According to a study released on Monday, residential property demand in the UK has almost halved since the government’s September budget, which alarmed the financial markets and forced the UK prime minister to resign.
September 23 budget proposal spooked markets
The budget proposal, unveiled on September 23, sparked a bond sell-off and raised concerns about a possible property market meltdown due to a sudden rise in interest rate projections. Following the budget, many loan transactions were cancelled, and several lenders suspended lending activities as they evaluated the volatility.
According to the real estate website Zoopla, consumer demand decreased 44% year over year within four weeks leading up to November 20, while new home sales dropped 28%. However, the supply of available homes increased by 40% during the same time period.
According to Zoopla, as purchasers sought to analyze the prognosis for loans, as well as their employment and earnings, demand had decreased to levels often seen around Christmas – one of the quietest times for property markets.
Zoopla’s senior director for research, Richard Donnell, stated that the company anticipated housing price declines of around 5% in 2023.
But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors.
This is in addition to the current property scarcity, with the available properties still almost a fifth lower relative to pre-pandemic levels.
Housing prices to drop more in 2023
Despite widespread expectations of a decline in housing values, Zoopla’s forecasts are less pessimistic than others. On the other hand, Pantheon Macroeconomics expects an 8% decline, while Nationwide expects house prices to decline by almost 30%. In addition, UK’s Budget Responsibility Officer stated that it expects a 1.2% housing prices decline in 2023 and a 5.7% drop in 2024.
A Zoopla report indicated that the current market trend is more of a shakeup for a housing crash. According to the report, the mini-budget delivered a shock to consumers and sellers.
The report said,
All the leading supply and demand indicators we measure continue to point to a rapid slowdown from very strong market conditions. We do not see any evidence of forced sales or the need for a large, double digit reset in U.K. house prices in 2023.