Until recently, it appeared as though house prices were on a never-ending upward spiral in the UK. However, over the last year we’ve seen the bubble burst and a drop in house prices across the country. Whether this is seen as a huge positive or negative will depend on where you are on the property ladder.
The drop in house prices goes hand in hand with a slowdown in property sales, which are on course to drop to their lowest level since 2012. But why is this happening and what does it mean to you?
Keep reading for a closer look at this subject.
How Have UK Home Sales Dropped Over the Past Year?
According to Zoopla’s House Price Index, property sales are set to fall around 21% in 2023 compared to 2022. Whereas 1.26 million homes were sold in 2021 and 1.48 million in 2020, that figure is only expected to be around 1 million in 2023.
It’s a significant drop which is also coinciding with lower house prices, as sellers are reducing valuations due to the lower demand. The figure is even worse for properties bought with mortgages, which are set to go down by 28%.
It adds up to a worrying trend for those looking to sell their homes as they face either accepting less than they’d hoped for or delaying selling their home. Let’s take a look at why sales have dropped to better understand the issue.
Why Are UK Home Sales Dropping?
Many factors affect the property market, but while some of them are quite nuanced, interest rates are the most significant cause of this slowdown. After 14 consecutive rises, the Bank of England temporarily froze the rates in September 2023 to a level of 5.25%
These higher borrowing costs have slowed down the buying market for two main reasons. Firstly, the cost of borrowing is now much higher, meaning that potential borrowers feel they won’t be able to afford mortgage payments at their current level.
The second is that due to the higher cost of borrowing, potential buyers are more likely to delay getting an expensive mortgage in favour of keeping their money in savings and waiting for a more favourable time to buy.
Another factor that gets added to the mix is the increased cost of living. This is adding further worry to potential buyers who may not have the same level of income comfort they’ve enjoyed in previous years. It’s all added up to weak demand from buyers which shows little signs of changing in the immediate future.
When Will UK Home Sales Pick Up Again?
It’s hard to say for sure – but if the main driver of slow sales is high interest rates, then logic would dictate that sales will pick up when those interest rates start to fall. It unfortunately doesn’t appear as though it’ll happen for a long time yet.
The general expectation is that we’re yet to see the peak of interest rates but there is some optimism they won’t reach 6%. After that, there is hope they’ll fall but this isn’t expected until at least mid-2025.
Interest rates are far from the only factor that affects the housing market, but it is perhaps the one which has the most direct influence. Other factors may affect sales but it’s hard to know for sure over the next few years if there will be any changes to the likes of affordability of housing, economic growth, or unemployment, for example.
That being said, the fall in demand is expected to recover but we’re probably looking at years for this change instead of months. If you were hoping for a sharp increase in demand for housing, it doesn’t look to be coming anytime soon.
Should I Sell My House Now or Wait?
This is a difficult question to answer as there are a multitude of reasons that affect the best time to sell your property. It’s hard to predict the market but selling now could be seen as a good or a bad time, depending on your view of the housing trends.
We’ve seen that both demand and house prices are falling, therefore now could be a good time to sell before they fall any further. Conversely, there is a line of thinking that you should hold on and wait for a recovery in two to three years.
The right answer depends on your situation. If the time is right for you and your family to move property, delaying the house sale may not be in your best emotional interests, as you’ll feel stuck somewhere you don’t want to be.
If you’re selling for profit or are in no rush, you can afford to take a longer-term view. Ultimately the choice is up to you and your assessment of the risk. There are no certainties in the housing market and you always risk waiting for a change that never comes.
Best Parts of The UK for Selling a House Right Now
Another factor that can go into your selling decision is where you live in the UK, as there are big discrepancies in property price changes across regions, as well as how long it takes to sell a house. At the moment there is a significant north/south divide, with prices still rising slightly in the north.
This makes sense considering property prices tend to be higher in the south, and therefore the economic impact of high interest rates hits even harder. The entire south of England has seen a fall of around 1.5% with not much change in the east, west, and London.
The east of England sees a similar drop of 1.5% this year, but it’s a different picture to the rest of England. The northern regions are seeing small growth between 0.2 to 0.5%, indicating they are the best places to sell right now. Across the Midlands, the west has seen a slight rise of 0.4%, whereas prices in the east have fallen by 0.2%
As for the rest of the UK, growth is minimal in Wales at 0.1% and stagnant in Northern Ireland at 0.0%. If you’re looking for growth, then Scotland is the place to be with a 1.6% increase, far above the rest of the UK.
In summary, if you live in the south then it’s likely that you’ve missed for window to get the maximum sale price from your property. For those in the north, along with Wales, Scotland, and Northern Ireland, now could be the best time to sell.
If you want to cash-in on your property now before the UK prices drop, then We Buy Any Home are cash house buyers that can make this happen.