Zoopla has now joined Knight Frank and Lloyds Bank in forecasting a price drop in 2023.

The property website’s executive director, Richard Donnell, says: “New buyer demand has dropped quickly in the face of higher borrowing costs, it’s like the Christmas slowdown has come a month early. We don’t expect to see any impact on pricing levels between now and December and this will only start to materialise in early 2023.  It takes several months for pricing to adjust in the face of weaker demand.

“The most likely outcome for 2023 is that we see a fall in mortgage rates towards four per cent with a modest decline in house prices of up to five per cent. The labour market remains strong and the supply of homes for sale is below average creating a scarcity of homes for sale that will support pricing.”

Zoopla says the political turmoil in recent weeks resulted in mortgage rates surging to highs of around six per cent, hitting buyer demand which has fallen by a third since the disastrous September mini-Budget. 

Donnell says that the spike in mortgage rates represents the largest interest rate shock for new buyers since the late 1980s and despite signs that mortgage rates will fall back, they will not return to the ultra-low levels of recent years.  He says mortgages rates of four to five per cernt are likely to be the new norm. 

Zoopla’s figures shows that the drop in new buyer interest over the last month has been spread across all UK markets as limited buyers with cheap mortgage offers remain, with the biggest drops in new buyer interest in the South East (down 40 per cent) and in the West Midlands (down 38 per cent). Falls in buyer interest are also evident in more affordable regions such as the North East and Scotland but to a lesser extent.

This also coincides with an increase in asking price reductions – almost seven per cent of homes have seen the asking price reduced by at least five per cent – an increase in comparison to recent months, but still below 2018 levels. A scarcity of supply in the market continues to support pricing.

As the market remains turbulent, fall-throughs in sales are increasing, mainly as a result of a lack of affordable finance impacting buyer affordability. However, the market is still on track for up to 1.3m sales in 2022, down from 1.5m in 2021.

Zoopla concludes that if house prices did indeed fall by five per cent, the average UK property would lose eight months of capital gains (and in London it would lost about 13 months). 

Were prices to fall by 15 per cernt, this would see 20 months of capital growth knocked off the price for the average UK home with 80 months of growth removed in London, but only 15 months for properties in Wales.