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Falling UK house prices drag property sales to lowest in 12 years

Higher interest rates and costlier mortgages hitting affordability

House prices
House prices: Property inflation sees UK home sales drop by 21%. Photo: Getty (Karl Hendon via Getty Images)

UK's falling house prices has impacted the growth in property sales, according to Zoopla's index published on Wednesday.

The property group said that UK house price growth slowed to the lowest rate since 2012.

In London, property values fell 1% in a year. They were also down in the South East, South West, and Eastern England. In Scotland they were up 1.7%, the North West up 1.2% and Yorkshire and The Humber up 0.9%.

Across the North, Scotland and Wales, it’s cheaper to buy than rent, while across southern England and the Midlands its cheaper to rent than buy. Annual house price inflation has fallen to 0.1% – the lowest since 2012.

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Zoopla said that new sales of three- and four-bed homes were 40% lower in July compared with the same period over the last five years.

Similarly, new buy-to-let purchases are also being squeezed by higher mortgage rates, with purchases accounting for 8% of sales a year.

Read more: Asking prices for UK houses fall as rents climb

Housing affordability remains the primary barrier to more sales as both the level of house prices and the cost of mortgage repayments continue to rise. In Southern England, the household income to buy an average priced home remains high at over £75,000 in many market areas, weakening demand.

Zoopla’s data revealed that higher mortgage rates over the last year have increased average mortgage repayments by 23% or £216 per month.

Affordability measured on a house price to earnings ratio suggests a 9-10% improvement over 2023, as average wages increase by 7% in the last year while house prices drop.

Affordability has improved the most in London where the price to earnings ratio will move to single digits for the first time in 11 years. Simply put, pay is rising for Londoners while house prices are falling.

Geography remains a key factor with house price growth ranging from +1.7% in Scotland to -1% in London.

Housing affordability remains the primary barrier to more sales. Photo: Getty
Housing affordability remains the primary barrier to more sales. Photo: Getty (owngarden via Getty Images)

Richard Donnell, executive director at Zoopla, said: “House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates.”

He said mortgage rates need to fall below 5% to improve affordability.

Sarah Coles, head of personal finance at Hargreaves Lansdown and Yahoo columnist said: “It’s decidedly grim down south, as a North/South house price divide leaves southerners struggling. By contrast, prices are still on the up in the North."

Overall, it’s now cheaper to rent than to buy the same property and pay a mortgage on it, Coles said.

"We shouldn’t rush to overstate the case though. The property market isn’t booming in the north either. It’s just marginally less depressing than elsewhere. Across the UK, demand is down a third from the five-year average, and sales in 2023 are expected to be around 1 million – their lowest for more than a decade."

Watch: Will UK house prices ever fall?

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