The desire to downsize: How interest in one and two-bed flats is rising with nearly 50% of demand for apartments due to spiralling UK mortgage rates
- Two bedroom flats account for 27 per cent of housing market demand
- Zoopla suggests buyers are looking to make their budgets stretch further
- One modern two-bedroom flat in Shoreditch, London, is £675,000
Prospective UK homeowners’ preferences appear to be swaying towards flats as the cost of running a home has increased.
As a result of mortgage rates skyrocketing, more than a quarter (27 per cent) of conscious buyers are now looking for one and two bedroom flats, which is from 22per cent in January 2022 according to Zoopla.
In London, one and two-bed flats account for 49 per cent of demand, seven per cent up from a year ago.
Three bedroom houses remain the highest in demand with 39 per cent of new buyers in the market for them. However, this proportion has fallen back from 44 per cent since January 2022.
Zoopla suggested that the reasoning behind this is that buyers are looking to make their budgets stretch further as it has become a trend across the entirety of the United Kingdom in the first few weeks of the year.
This two-bedroom flat on Goldsmiths row, London, is on sale for £675,000. It has two bathrooms and one reception room
The 975 square feet London flat has a modern exterior and is nearly £500,000 above the average asking price for a two-bedroom flat in the UK
In London, one and two-bed flats account for 49 per cent of demand, seven per cent up from a year ago
One two-bed flat in Shoreditch, London, is currently on the market for £675,000, and boasts two bathrooms and one light-filled reception room.
Outside London, the average two-bed flat listed for sale on Zoopla – at £196,000 – is nearly £100,000 cheaper than an average three-bedroom home (£293,000).
This makes the flat in Shoreditch almost £500,000 more expensive than the average asking price for a two-bed flat in the UK.
The website demonstrates that the biggest increases in the proportion of demand for flats have been in towns which are within commuting distance to major cities, including in places such as Slough, Watford, Huddersfield and Stockport.
It collected data from its own website to make the conclusions, based on would-be buyers contacting estate agents to ask about and arrange viewings for homes listed on Zoopla.
Zoopla also suggested a number of people may look to downsize to a smaller property with cheaper running costs in the months ahead, which may help to support housing market activity in 2023.
This two-bedroom maisonette in Alexandra Park, north London is on the market for £650,000
The maisonette has one bathroom and one reception room inside an attractive period property
Prospective UK homeowners’ preferences appear to be swaying towards flats as the cost of running a home has increased
A number of people may look to downsize to a smaller property with cheaper running costs in the months ahead
One two-bedroom maisonette in Alexandra Park, north London is on the market for £650,000 as is situated inside a spacious period property.
Richard Donnell, Executive Director at Zoopla said: ‘There has been a clear shift towards flats as the early buyers focus on value for money and adjust expectations given the hit to buying power from higher mortgage rates.
‘A proportion of existing homeowners are holding back waiting to see if sizable price falls materialise and how far mortgage rates fall back before entering the market. We believe demand for homes has room to improve further in the coming weeks.’
Despite demand in early 2023 becoming in line with pre-pandemic levels, a portion of buyers are still holding off entering the market and waiting to see if house prices and mortgage rates start to fall.
Additionally, the scarcity of supply in the market is reversing, meaning that the average estate agent now has 23 properties to sell – up from 14 in early 2022. Not only does this provide more opportunity of choice for buyers, but also it will reduce the pressure on prices.
This one-bedroom flat on Gransden Avenue, London, is on sale for £579,950
The 569 square feet flat boasts a modern exterior and has one bathroom and one reception room
Richard Donnell, Executive Director at Zoopla said: ‘There has been a clear shift towards flats as the early buyers focus on value for money’
According to data from Nationwide, house prices have fallen for the fifth consecutive month in January as the average price of UK homes has fallen by 0.6 with December.
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The standard price is now at £258,297 as the housing market faces the longest period of consecutive falls since February 2009.
This marks the lowest rate of annual growth since June 2020, despite the fact that prices stand 1.1 per cent higher than they did a year ago.
Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: ‘Nationwide’s data show that house prices are continuing to buckle under the pressure of elevated mortgage rates, squeezed real incomes and weak consumers’ confidence.’
Although annual house prices are rising despite its slower rate, Tom Bill, head of UK residential research at Knight Frank, said the UK housing market was ‘headed for an annual fall in prices as mortgage rates remain notably higher than 12 months ago’.
He added: ‘We expect prices to decline 10per cent over the next two years as budgets get recalculated.’
Tom Ashwood, Director of London agency Tom Ashwood Real Estate said: ‘Due to the interest rate rises we have seen since September, it is apparent that a large portion of our buyers are not prepared to risk overspending and therefore have reduced budgets accordingly.
This spacious two-bedroom flat on Blaker Road, in the London borough of Newham, is currently on the market for £700,000
The London flat has two bathrooms and one reception room and is situated inside a modern building
More than a quarter (27 per cent) of conscious buyers are now looking for one and two bedroom flats, which is from 22per cent in January 2022 according to Zoopla
A key danger to overall sales volumes for 2023 is unrealistic seller expectations as they will need to ensure their home is competitively priced in order to secure a sale
‘This, in my opinion, isn’t isolated to the housing market but the wider cost of living crisis that has been heavily publicised. I will say that the appetite to buy is most certainly still there.
‘Managing expectations for all sellers is a vital component to achieving sales in the present market and honesty really is the best policy.
‘The demand will automatically subside where buyers do not see a reflective price for a property that they are viewing versus what their expectations are – and when an agent lists a property at a higher price to appease the seller and win that business.’
A number of buyers are still holding off entering the market and waiting to see if house prices and mortgage rates start to fall
Another two-bedroom apartment in the London borough of Newham is going for £700,000 – offering two bathrooms and one reception room inside a modern block of flats.
Buyers will continue to remain cautious in the next few weeks before an anticipated pick-up in demand after Easter. However, much still depends on the economic outlook, the strength of the labour market and the trajectory for consumer price inflation.
A key danger to overall sales volumes for 2023 is unrealistic seller expectations as they will need to ensure their home is competitively priced in order to secure a sale.
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