UK house sales to hit lowest point in 11 years

The UK housing market is facing a slump in 2023 with the number of sales expected to drop by 21% compared to 2022 and reach the lowest level since 2012, according to a new report by Zoopla.

Its latest House Price Index data predicts that only one million homes will be sold in 2023, which means that the average household will move once every 23 years, up from 17 years in 2021.

The main reason for the decline in sales is the rise in mortgage rates, and Zoopla estimates that mortgaged sales will fall by 28% in 2023, while cash sales will remain stable.

The report also reveals that house price growth has slowed down to +0.1% year-on-year, the lowest rate since 2012.

However, there are significant regional variations, with Scotland seeing the highest growth of +1.7% and London experiencing the biggest drop of 1%.

Zoopla expects that the housing market will recover in 2024, as earnings growth improves affordability and mortgage rates become more favourable.

The report also notes that the supply of homes for sale remains low, which will support prices in the long term.

‘House price growth has slowed rapidly’

Richard Donnell, an executive director at Zoopla, said: “House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates.

“Prices are falling more in southern England where higher mortgage rates have priced more people out of the housing market, weakening demand.

“While UK house prices are 0.1% higher over the year, it is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage reliant buyers.”

He adds: “Cash buyers are more immune and on track to account for more than one in three sales in 2023.

“Mortgage rates have started to fall slowly but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023.”

It’s now cheaper to buy than rent

According to Hargreaves Lansdown, across the North, Scotland and Wales, it’s now cheaper to buy than rent, while across southern England and the Midlands it is cheaper to rent than buy.

It points to Zoopla’s report which also says that house prices are also down in the South East, South West and Eastern England but are up 1.2% in the North West they are up 1.2% and Yorkshire and the Humber by 0.9%.

Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “It’s decidedly grim down south, as a North/South house price divide leaves southerners struggling.

“This owes a huge amount to house prices and mortgage rates.

“In the south, prices tend to be higher and mortgages larger, so higher mortgage rates have taken a bigger toll on affordability.

“More people are priced out of the market, so demand has fallen, and house prices have dropped.”

‘Relative affordability compared to rentals’

Ms Coles continued: “Given that first time buyers make up a third of buyers, the relative affordability compared to rentals is also key.

“Overall, it’s now cheaper to rent than to buy the same property and pay a mortgage on it.

“However, in the north it’s still cheaper to buy, which has helped boost property prices.

“While mortgage rates remain higher, the geographical divide is likely to endure.”

‘Buyers have been more cautious’

Matt Thompson, the head of sales at Chestertons, said: “With the Bank of England confirming the 14th consecutive rise in interest rates in a row at the start of August, buyers have been more cautious and are in some cases pausing their property search in order to adjust their finances.

“However, there still are buyers who have already locked in a mortgage rate with their lender and are keen to secure a property before the rate expires.”

He added: “Meanwhile, homeowners remain eager to put their property on the market and wait for the right buyer with Chestertons’ branches registering a 10% increase in properties being put up for sale last month vs the same month last year.”

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