The number of home sales taking place across the UK this year is on track to be around 21% lower than in 2022, according to property website Zoopla.
About one million sales could be completed in 2023, which would be the lowest total since 2012 and equate to the average household moving just once every 23 years, Zoopla said.
The website made its predictions based on house sales in the first half of this year.
With mortgage costs increasing sharply, the number of house sales with a mortgage is expected to plunge by nearly a third (28%) this year, compared with 2022.
Cash sales, where buyers do not relying on a mortgage, are expected to hold up relatively well, edging down by 1% compared with 2022, meanwhile.
Existing homeowners using a mortgage typically account for a third of annual sales. This group may be more likely to wait until the outlook for mortgage rates improves, Zoopla suggested.
"House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates," Zoopla executive director Richard Donnell said.
"Prices are falling more in southern England, where higher mortgage rates have priced more people out of the housing market, weakening demand.
"While UK house prices are 0.1% higher over the year, it is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage-reliant buyers.
"Cash buyers are more immune and on track to account for more than one in three sales in 2023. Mortgage rates have started to fall slowly but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023."
Zoopla said sales of smaller, more affordable properties have fallen back to a lesser extent than transactions involving three- and four-bedroom homes.
New purchases of buy-to-let homes have also been squeezed by higher mortgage rates, Zoopla said. Reports have previously pointed to rental prices rising sharply against a backdrop of mortgage rises, affecting landlords as well as other homeowners, and a lack of available homes for tenants.
The Bank of England has been raising interest rates to quell stubbornly high inflation, but Zoopla said if mortgage rates were to fall below 5%, this would improve affordability and stimulate more home moves.
Figures released separately by Moneyfactscompare.co.uk on Tuesday showed that the average two-year fixed homeowner mortgage rate on the market was 6.73%. The average five-year fixed homeowner mortgage rate was 6.21%.
Zoopla also said that strong wage growth has been supporting housing affordability.
Housing affordability, on a house price-to-earnings basis, looks set to improve over 2023, as prices register modest falls and average earnings increase.
The UK house price-to-earnings ratio will be in line with the 20-year average at the end of 2023 at a multiple of 6.3 times, it predicted.
In London, the average house price-to-earnings ratio is set to move into single digits for the first time in 11 years, the website expects, to an estimated 9.6, down from 10.7 in 2022.
Carl Jenkinson, director at sales-only estate agent Venture Properties, said the company was witnessing a decline in buy-to-let investing.
"We have already seen many lenders reducing rates over the last few weeks and expect this to be the same over the coming weeks, which is making some clients become 'rate chasers', waiting for the best deals.
"Our buy-to-let investors have fallen slightly due to the mortgage rates and the criteria involved, although our rental stock remains in high demand."
Matt Thompson, head of sales at London-based estate agent Chestertons, said buyers have been more cautious and are in some cases pausing their property search in order to adjust their finances.
"However, there still are buyers who have already locked in a mortgage rate with their lender and are keen to secure a property before the rate expires," he said.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said:
"As wages rise relative to property prices, we know once mortgage rates go low enough, we should see affordability to start to work its magic on the market again. The problem is that predicting exactly how low rates need to go, and when they'll get there is a tricky business."
Source: PA
