House price growth has ground to a standstill as the cost-of-living crisis continues to squeeze disposable incomes, a new report found. 

A report from real estate company Zoopla shows demand to buy dropped in the final months of last year which is expected to "feed into a rapid slowdown in the annual rate of price growth".

A 50 per cent drop in buyer demand prompted property prices to stall in the last months of 2022.

In Scotland, house prices increased by 5.1 per cent between December 2021 and 2022 - below the UK average annual price growth of 6.5%.

Across the UK, buyer demand had dropped by almost a quarter (23%) this January compared to the five-year average. 

This has brought it "back in line with pre-pandemic levels" but it remains 10% ahead of 2019. 

The pandemic saw a boost in households looking for new homes, but demand has fallen amid higher mortgage rates, living costs and weak consumer confidence. 

"This is not surprising," the report reads. "The last 3 years have been exceptional with the pandemic reshaping how households think about housing, driving more moves."

Soaring inflation and tighter budgets are also reflected in an emerging shift towards a demand for flats. 

The first few weeks of 2023 showed a "clear shift" with 27% of buyers looking for one and two-bedroom flats - rising from 22% last year. 

Meanwhile, the demand for three-bed houses dropped by 5% year on year. 

"This is a trend we are seeing across all areas of the UK in the first few weeks of the year," the report adds.

Of the 20 cities for which annual house price changes are listed, the three Scottish cities experienced some of the lowest increases. 

Glasgow house prices saw a year-on-year rise of 3.8% with the average property selling for £142,200, while Edinburgh saw a lower rise of 3.5% ut with average prices reaching £267,200.

Aberdeen was the only city of the 20 across the UK which dropped with a percentage change over the 12 months of -0.4%. 

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The first part of this year is expected to lead to further small decreases in prices but Zoopla's executive director for research Richard Donnell writes that the housing market is in "better shape to deal with the headwinds". 

He writes: "It’s early days to get a clear read on the market outlook for 2023.

"The economic outlook has improved slightly in recent weeks but the squeeze on household disposable incomes is very real with a direct impact on sales activity."

However, improving mortgage rates are expected to see demand rise again later this year. 

“It’s going to be a slow start to 2023 but we expect demand to pick up in the coming months as the economic outlook becomes clearer and mortgage rates settle around 4% to 4.5%," Mr Donnell adds in the report.

Commenting on the report, the chief executive of industry body Propertymark said supply was "booming" in January. 

Nathan Emerson said: "Estate agents have noted a booming January with a rise in homes coming to the market and plenty of keen sellers present.

"Buyers are learning quickly that the power of the purchase is now in their hands due to competition levels easing for the first time in a while, but their purse strings are being tightened and some are now looking for slightly smaller, more cost-effective homes than before."

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Meanwhile, rent prices continue to skyrocket with no "sign of a slowdown" due to chronic supply and demand issues.

A December report by Zoopla on the rental market detailed that the supply of homes for rent in the UK remained 38% below the five-year average. 

Rents across Scotland soared by 11.4% in year-on-year data, with Glasgow second on the report's city breakdown with annual increases of 14.1% in rent prices. 

The city is only behind Manchester which saw rents rise by 15.6%.

Edinburgh is fifth on the list after would-be renters experienced a 12.4% rise in rental prices.