Call for first-time buyer support as house sales fall

Property sales have fallen by a fifth this year after a series of interest rate hikes made it harder for buyers to afford a new mortgage.

Tracking the number of homes sold subject to contract so far in 2023, Zoopla found that sales are currently down 21% compared to last year.

For the full year, the property website expects the number of homes sold across the UK to be the lowest for more than a decade.

Government intervention

The net decline in property sales this year is largely from mortgaged buyers. Zoopla expects mortgaged sales to drop 28% on last year, while sales of houses bought with cash -- where buyers are not relying on a mortgage -- will fall just 1% compared to 2022.

A new scheme to help buyers back to the market is one way that the government could -- and should -- intervene, according to Heather Powell, head of property and a partner at tax and advisory firm Blick Rothenberg.

"The continuing fall in residential property sales show how slow the recovery is going to be for industries that thrive on a healthy property market, and the government need to act now to reinvigorate this essential element of the UK economy," Powell argued.

She added: "A regime that encourages first-time buyers, without inflating prices, is needed to 'prime this pump'. It is to be hoped that incentives such as 'Help to Buy', with ceilings appropriate for a given region, are being discussed in the office of the Minister of State for Housing and Planning. Our economic recovery will be assisted by releasing the capital triggered by a healthy, active housing market."

Running from 2013 to 2022, the Help to Buy scheme allowed first-time buyers to purchase a new-build home with a 5% deposit and receive an equity loan for up to 20% of the property value, interest-free for five years. This meant that eligible applicants could take out a standard mortgage for the remaining 75%, instead of a costly 95% mortgage.

House prices pushed lower

The squeeze on affordability due to high mortgage rates and cost-of-living pressures has led to falling house prices. Average house prices in August 2023 were 4.6% lower than in the same month a year ago, representing a decrease of £14,000 for the average home, according to the latest monthly report from Halifax.

It's the biggest annual fall in 14 years, although the mortgage lender noted that this is relative to the record high property prices seen last summer.

The average home now costs £279,569, down by around £5,000 since July, and back to the level seen at the start of last year. However, prices are still £40,000 higher than before the pandemic.

"We may now be seeing a greater impact from higher mortgage costs flowing through to house prices," said Kim Kinnaird, director of Halifax Mortgages.

"The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years."