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House prices falling in 80% of the UK as higher mortgage rates impact sales

House prices falling in 80% of the UK as higher mortgage rates impact sales
Emma Lunn
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Emma Lunn

Four in five local housing markets have registered annual price falls, with UK house prices projected to fall 2% in 2024, according to Zoopla.

The property portal found the largest house price falls are concentrated in Southern England towns including Colchester (-3.5%), Canterbury (-3.4%) and Luton (-3.3%).

In contrast, the highest house price growth is in the North of England, with Halifax in Yorkshire having the highest growth rate at +3.6%.

Zoopla data suggests that the impact of higher mortgage rates and cost-of-living pressure is now impacting house prices across more local markets.

Weaker demand and reduced buying power have resulted in a rapid cooling of house price growth from +9.2% a year ago to -1.1% today. According to Zoopla, this is the most dramatic slowdown in price growth since 2009.

Housing sales down

Zoopla said that higher mortgage rates are impacting the number of house sales, rather than house prices. It found there had been a 23% reduction in housing sales in 2023 compared to 2022.

Zoopla anticipates that housing transactions will stay flat at one million in 2024, although this could improve if mortgage rates go down, prompting people who have delayed moving to return to the market.

The rise of the cash buyer

According to Zoopla, cash buyers account for one in three sales in 2023; this is an increase from an average of one in five sales over the past five years.

Zoopla said many cash buyers have room to be “more realistic” on price as they are also mortgage-free sellers who have lived in their homes for many years. Their realistic outlook on pricing will also support the number of transactions in 2024.

However, first-time buyers are on track to be the largest buyer group in 2023, with first-timers often “pushed into buying by the continued, rapid growth in rents”.

Zoopla identified up-sizers as the group most sensitive to higher mortgage rates as they tend to buy bigger homes which require larger mortgages.

What’s next for the housing market?

Assuming mortgage rates drop to 4.5% by the end of 2024, Zoopla expects that house price growth will remain negative with prices down 2% next year. It suggested that a faster fall in mortgage rates towards 4% would boost sales activity rather than house prices.

Richard Donnell, executive director at Zoopla, said: “House prices have proven more resilient than many expected over the last year in response to higher mortgage rates. 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 one 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.”