In a recent report, analysts have said that the demand for new homes in the UK is falling on the back of a series of base rate hikes. While demand and transactions were healthy during the early part of the year, Zoopla claims that things are starting to slow down, although property prices are still up.
Figures show that house prices increased by 8.3% in the past twelve months, which equates to an average increase of just under £20,000. According to the research, the average price of a home has now increased to £256,900. In addition, Zoopla data shows that house prices continue to rise, with the average property price for first-time buyers growing by £33,000 to £269,000 year on year.
Weaker demand despite house price surge
Zoopla analysts said that despite the surge in house prices still being experienced, there are signs of weaker demand. They believe this is down to a combination of soaring living costs and the spate of rate hikes implemented by the Bank of England since last December.
The series of rate hikes over the past eight months has included five increases of 0.25% each, followed by the latest more considerable rise of 0.5%. These rises have taken the base rate to 1.75%, and mortgage rates are expected to continue climbing.
Data showed that demand for new homes did vary based on region, with demand tending to be weaker in areas of high-value properties. Zoopla highlighted London as experiencing weaker demand, and as mortgage rates continue to rise, this trend is likely to worsen.
In addition, the rate at which property prices are increasing in the capital is way behind the UK average, according to the latest figures.
Earnings need to rise to aid affordability
With mortgage rates expected to be hiked further this year, analysts claim that first-time buyers will need to earn £12,250 more in order to afford a home. For those looking to purchase a home in London, this figure rises significantly to £35,000.
Zoopla also pointed out that the number of days it takes to sell a home on average has increased in the last few months. In April, selling a property took an average of 19 days, but this has now grown to an average of 22 days.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “The property market may not be as safe as houses, because while annual price rises are still impressive, there are signs of weakness creeping in. Demand is getting shakier, and the first-time buyers who have been propping the market up are feeling the strain.”