Property experts predict a year of falling house prices ahead – but by how much?

Thames Water Property SearchesBy Legal Futures Associate Thames Water Property Searches

As a roller coaster year draws to a close – one that began with the housing market flying high and finished with soaring interest rates and slumping prices – many property professionals are holding their breath to find out what is in store over the next 12 months.

As the country weathers the economic storm, one thing that seems certain is we’re facing the end of the UK’s 13 year housing boom. After mortgage rates shot above 6 per cent in the wake of September’s mini budget, buyers have become understandably more cautious about stretching themselves financially. The latest figures from the Halifax House Price Index revealed prices fell for the third time in a row last month, with November’s 2.3 per cent fall marking the biggest monthly drop since the beginning of the financial crash in 2008.

A recent report from the Royal Institution of Chartered Surveyors (RICS) made for sobering reading, predicting that many homeowners will struggle to make mortgage repayments and repossessions will rise next year. Meanwhile stock levels were found to be at a historic low, with estate agents listing an average of just 34 properties on their books.

While everyone predicts prices to fall further in the year ahead, the jury is out on just how much they will fall by.

Knight Frank forecasts suggest UK house prices will fall by 5 per cent in 2023 and again in 2024, before returning to growth. But the estate agent’s analysts pointed out that it won’t be the same across the board with some markets, such as prime central London, only expected to fall 3 per cent before flattening out in 2024, thanks to higher levels of affluence and housing equity as well as a broader base of returning international buyers.

Meanwhile Savills estate agents predicted a bigger reduction in prices, in the region of 10%.

Lucian Cook, head of residential research at Savills said: ‘Given the prospective path of the Bank of England base rate, we expect to see mortgage rates elevated through 2023 and well into 2024. Mortgage affordability, already stretched in Autumn 2022, will be stretched even further over the remainder of this year and next by historical standards.

That points towards double-digit house price falls in 2023, in a year when discretionary movers sit on their hands and both first-time buyers and buy-to-let investors curtail their activity given the specific affordability pressures they face.’

Commenting on what lies ahead next year, the National Association of Property Buyers’ Jonathan Rolande commented: ‘For 12 years the market has proven doom-mongers wrong, climbing ever higher despite political strife, a pandemic, Brexit and even a European war. But given the current circumstances, it is becoming increasingly hard to see hope for the next year. In fact, it’s even becoming tougher to remain on the fence with a ‘something will turn up’ approach. It now seems clear that 2023 will be the year of the property price drop. It’s not a matter of if, but when, how fast, and by how much.’

On how far prices might fall he added: ‘The first quarter of 2023 will be crucial. If there is a New Year bounce, buyer and lender confidence could hold and the rate of decline will be slow. But if 2023 doesn’t start with a property buying spree, that confidence will be further eroded and that could well spell monthly reductions throughout the whole of next year.’

Rest assured that whatever challenges lay ahead for the property market, Thames Water Property Searches will be here to help all our customers in every way we can.


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