UK Home Sales Headed for Lowest Levels Since 2012 Amid Plunging Mortgage Demand.
The United Kingdom is on track to experience the lowest annual count of home sales this year since 2012, according to the latest house price index released by real estate company Zoopla on Wednesday.
The report highlights a projected 21% decrease in completed sales for 2023 compared to the previous year. It anticipates that approximately one million property transactions will be finalized by the end of this year.
This equates to the average household relocating only once every 23 years, an increase of six years from the 2021 statistic, as outlined in the monthly report.
Over the last four weeks, demand for homes has plummeted by 34% compared to the average figures from the past five years.
Zoopla attributes this decline to the confluence of higher mortgage rates and the pressures of rising living costs, which have cast a shadow over the housing market.
The slump in sales coincides with a deceleration in house price growth. Data from the Office for National Statistics reveals a marginal increase of 1.7% in house prices over the twelve months leading up to June.
During June, the average cost of a house in the UK stood at £288,000 ($364,000), signifying a £5,000 uptick from the same period in the previous year. However, it fell short by £5,000 compared to the peak observed in November 2022.
Although house prices have experienced a slight uptrend, the sales figures have borne the brunt of the impact arising from elevated borrowing costs. Zoopla’s Executive Director, Richard Donnell, emphasized this in a press release.
He pointed out that cash buyers have demonstrated more resilience and are projected to account for over one-third of all sales in 2023. Donnell suggested that while mortgage rates have started to decrease gradually, a reduction below the 5% threshold is necessary to stimulate a heightened desire among individuals to relocate during the latter half of 2023.
Zoopla’s estimates suggest that cash sales are poised to witness a marginal drop of around 1% compared to the previous year. On the other hand, the count of mortgaged sales could plummet by a staggering 28%, predominantly due to potential homebuyers grappling with the burden of elevated mortgage rates.
The Bank of England has executed a series of 14 consecutive interest rate hikes, the most recent on August 3rd, pushing the underpinning figure that influences most mortgage lending rates to a 15-year high of 5.25%.
While there has been a gradual decline in mortgage rates, they remain relatively high.
As of August 21st, the average rate for a 2-year fixed mortgage with a 95% loan stood at 6.7%, according to online real estate company Rightmove. This figure represents a marginal 0.2% reduction compared to the preceding week’s statistics.
The UK’s housing market is grappling with the dual challenges of a sharp decline in home sales and a sluggish growth in house prices. Elevated borrowing costs, driven by a series of interest rate hikes, have significantly impacted potential homebuyers, particularly those dependent on mortgages.
The situation has led to an increased reliance on cash buyers, as individuals wait for mortgage rates to dip below the 5% threshold before rekindling their enthusiasm for property purchases. As the Bank of England’s interest rate policies and market dynamics continue to evolve, the trajectory of the UK’s housing market remains uncertain.
