More than four in 10 UK house sellers are having to shave more than 5% off the original asking price to achieve a sale, according to Zoopla, in signs that rising mortgage rates are dampening the market. The property website said this proportion, seen in June, is the highest it has recorded since 2018. Around one in six, 15% of, sellers are having to shave more than 10% off the initial asking price to get a sale over the line,
Zoopla said. It said that with around 70% of sales being made to buyers who are relying on a mortgage, rising rates have delivered a hit to house hunters’ purchasing power. Zoopla’s report said: “Our view remains that 5% mortgage rates represent a tipping point, beyond which house prices will post annual price falls with lower sales volumes.”
The main points from the last Zoopla rental report:
- Rental inflation running in double digits for 15th consecutive month
- No let up in supply/demand imbalance as we enter busier summer
- period when demand typically increases by up to 40%
- Rents have grown faster than average earnings over last 21 months
- Rental costs as a proportion of earnings reach highest for a decade
- Emerging evidence of growing stress for renters on lower incomes
- Weakness in the sales market likely to support rental supply in H2
- Higher mortgage rates hit 20-30% of landlords with largest loans
- Landlord sales are concentrated in London and the South East
- where yields are lowest and extra equity required at refinancing
Landlords Exiting Creates Opportunities
The latest Zoopla report highlights that 1 in 10 homes for sale on the platform were formerly rented out and we all know landlords who have chosen to cash in for a variety of reasons.
These challenges can create opportunities for investors looking to expand their portfolio as there’s an increased chance of mutually beneficial deals being available.
One key reminder for investors is around cash and how crucial having a good amount of equity in a property can shield against the risk of mortgage rate rises.
Landlords looking to buy should be reminded that cash is king and that 80% (even arguably 75%) LTV could be leveraging too high where limited cash reserves exist.
Tenant Demand Is Extremely High
The rental market is one of supply and demand, meaning that with the availability of rental homes being 20-40% lower than pre pandemic levels means more renters are chasing fewer homes.