Zoopla: House prices have stabilised – but the clouds are looming

House price falls have slowed down, and are expected to remain static throughout the rest of 2023, Zoopla said in its house price index.

Prices fell by 1.3% in the past six months, though annual growth still stands at 1.9% in the year to May.

Some 18% of homes currently listed for sale on Zoopla have had the asking price cut by more than 5%, down from 28% in February.

In London prices have fallen by 0.2% in the past year.

Sarah Coles, head of personal finance, Hargreaves Lansdown, is worried the market could be damaged by more Bank of England base rate rises.

She said: “There are still plenty of positives – including higher sales, and fewer price reductions. However, to an enormous extent, the future of the market lies in the Bank of England’s hands.

“A strong labour market and gradually falling mortgage rates had helped accentuate the positive. In May, sales were 11% over the five-year average, and although both sales and demand are lower than last year, it’s worth bearing in mind that it was a bumper year.

“House prices continued to fall, but the rate of those drops eased, keeping annual prices in positive territory, and a fifth of properties on the market had seen price cuts – well down from the February peak.

“However, last week saw the dark clouds roll in. The rise in core inflation saw the market price in rate rises to around 5.5%. There’s a reasonable chance this is an over-reaction, and more evidence of a global slowdown could take some of the heat out of the swaps market and bring these expectations down. However, in the interim it’s bad news for mortgage borrowers.

“Higher mortgage rates would make it more difficult for new buyers to get an affordable mortgage, which could dampen demand and could bring prices down. Meanwhile, it could create problems for remortgagers, some of whom may be forced to sell up, boosting supply. An imbalance of supply and demand could dent prices.

“The extent of the impact will depend to some degree on how long higher rates last. If core inflation starts to move in the right direction, it may ease concerns about more rate hikes – making mortgage deals cheaper. However, if inflation remains stickier than expected, this could cause more serious issues for the housing market.”