The number of buyers searching for homes in London has slumped dramatically since the mini-budget, raising alarm over a steep fall in prices over the winter.
New data from Zoopla shows how confidence has been shattered in the two weeks after Kwasi Kwarteng’s Commons statement on September 23 which sent mortgage rates soaring. One developer said the turmoil has “literally killed the housing market stone dead”.
Demand from buyers — defined by Zoopla as calls and emails to agents about properties — across the capital has fallen 21 per cent. But the most startling declines were in the commuter belt where prices had been pushed up fastest by the “race for space” during the pandemic.
Demand is 37 per cent lower in Watford postcodes, 32 per cent down in Kingston and Bromley, 30 per cent in Romford, 29 per cent in Enfield, and 27 per cent in Twickenham.
Richard Donnell, director of research at Zoopla, said: “Demand for homes has fallen the most in outer areas and the commuter zones where house price growth has been strongest in the last two years as buyers search for space and push up the value of three-bed homes.”
Fixed rates have climbed remorselessly, the mini-budget exposing thousands of buyers to huge increases in their bills when they have to remortgage. Average five-year fixed rates are now about 6.3 per cent, compared with 4.75 per cent on the day of the mini-budget and just 2.55 per cent only a year ago. Two-year rates are close to 6.5 per cent, compared with 4.74 per cent on September 23 and 2.254 per cent a year ago, according to data from Moneyfacts.
Market specialists and advisers say a major correction was now all but unavoidable. Joe Garner, co-founder and managing director of property developer NewPlace, said: “A house price crash in the capital is now a fait accompli. The only unknown is how hard and how fast the crash is. Only a few weeks ago, I was fairly confident the crash would be minimal, but then Liz Truss and Kwasi Kwarteng blew the mortgage, property and bond markets apart.
“We will now be lucky if we manage to get away with a 10 per cent drop in prices, and a fall of 20 per cent in London cannot be ruled out. Projected monthly repayments will have doubled for some first-time buyers in the past few weeks alone, making buying a property practically impossible.”
Dean Esnard, director at mortgage broker MagniFinance, said: “It is very likely prices in the capital will drop 15 per cent in the next six months. As brutal as that sounds, and as we saw after the global financial crisis, prices can bounce back quickly, too, and the average house price has doubled since. A sharp house price crash in the capital is now a very realistic possibility. But prices will recover, as they always do.”
Rob Gill, managing director at brokers Altura Mortgage Finance, said: “A buyers’ strike in the capital is a real risk if mortgage rates remain at their current levels. Many buyers are worried prices in the capital are on the edge of a precipice.”
The average London home costs an all time high of £543,517 according to latest figures from the Land Registry.
