Zoopla: Demand for flats rises as household costs soar

Home buyers shifting preferences from houses to one or two-bedroom flats

A number of signs with letting and estate agents details outside flats on the Old Kent Road in London. File Photo

Home buyers in the UK are shifting their focus towards flats, as the costs of running a house rise significantly, according to a new survey.

Property website Zoopla said more than a quarter (26.8 per cent) of new buyers are looking for one or two-bedroom flats, up from 22.2 per cent in January 2022.

The proportion of people seeking three-bedroom flats has moved slightly higher since January 2022, from 3.4 per cent to 3.7 per cent.

Zoopla suggested that higher mortgage rates and soaring energy costs are driving more buyers to consider purchasing a flat rather than a house.

But the website also said that its latest House Price Index shows that three-bedroom houses remain the property type with the highest demand, with 38.9 per cent of new buyers looking for them, although this proportion has fallen back from 43.7 per cent in January 2022.

Outside London, the average two-bedroom flat listed for sale on Zoopla, at £196,000, is nearly £100,000 cheaper than an average three-bedroom home, which has a price tag of £293,000.

“The first few weeks of the year have got off to a stronger start than might have been expected given how market activity stalled at the end of 2022,” said Richard Donnell, executive director at Zoopla.

“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 sizeable price falls materialise and how far mortgage rates fall back before entering the market,” he added.

Tom Ashwood, director of London agency Tom Ashwood Real Estate said: “It is apparent that a large portion of our buyers are not prepared to risk overspending and therefore have reduced budgets accordingly.”

“This, in my opinion, isn't isolated to the housing market but the wider cost-of-living crisis that has been heavily publicised.”