Estate agents’ “Sold” and “For Sale” signs outside residential properties in Maida Vale in London, UK, on Thursday, June 30, 2022.
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Monday’s research showed that UK residential property demand has nearly halved in the wake of the September government budget which spooked financial markets and ousted the prime minister.
The fiscal package, announced on September 23, caused a sell-off in bonds and led to predictions of a possible crash in the housing market as interest rate expectations rose sharply. In the wake of the budget, a record number of mortgage deals were pulled and many lenders have paused offers as they assess the volatility.
Buyer demand fell 44% year over year in the four weeks through November 20, according to real estate website Zoopla, while new property sales fell 28%. The stock of homes for sale rose 40% over the same period.
Demand fell to levels normally seen during Christmas — among the quietest times for property markets — as buyers waited to take stock of the prospects for mortgages, along with their jobs and wages, Zoopla said.
Richard Donnell, executive director of research at Zoopla, said the company expects home prices to fall by up to 5% in 2023.
“But the number of ongoing sales will remain high for a combination of structural, demographic and economic factors,” he said, including an ongoing housing scarcity, with the average number of homes offered per real estate agency still a fifth lower than it was before the pandemic. .
Although a decline in home prices is widely expected, the company’s forecasts are less bearish than others.
Economists at Pantheon Macroeconomics forecast an 8% drop over the next year, while Nationwide, one of the UK’s largest mortgage providers, said earlier this month that house prices could collapse by up to 30% in its worst-case scenario.
In contrast, the UK’s Office for Budget Responsibility said it expects house prices to fall by 1.2% next year and by 5.7% in 2024.
This comes after the desirability of various types of real estate during the pandemic, the suspension of the purchase tax on homes under $500,000 from July 2020 to July 2021, and persistent supply shortages sent home prices to record levels.
There is currently “extensive” re-pricing of homes, Zoopla said, but it is modest in scale. It puts UK house price growth at 7.8% y/y.
Its report called the market trends a “joke-up rather than a precursor of a housing collapse” and said the micro-budget had “shocked” buyers and sellers.
“All the leading supply and demand indicators we measure continue to point to a rapid slowdown from very strong market conditions. We see no evidence of forced sales or the need for a significant, double-digit reset in UK house prices in 2023,” its report said.
Meanwhile, private rental costs in Britain have risen to record levels amid intense competition for property, according to separate data published by Rightmove last month.
It found that rents in London rose 16.1% year-on-year, the highest growth of any region on record.
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