Property sales slump as new buyers wait for fall in prices

HOMEBUYER demand has collapsed by a quarter as the effects of soaring mortgage rates bite and would-be purchasers wait for house price falls.

The volume of agreed sales in the week to Jan 22 was down by nearly a quarter compared with the same period last year, according to property website Zoopla, in a clear sign that rising interest rates has brought the pandemic property boom to a halt.

Sales levels over the period were a fifth below the five-year average, although levels were still higher than for the same period in 2019, before the virus lockdowns.

Richard Donnell, of Zoopla, said: “A proportion of existing homeowners are holding back waiting to see whether sizeable price falls materialise and how far mortgage rates fall back before they decide to enter the market.”

Demand is likely to rise in the coming weeks but sellers need to adjust their expectations, Mr Donnell said.

“Anyone who is serious about selling needs to be realistic on the asking price and needs to ensure this is in line with what buyers are prepared to pay,” he warned.

In the current climate, the average seller of a property must be prepared to cut their asking price by between 3pc and 4pc to achieve a sale, Zoopla said.

Annual house price growth slowed to 6.5pc, down from 8.3pc at the end of last year. Zoopla found that supply is rising as buyers hold off on purchases: the average estate agent now has 23 properties for sale, up from a low of 14 at the start of 2022.

This number is likely to climb further as higher running costs and rising pressures on incomes puts pressure on some people to downsize.

Tom Ashwood, of Tom Ashwood Real Estate, said: “It is apparent that a large portion of our buyers are not prepared to risk overspending and therefore have reduced budgets accordingly.” He added: “Undoubtedly you will see more and more reduced properties at the back end of Q1 heading into Q2.”

As affordability pressures bite, buyer demand is shifting to flats from houses.

Zoopla data show 27pc of new buyers are looking for one- or two-bedroom flats. This has increased from 22pc a year ago.

Demand for three-bedroom houses, by contrast, has fallen by three percentage points to 39pc.