Higher mortgage rates have reduced buyer demand by 18% in the last two months alone, Zoopla’s latest housing price index (HPI) reveals.
The report, published today, shows that annual UK house price growth slowed to +0.6%, last month compared to +9.6% in June 2022.
Zoopla says weaker demand and rising supply are to blame for the slowdown.
The HPI shows that the South of England is bearing the brunt, with house prices falling across all regions.
In commuter markets such as a Southend and Watford, prices are falling by as much as – 1.5% and -1.2% respectively.
This is in stark contrast to the rest of the country, where house prices in more affordable areas continue to register annual house price growth of over 1%
While the 18% decline in buyer demand is less extreme than that recorded after the 2022 mini-budget, year on year it is down by 40%.
However, Zoopla says committed buyers and sellers remain in the market, with sales agreed only 17% lower than this time last year.
With more households priced out of the market, reducing demand and pushing prices lower, some would-be buyers are delaying moving.
According to Zoopla, sales volumes are expected to be 23% lower in 2023 compared to 2022, while buyers are also shifting to smaller, lower value homes.
As a result, new sales of three- and four-bedroom family homes are down by up to 41% when compared to the same time period (the last four weeks) over the last five years.
Zoopla says this is generally down to buyers taking a ‘wait and see’ approach to the market.
According to the HPI, UK house prices are expected to be 5% lower than predicted in 2023.
Zoopla executive director Richard Donnell says: “Higher mortgage rates have hit home buyer demand once again after a sustained improvement over the spring as mortgage rates fell to 4%.
“House prices increased slightly over the last three months to June, but higher mortgage rates and weaker demand mean we expect a return of modest price falls in H2.
“Overall, we expect prices to be 5% lower by the end of the year, still 15% higher than pre-pandemic levels.
“The impact of higher mortgage rates is far from uniform across the country. It all depends on housing affordability in local housing markets.
“Activity levels and prices in Southern England have been hit hardest by higher borrowing costs while the most affordable parts of the UK continue to see prices rising slowly.”
Chestertons head of sales Matt Thompson says: “Although there still is a vast number of buyers wanting to move as soon as possible, rising interest rates have forced others to be more cautious, review their financial situation and calculate a more conservative budget.
“Whilst this resulted in fewer new buyers entering the market last month, we expect activity to pick up again once buyers have adjusted their criteria and lenders are bringing more products to the market again.
“Recently, the property market has been predominantly driven by buyers who are seeking a home rather than an investment.
“Areas such as Battersea Park, Islington and Camden have proven popular as they offer a wide choice of property styles, nearby amenities, transport links and schools.”
