British property market activity stalled in October and house price growth slowed to its lowest quarterly level since February 2020 due to a disastrous ‘mini-budget’ and a cost-of-living crisis, a survey showed.
Zoopla's house price index said the October slowdown was in part due to the economic plan set out in September by then Prime Minister Liz Truss, which triggered a sell-off in bond markets. The spike in mortgage rates in the aftermath of the Truss plan led to a sharp decline in housing activity. Buyer demand fell 44% year-on-year in October, while sales volumes were down 28% compared to a year earlier, but on par with the pre-pandemic period, Zoopla said.
Mortgage rates are expected to return towards the 4-5% level at the start of 2023 after the cost of 5-year fixed loans eased from a peak above 6% last month. In annual terms, house price inflation slowed to 7.8%, with quarterly growth at 0.7%, the lowest rate since February 2020.
British house price growth may head towards 0% and possibly enter negative territory next year. A rapid rent surge will add to cost-of-living pressures and add continued impetus to first-time buyer demand, he added. Despite the shocks, the slowdown in the property sector is a "shake-out" rather than the start of a crash, Zoopla said. A separate survey showed property demand has shifted from buying to renting amid financial uncertainty.
