One in four (25%) homes have been sold at a discount since September according to Zoopla research, as Hargreaves Lansdown says demand has fallen off a cliff since the infamous mini-budget.
Sales are down by as much as 50%, while a significant 15% are falling apart after a sale is agreed.
Rising mortgage rates and an uncertain economic climate have been blamed on the collapsing demand, as the average sale is 3% below the asking price, while a tenth (11%) of homes experienced a price drop of more than 5%.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, paints a grim picture of the market.
She said: “Demand has collapsed since the mini-budget unleashed chaos on the mortgage market. Meanwhile sales are down – in some areas as much as 50%.
“Even once a sale is agreed, the proportion of sales that fall apart during the buying process is rising – and has hit 15%.
“One in four sellers have had to cut their asking price, and increasingly they’re having to accept an offer.
“For most of the past two years, sellers have on average achieved their asking prices. However, in recent months, a gap has opened up, so they’re having to accept offers 3% below the asking price.
“Zoopla estimates that when this discount hits 5%-7%, prices will be falling – and that can’t be far off now.”
There will be a 5% drop in house prices thanks to this period, Zoopla predicted.
However there are early signs that economic conditions are improving.
While mortgage rates are still far higher than before the mini-budget, they’ve been on a downward trend since Rishi Sunak and Jeremy Hunt became Prime Minister and Chancellor respectively.
Coles added: “There’s not an awful lot to be cheerful about in the property market at the moment, but there is one bright spot.
“Mortgage rates are coming down, and according to Moneyfacts, five-year fixed rates have dipped below 6%.
“As times get tougher, and the threat of more rate rises starts to fade, we may well see these rates come down further.
“It’s highly unlikely to be enough to turn the market around, and see buyers return once we’re deeper into the recession.
“However, more manageable rates may well mean that the market correction isn’t as dire as some analysts had predicted.”
Richard Donnell, executive director at Zoopla, said: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double digit house price falls at a UK level remains low.
“While the outlook for house prices is weak, we see a shift to more needs driven motivations to move in 2023 and beyond which will support sales volumes. Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves.
“Cost of living pressures will compound these trends encouraging home owners to consider their next move. The rapid growth in rents, which shows little signs of slowing, will add to cost of living pressures and add continued impetus to first time buyer demand.”
