By Suban Abdulla
LONDON - 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 released on Monday 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 that real estate group Zoopla said was "more pronounced in new buyer demand than sales agreed".
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.
Zoopla said it expects mortgage rates 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.
Zoopla predicts British house price growth to head towards 0% and possibly enter negative territory next year.
"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," Richard Donnell, executive director at Zoopla said.
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 published on Friday showed property demand has shifted from buying to renting amid financial uncertainty.