Homes are 8% more expensive, but prices will be “fair” by the end of the year, according to Zoopla

House prices are 8 percent more expensive compared to people’s incomes, according to Zoopla, and will rise further by the end of the year.

The property website said the typical cost of a home has remained stable over the 12 months to May 2024.

However, he noted that prices were now rising in some areas and that figure would rise to 1.5 per cent by 2024 as a whole, which would equate to a rise of £3,900.

The typical house now sells for £264,900 according to their figures.

But despite the slow growth, Zoopla said the average home was still “overvalued” by 8 per cent in the first three months of this year.

This is based on their calculations, which measure the extent to which actual home prices are higher or lower than an “affordable home price,” based on household income and mortgage costs.

By the end of 2023, he said, home prices were 13 percent too expensive, thanks in large part to a rise in mortgage rates, and were 53 percent overvalued just before the 2008 financial crisis.

Zoopla predicts that although prices will rise this year, the average home will no longer be overvalued by the end of 2024.

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This is because people’s incomes are expected to increase to cover the additional costs.

Home prices are assumed to rise 1.5 percent and lower mortgage rates are assumed to remain at or below their current level of about 4.5 percent.

Several lenders have reduced their mortgage rates this week, in a sign of hope for the market.

Richard Donnell, chief executive of Zoopla, said: “The property market continues to adjust to higher borrowing costs through modest falls in house prices and increases in incomes.

‘Buyers who use mortgages also rely on longer mortgage terms to gain those few extra percentage points of purchasing power to purchase a home.

“Agreed sales have continued to rise and more homes for sale mean more buyers will be looking to move in the second half of the year.”

If the Bank of England decides to cut the base rate in August or September, as currently predicted, Zoopla said this could ‘boost market sentiment and sales activity’ but ‘the impact on fixed-rate mortgages is likely to be more muted.’

He said there are currently about a fifth more homes for sale than there were a year ago at this time, although “there are signs that market activity is starting to slow as we approach the quieter period of summer.”

Buyers have not been intimidated by the elections and sales being agreed are 8 percent higher than a year ago, Zoopla added.

North-South divide in housing prices

Data from Zoopla suggests house prices in the south and east of England have fallen over the last year as they ‘realign’ with people’s incomes.

In the east of England typical prices fell 1.4 per cent in the year to May, the biggest fall of any region.

This was followed by the South East (excluding London) with 1 per cent and the South West with 0.9 per cent.

By contrast, in Northern Ireland prices increased by 3.3% in the same 12-month period. The North West recorded the biggest growth in England, at 1.5%, and the North East saw a price rise of 1.4%.

Of the top 20 cities Zoopla monitors, Belfast had the biggest price rise, with the average home rising 3.4 per cent to £173,900. Bournemouth saw the most significant drop, falling 1.5 per cent to £331,700.

However, Zoopla said prices had increased in all regions in the three months to the end of May.