House prices in the UK increased by 8.1% in September, down from 8.2% last month, according to Zoopla’s latest house price index.
The data shows that the strength of demand and sales agreed over the last six months drove the annual increase. The ongoing supply shortage also played a part.
The surging rise in mortgage rates to 6% has seen buyer demand fall by a third since the mini-budget, as Zoopla highlights that mortgage rates of 4% to 5% “are likely to become the new normal”.
The drop in new buyer interest over the last month has been spread across the UK, with the biggest drops in new buyer interest in the South East with a decrease of 40% and in the West Midlands where there has been a decline of 38%.
Falls in buyer interest are also evident in more affordable regions such as the North East where interest has fallen by 20% and by 24% in Scotland.
The number of price reductions to homes on the market has increased with almost 7% of homes having been reduced by more than 5%.
Zoopla says this is an increase in recent months, but still below 2018 numbers.
Despite turbulent times, the market is still on track for up to 1.3m sales in this year, down from 1.5m in 2021.
Looking to 2023, Zoopla expects a price reduction of up to 5% is most likely to be seen in the property market.
This would mean the average UK property would lose eight months of capital gains with London (13 months) set to see the biggest loss of value while Wales (six months) would see the least.
Looking ahead to 2023, Zoopla executive director Richard Donnell says: “The outlook for the year ahead hinges on the trajectory for mortgage rates which impacts the buying power of households who are already facing higher living costs. Mortgage rates were always heading for 4-5% and the impact of the mini budget has boosted them even higher.”
“We expect borrowing costs to fall in 2023 easing some of the hit to buying power, but we also expect a degree of price adjustment in the face of price sensitive demand. House prices have risen significantly over the pandemic and homeowners wanting to sell in 2023 will need to be realistic on price and may have to forgo some of the pandemic price gains to achieve a sale in 2023.”
Pattinson Estate Agents managing director Caroline Pattinson adds: “It has definitely been an interesting time in the property market in the last few months. Following the mini budget and interest rate rises we did see some buyers changing their mind about buying. We aren’t however seeing every chain collapsing and the sales pipeline dropping to nothing. A lot of the people who have sales underway committed to moving months ago and if they had submitted a mortgage application would be buying at lower interest rates.”
“We still have new buyers registering and applying for mortgages, based on our figures I can see there is a slight drop in sales when we compare to October 2021, the interesting thing is that the level of sales is higher than in 2018. The number of properties exchanging this October is higher than last year and our sales pipeline has 65% more properties under offer than we had when we went into the first covid lockdown.”
“We are talking to sellers about repricing where their property is not attracting as much interest as we would like. Shifting from a sellers to a buyers market means we will need to work with sellers to help their house stand out – curb appeal does matter, making properties as attractive to buyers will be increasingly important and that is where feedback from viewers is key.”
