UK House Sales Slowest in Decade Amid Mortgage Rate Surge, Says Zoopla

A sold sign is seen outside new houses on a construction development in Nantwich, England, on June 22, 2023. Christopher Furlong/Getty Images

The number of houses and flats sold in the UK this year is predicted to be the lowest in a decade, as buyers feel the impact of higher mortgage rates and cost-of-living pressures, a leading property website reported.

The house price index by Zoopla on the latest housing trends in August 2023 revealed a 21 percent net decline in property sales this year. It will be the lowest number of properties sold since 2012.

The website said it was the equivalent of every British household moving once every 23 years, given that the average time it takes to move home in the UK is around eight years.

The fall is largely attributed to mortgage buyers, with the number of mortgage sales expected to drop 28 percent over last year. Zoopla reported that cash sales are set to fall just 1 percent in comparison with 2022.

“The housing market continues to feel the impact of higher mortgage rates and cost of living pressures. It’s resulting in weaker demand from buyers, fewer sales, and very low house price growth,” said Zoopla Executive Director Richard Donnell.

High Mortgage Rates

High mortgage rates have played a significant role in discouraging potential buyers. The Bank of England has been consecutively raising interest rates, faced with high consumer price inflation, which is currently at 6.8 percent.

The current interest rate stands at 5.25 percent, while experts predict another hike in September and further in 2024.

Zoopla data showed the demand from buyers in the last four weeks to be 34 percent lower than average in the same period over the last five years. Buyers are seeing more homes for sale now than in the last two years, while the number of agreed sales is down 20 percent.

Both homeowners and landlords are feeling the impact of higher mortgage rates, according to Zoopla. Homeowners with a mortgage, who usually account for a third of annual property sales, are predicted to wait for the rates to drop before they move.

Meanwhile, investments in buy-to-let properties are expected to be lower this year because investors in southern England need to have equity of 40–50 percent of the property’s value.

During the cost-of-living crisis, Britons have become less likely to release their savings and enter high-cost transactions.

On the positive side, Mr. Donnell said that in the coming two to three years the number of sales will “recover well.”

“More flexible working, demographic trends from an ageing population, the strong labour market, and high immigration will all encourage people to move house,” he said.

House Prices

Even if the mortgage rates drop below 5 percent this year, as Zoopla expects, it will be less likely to affect the market and make properties more affordable until at least the first half of 2024.

This in turn will affect house prices, with the annual UK house price growth of 0.1 percent being at a “virtual standstill” and the lowest growth rate since 2012.

Property won’t become more expensive for the foreseeable future, said Mr. Donnell, predicting price growth to stay within the +2 percent to -2 percent range.

Residents in the south of England face a different picture than in the north of the country. Every region in the south has seen a drop in house prices by up to 1 percent in 2022. In comparison, Scotland is seeing a price growth of 1.7 percent.

The north–south divide in house price inflation is explained by the fact that buyers in the south need bigger deposits, larger mortgages, and higher incomes. This prevents more people from moving into the area and reduces price growth.

For Britons living in southern England and the Midlands, it is more expensive to buy a home than to rent. In Scotland and in the northeast it costs up to 18 percent less to buy than rent, while in London the average mortgage repayment is 24 percent higher than the monthly rent.