households start to delay moving decisions, the market is increasingly being driven by a smaller group of committed buyers.

This is creating a growing gap between weaker buyer demand and more stable levels of sales agreed.

Zoopla’s data shows that buyer demand has been running below last year’s levels across the first three months of the year.

Demand has weakened further over March, reflecting the impact of events in the Middle East, with buyer enquiries 13 per cent lower than a year ago as potential buyers adopt a more cautious “wait and see” approach.

Average mortgage rates have increased by 0.4 percentage points in the last month, with many sub-four per cent deals being withdrawn as financial markets and buyers, adjust to uncertainty over the inflation outlook.

However, sales agreed are proving more resilient than demand, registering a decrease of just two per cent year-on-year.

This reflects the continued presence of “committed movers” – buyers with mortgage offers agreed and/or a clear need to move – who are continuing to support the number of sales agreed.

This gap between buyer demand and more stable sales agreed is reflected across the country.

Buyer enquiries have decreased by between seven and 19 per cent year-on-year, with the largest decline in active buyers recorded in the North East and West Midlands, albeit with enquiries falling off a high base compared to last year.

Meanwhile, sales agreed are holding up more consistently, with more modest declines in northern regions of England, again off a high base.

Unlike buyer demand, sales agreed are flat or slightly higher in some regions – such as Wales, Yorkshire and the Humber and London – compared to last year.

At the same time, the overall number of homes for sale has increased by six per cent year on year, reflecting a continued desire among homeowners to move despite the more uncertain backdrop.

A significant proportion of transactions is also less sensitive to rising mortgage rates.

Around a quarter of sales are cash purchases, while many existing homeowners have built up equity and secured borrowing in advance, reducing the impact of higher mortgage rates.

This is helping to support sales in the short term, but also highlights growing reliance on less mortgage-rate sensitive buyers.

Richard Donnell, executive director at Zoopla, said: “The market remains active, but is becoming increasingly reliant on a smaller pool of serious buyers.

“Some early stage buyers are adopting a wait-and-see approach but there is a sizable group of committed buyers who are pressing ahead with housing purchases.

“If mortgage rates stabilise at current levels, we expect sales activity to continue to hold up well compared to last year.

“Further increases in borrowing costs could weaken demand and impact sales volumes later in the year.

“The outlook is far from clear, although over the last week we have seen a uptick in demand that has narrowed the gap to last year, reflecting how some buyers paused on uncertainty and have subsequently decided to resume with the search for their next home while keeping their options open.

“For buyers, there is less competition and more choice, but affordability is becoming more stretched.

“For sellers, homes are still selling, but buyers are more selective and price-sensitive.”