Get Ready for a Crisis: UK House Sales Expected to Hit Rock Bottom, According to Zoopla!

The UK housing market is expected to experience a considerable decline in home purchases this year, with forecasts indicating a 21% drop to the lowest level seen since 2012.

The UK housing market is expected to experience a considerable decline in home purchases this year, with forecasts indicating a 21% drop to the lowest level seen since 2012. This projection comes from leading property company Zoopla, attributing the decline to increasing borrowing costs. While the number of home purchases has been impacted by rising rates, it is particularly challenging for buyers relying on mortgages.

Zoopla's forecast for 2023 suggests that house sales will reach 1 million homes, a significant decrease compared to last year's figure of 1.26 million. However, it is worth noting that sales are expected to rebound in 2021 and reach a 14-year high of 1.48 million. This surge in sales is primarily attributed to the ultra-low interest rates and tax incentives implemented during the COVID-19 pandemic, which have substantially boosted demand.

Despite seeing a modest 0.1% increase in UK house prices year-on-year, the number of home purchases has been hit harder, primarily due to the impact of rising borrowing costs. Buyers reliant on mortgages have faced the brunt of these costs. According to Zoopla's predictions, mortgage-based purchases are expected to plummet by 28% this year. In contrast, cash buyers will face a minimal decline of 1%, accounting for more than a third of all home sales.

Recent official data reveals that between April and June 2023, home purchases dropped by 22% compared to the same period the previous year. Although the average house price in May 2023 experienced a 2% decrease from its peak in September 2022, it still marked a significant increase of over 20% in comparison to pre-pandemic levels. This surge can be attributed to the combination of affordable financing options and a surge in demand for new homes, especially those offering more spacious living environments.

In response to soaring inflation and market expectations, the Bank of England (BoE) has hiked interest rates 14 times since December 2021. The rates have risen from 0.1% to 5.25%, reaching the highest level recorded since 2008. The central bank aims to tackle inflationary pressures and has further indicated the likelihood of two more interest rate increases to 5.75% within this year.

Zoopla, a leading player in the property market, offers a range of services, including property valuation services and an extensive database advertising over 1 million properties for sale or rent. With their insightful forecasts and comprehensive knowledge, Zoopla aims to provide valuable information to both buyers and sellers, assisting them in making well-informed decisions in a dynamic and ever-changing market.