The United Kingdom's property market is experiencing a significant slowdown, characterized by a standstill in sales and a decline in mortgage approvals. This stagnation is attributed to a combination of elevated borrowing costs and concerns over potential property tax changes, particularly those linked to political figures.
Figures released by the Bank of England indicate that mortgage approvals fell to 56,205 last month. This represents a decrease from 66,034 approvals in April and marks the lowest figure recorded since December 2023. Data from the property website Zoopla reveals that three out of every five homes listed for sale since January have not yet found a buyer, and overall house sales have seen a 7 percent year-on-year reduction.
"Higher mortgage rates and political uncertainty have shrunk the pool of committed home buyers," a Zoopla report stated. The report also cited "a change of prime minister and questions over future tax and spending priorities in the Autumn Budget" as contributing factors to the prevailing uncertainty.
Industry experts have cautioned that the market could face further challenges throughout the summer. Speculation is mounting regarding potential future tax policies, with particular focus on Andy Burnham, who is expected to assume a significant leadership role in the coming month. Concerns have been raised that he might introduce a property tax that could disproportionately affect homeowners in more affluent areas.
Tom Bill, head of UK residential research at Knight Frank, commented that "a summer of tax speculation could stifle demand in the housing market for the second year running." He noted that after an early spring market that was curtailed by increased mortgage costs stemming from international conflicts, buyers and sellers may not have adequate opportunity to recover.
Zoopla's research indicates that house prices have seen a modest increase of only 1.4 percent compared to the previous year. A discernible North-South divide in price performance has emerged, with prices in the North rising by 3.5 percent, while London has experienced a nine-month consecutive decline in property values.
The increase in borrowing costs has translated to higher monthly mortgage payments. Zoopla data suggests that the average mortgage has become approximately £125 more expensive per month, or £1,500 annually. However, the impact is more pronounced in regions with higher property values, such as London, where monthly mortgage costs for buyers have increased by £244, compared to a £69 monthly rise in the North East.
This disparity in mortgage cost increases helps to explain the varied market performance across different regions. Sales have declined by 3 percent in the North East and 4 percent in Scotland. In contrast, sales have dropped by 9 percent in London, 10 percent in the East of England and the South West, 11 percent in the East Midlands, and 12 percent in Wales. Richard Donnell, executive director at Zoopla, stated that "higher mortgage rates have hit sales and squeezed affordability alongside increased political uncertainty."