An end-of-year assessment by Zoopla suggests the price of flats across the UK have underperformed the rest of the market and are likely to see increased demand in 2023 as buyers seek better value for money.
The pricing of flats has lagged that of houses which have been more in demand while flats have suffered from cladding and leasehold problems. The average value of a house outside of London is now 2.1 times more expensive than that for flats - the greatest gap for over 20 years and an opportunity for those seeking value for money, the portal says.
Whilst year on year house price growth across all property types on average remains at 7.2 per cent, quarter on quarter price falls are expected in the first half of 2023 as the quarterly growth rate more than halves from over two per cent in H1 2022, to 0.3 per cent today.
Cost of living pressures and higher mortgage rates means the demand for homes is down by half - literally 50 per cent - as buyers hold out to see what the market holds in January and early 2023.
The number of sales being agreed are holding up better, down 28 per cent year on year, however many sellers are having to accept bigger discounts - four per cent off initial asking prices in November on average - to achieve a sale.
Despite this, average UK house prices increased by £17,500 in the last 12 months although Zoopla expects prices to fall by up to five per cent in 2023. Whilst buyer interest has fallen sharply, committed buyers still remain in the market.
The portal also notes that the pandemic saw people moving from urban areas in a ‘search for space’, afforded by the onset of more flexible hybrid working and a big increase in retirement by older workers. Many buyers relocated to rural and coastal areas across the UK, pushing up house prices in the South West, Wales, Kent and Norfolk.
Buyer interest in affordable, accessible urban areas is holding up.
Levels of demand, compared to the five year average, is strongest in Bradford (61 per cent), Swindon (57), Coventry (47), Crewe (47), Southend (47) and Milton Keynes (45 per cent) - all areas which have their own employment base, but are also adjacent too, or have good transport connections into much larger employment centres, such as London, Leeds, Manchester and Birmingham.
Continued employment growth will further stimulate housing demand over 2023 in these affordable city regions.
Zoopla forecasts that in 2023 affordable urban areas and apartments are expected to see pricing perform better than the UK market. Lower value housing markets are less exposed to the impact of higher mortgage rates than higher value markets where mortgages tend to be larger.
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