Index also reveals 28% decline in sales
The latest Zoopla House Price Index (HPI) has revealed that following the mini-budget fallout, which resulted in a spike in mortgage rates, demand for houses has plummeted with buyer demand falling by 47% in Q4.
According to the index, housing market activity in Q4 has fallen with new buyer demand almost half what it was a year ago. The decline has been put down to weaker market conditions, higher mortgage rates, and the cost of living crisis. The decline in demand since the mini-budget in September alone has been revealed to be 44%, highlighting the disruption that was caused.
Sales volumes are also down from a year ago, having fallen by 28%. In some areas sales volumes are almost half what they were a year ago, typically in mid to upper price bands, such as southern England (excluding London), the East Midlands and Wales. The decline in sales has been shown to be less apparent in areas with more affordable properties such as the North East and Scotland.
This drop in demand and sales has culminated in house price inflation plateauing. The index reports the lowest quarterly rate of growth (0.7%) since February 2020, leaving house price inflation at 7.8%. The index predicts house price growth to slow to 0% before moving into negative growth during 2023.
However, this data conflicts with findings by Compare My Move which showed their conveyancing leads increased by 6.79% after the 23rd of September when the mini-budget was announced, generating more work for our conveyancing partners. Their data also showed that conveyancing partner registrations increased by 41%. Whilst they acknowledge that leads did drop by 25% in response to the base rate increase on the 3rd of November, they compare this with the previous year’s figures which showed the previous year had lower numbers of leads in all areas. This goes along with the believe that current trends represent a reversal to pre-pandemic levels in the housing market.
Although the index does report that mortgage rates will fall back to 4.5-5% as house prices drop next year, with rates currently exceeding 6%. In addition to this, the index predicts that:
“All the leading supply and demand indicators we measure continue to point to a rapid slowdown from very strong market conditions. We do not see any evidence of forced sales or the need for a large, double-digit reset in UK house prices in 2023.”
Richard Donnell, Executive Director at Zoopla, stated:
“We still expect house price falls of up to 5% in 2023 with one million sales and mortgage rates dipping below 5%. But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors.”
Stephen McCarron, NAEA Propertymark President, commented on the findings:
“Zoopla’s latest report reiterates what our member agents have told us about the current market. The sales market was unsustainable, and we are now starting to see it balance out to pre-pandemic levels.
Our latest figures in our Housing Insight Report showed us for the first time that we are on the cusp of seeing the sales market handing back purchasing power to buyers which is a trend we haven’t seen in months as the market was very much in the seller’s favour. Signs of balance within the market is also being seen as competition for homes starts to slow which will allow the number of properties available to buy to fall back in line and a return to a more realistic market.”
