Rising mortgage costs and the broader cost-of-living crisis will drive home prices down by around 8% next year, according to forecasts from lender Halifax.
Halifax, which in November reported the biggest monthly decline in house prices in 14 years, said the market was rebalancing after years of conditions that led to some of the biggest house price increases on record. .
The coronavirus pandemic has also fueled a housing mini-boom, as flexible and home-based working has led to increased sales of larger properties in more rural and idyllic settings.
“With such rapid growth in house prices and growing economic headwinds, a downturn was almost inevitable,” said Andrew Asaam, director of homes in Halifax. “As the rising cost of living puts increased pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there is understandably more caution among buyers. and sellers, which has seen demand dip as people take stock.”
The Bank of England on Thursday raised interest rates to 3.5%, the highest level in 14 years and its ninth consecutive hike, a day after the annual inflation rate edged down to 10.7 %. Unemployment is also expected to rise to around 5.5%.
Halifax said that between the start of the pandemic in March 2020 and August this year, the average UK house price rose by £55,000, or nearly 23%, to a record high of £293,992. £.
The bank said the 8% drop forecast for next year was equivalent to the value of a typical UK home in April last year, meaning homeowners would not see all their pandemic gains wiped out.
“There is still uncertainty around these predictions,” Asaam said. “The housing market will continue to rebalance to reflect these new standards. While overall inflation may be near or at its peak, household energy bills are likely to rise again, putting more pressure on household budgets.
The average UK house price is currently £285,579, still up £12,000 from a year ago. As recently as June, house prices registered an annual increase of 12.5%, the highest annual growth rate since 2005.
Last month property portal Zoopla predicted that UK house prices would fall by around 5% next year.
“We expect 2023 to be characterized by a slower real estate market in which around 25% fewer properties will come on the market and change hands compared to a ‘normal’ year,” said Sebastian Verity, head of research at Chestertons estate agent. .
“The government is actively working with mortgage lenders to avoid additional stress on borrowers, so we believe the number of forced sales will be relatively low and the lack of supply, combined with strong underlying housing demand, will insulate eventually the market of any dramatic price falls.