According to real estate business Zoopla’s most recent house sales price index, which was released on Wednesday, the number of homes sold in the U.K. this year is expected to be at its lowest level since 2012.
One million transactions are anticipated to be completed this year, according to the research, which projects a 21% reduction in home sales completions between 2023 and last year. The monthly report indicated that this is an increase of six years from 2021, or once every 23 years for each home.
Higher mortgage rates and pressure from rising living costs have reduced demand for properties in the last four weeks by 34% when compared to the average over the previous five years, according to Zoopla.
According to data from the Office for National Statistics, the decrease in homes sales occurs as home price growth sputters, with a modest increase of 1.7% in the 12 months leading up to June. In June, the average price of a home in the UK was £288,000 ($364,000), which is £5,000 more than it was at the same time last year but £5,000 less than the most recent peak in November 2022.
Although there has been a little increase in home prices, rising borrowing costs have had the most impact on home sales, according to Richard Donnell, executive director of Zoopla.
Cash purchasers are more resilient and on track to represent more than one-third of home sales in 2023, according to Donnell.
“Mortgage rates have started to fall slowly, but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023,” the expert continued.
Zoopla predicts that the number of cash sales will decline by about 1% from last year, while the number of mortgaged sales may fall by 28% as consumers deal with increased mortgage rates.
On August 3, the Bank of England raised interest rates for the fourteenth time in a row, pushing the benchmark rate for most mortgage loans to a 15-year high of 5.25%.
With the average rate for a 2-year fixed mortgage for a 95% loan at 6.7% for the week of Aug. 21, online real estate company Rightmove said last week that mortgage rates have started to decline but are still high. That is a decrease of 0.2% over the prior week.
Mortgage approval reduces home sales
While approvals for remortgages increased marginally during the same month, net mortgage approvals decreased from 54,600 in June to 49,400 in July.
According to the financial information provider Moneyfacts, the average interest rate for a two-year fixed mortgage contract is 6.74%. A longer five-year contract typically has a rate of 6.22%.
Mortgage expenses have increased significantly since many homeowners used to enjoy ultra-low rates of less than 2%.
In an effort to contain rising prices, the Bank of England raised its benchmark rate 14 times in a row to reach its current level of 5.25%.
According to Zoopla, sales of smaller, more reasonably priced residences have not been affected as severely as those of three- and four-bedroom houses.
The cost of new buy-to-let house acquisitions has also increased due to higher borrowing rates.
In addition to more expensive mortgages, the cost of rent has drastically increased, making it difficult for many tenants to obtain cheap homes as landlords raise rates to offset their rising costs.
According to data from Halifax Building Society, London has the most expensive homes overall, costing 9.3 times the average income and consuming 49% of it in mortgage payments.
The most cheap areas for housing are the North East of England (properties valued at 4.9 times average earnings) and Scotland (houses priced at 5 times typical earnings). The Halifax said that Inverclyde had the most affordable dwellings of any local government region, with homes costing 2.9 times average incomes.
Read Also: Home sales fall again in July
Estate agent Jackie Quinn from Surrey said on the BBC’s Wake Up To Money program that she had noticed a decline in property prices over the previous six months, but she added that things were beginning to change as the summer vacations came to a close.
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