According to Zoopla’s House Price Index (HPI) for August 2022, the housing market is transitioning to a buyers’ market as higher mortgage rates are set to cut buying power by up to 28%.
It is also reported that some regions have seen 10 years of house price growth compressed into two years.
Figures also suggest that buyer interest is weaker than at the same time last year, despite new sales remaining consistent.
Rising mortgage rates to cut buying power
According to Zoopla’s analysis, if mortgage rates rise from 2% to 5%, buying power could reduce by as much as 28%.
This could, therefore impact the housing demand in 2023 for the estimated seven in 10 buyers who rely upon a mortgage.
Asking price reductions rise to pre-pandemic levels
It is reported there has been an upward trend of listings which have had asking prices reduced by 5% or more over the spring and summer.
The data also shows that 6% of homes listed for sale have seen the asking price adjusted downwards, which is the highest level since before the pandemic.
Stamp duty benefits
The UK government announced last week that Stamp duty was being removed for all house purchases up to £250,000, and extending relief to first-time buyers.
The HPI suggest that Stamp duty changes will support regional markets and first-time buyers in southern England.
Stamp duty from London and the South East accounted for two-thirds of stamp duty income in 2020/21.
First-time buyers (FTBs) account for one in three purchases and will not pay stamp duty up to £425,000 with a reduced rate up to £625,000, according to Zoopla’s HPI.
This change, it is claimed, will provide a further boost to buyers in southern England who will get new savings of up to £10,000 per purchase.
Richard Donnell, Research Director of Zoopla, stated:
“Stamp duty changes are welcome and will boost some sectors of the market but, overall, they are unlikely to offset the impact of higher mortgage rates on housing activity.”
View the full report here.
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