Zoopla offers the latest statistics
The effects of higher mortgage rates and the cost-of-living crisis are now more evident and being felt across the country, with 80% of local housing markets registering annual house price falls, according to property listing platform Zoopla.
Mostly observed in southern England previously, house price falls are now impacting lower-value markets with four in five housing markets reporting annual price declines, up from only one in 20 just six months ago.
Zoopla said weaker demand and reduced buying power had resulted in a rapid cooling of house price growth from +9.2% a year ago to -1.1% today – the most dramatic slowdown in price growth since 2009.
The property website’s latest House Price Index has also revealed that the number of housing sales is feeling the impact of higher mortgage rates more than house prices – with a 23% reduction in housing sales so far this year compared with last year.
Zoopla predicts that housing transactions will remain flat at 1 million in 2024, although this could improve if mortgage rates drop back towards 4% over the first half of 2024. Cash buyers are also expected to become an important buyer group alongside first-time buyers, who will continue to be pushed into buying by the unrelentless rental growth.
Housing affordability, the report added, needed to improve to price more buyers back to the market and support more sales. Assuming mortgage rates dropped to 4.5% by the end of 2024, Zoopla expected that house price growth would remain negative with prices down 2% next year, and a faster fall in mortgage rates towards 4% would boost sales activity rather than house prices.
“House prices have proven more resilient than many expected over the last year in response to higher mortgage rates,” Richard Donnell, executive director at Zoopla, commented. “However, almost a quarter fewer people will move home due to greater uncertainty and less buying power.
“Modest house price falls over 2023 mean it’s going to take longer for housing affordability to reset to a level where more people start to move home again. Income growth is finally increasing faster than inflation, but mortgage rates remain stuck around 5% or higher.
“We believe that house prices will post further small falls, averaging 2%, over 2024 with 1 million home moves. Slow house price growth and rising incomes over the next 12 to 18 months will improve affordability to levels last seen a decade ago, creating the potential for a rebound in home moves as consumer confidence returns.”
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