Study Reveals 44% Decline in UK Property Demand Following Market-Impacting Mini-Budget

Research released on Monday revealed a dramatic drop in demand for residential properties in the U.K., following the government’s budget announcement in September. The fiscal measures, unveiled on September 23, triggered turmoil in financial markets and led to heightened concerns about a potential housing market crash as bond sell-offs and increased interest rate expectations rattled investors. This uncertainty prompted a record number of mortgage deals to be withdrawn, while many lenders paused their offerings to assess market volatility.

According to data from property website Zoopla, buyer demand plummeted by 44% year-on-year in the four weeks leading up to November 20. Additionally, new property sales saw a decline of 28%, with the stock of homes for sale increasing by 40% during the same period. The drop in demand reached levels typically observed during the holiday season, as potential buyers adopted a wait-and-see approach amid uncertainties surrounding mortgages, employment, and wages.

Zoopla’s executive director for research, Richard Donnell, anticipates house price declines of up to 5% in 2023, although he expects transaction volumes to remain robust due to various structural, demographic, and economic factors. Despite the forecasted decrease in house prices, Zoopla’s projections are relatively optimistic compared to other estimates. Economists at Pantheon Macroeconomics anticipate an 8% decline over the next year, while Nationwide warned of a potential collapse of up to 30% in its worst-case scenario.

The Office for Budget Responsibility, however, has taken a more moderate stance, projecting a 1.2% decrease in house prices next year and a 5.7% decline in 2024. The current market dynamics, characterized by a modest repricing of homes, are described by Zoopla as a “shake-out” rather than a precursor to a housing crash. Despite record-high private rental costs, particularly in London where rents surged by 16.1% year-on-year, Zoopla does not foresee the need for significant price corrections or forced sales in the U.K. housing market in 2023.