House Prices: Are They Going Down?

UK house price growth has shown remarkable resilience since the global financial crisis in 2008, remaining strong and consistent. The persistent demand for homes has consistently outpaced supply, leading to inflation in house prices.

Starting in 2020, the impact of the Covid-19 pandemic further accelerated average price increases, primarily driven by the government’s introduction of a stamp duty holiday and a surge in relocations.

However, the situation took a turn since late 2022, with a notable slowdown in growth. Several factors, including economic uncertainty, a cost of living crisis, high interest rates, and rising inflation, have created significant challenges for prospective property buyers.

As a consequence of reduced demand, average property prices have experienced a decline, marking a shift after more than a decade of steady growth.

Let’s take a look at an overview of average house prices over the last four years, as reported by some of the main data providers:

*Halifax and Nationwide figures are based on purchase prices from approved mortgages. Rightmove figures are based on asking prices for homes for sale

As of the beginning of 2023, numerous mortgage providers and property experts have projected a substantial decline in average house prices over the next 12 months. These negative forecasts are based on several factors, such as rising mortgage rates and an increase in the overall cost of living, which collectively contribute to a decrease in demand from prospective buyers.

Below is an overview of some of the 2023 house price predictions from leading market commentators:

As of June 2023, the house price predictions made by market commentators appear to be partially coming true. The table above indicated that these commentators anticipated average house prices to fall within the range of five percent to 10 percent for the year.

According to Nationwide’s House Price Index, the average UK property price was down 3.5 percent year-on-year in June 2023. Additionally, Halifax’s data showed a year-on-year fall of 2.6 percent in the same month.

If the prices continue to decline at a similar rate during the second half of the year, it is possible that the annual drop could fall within the predicted range of five percent to 10 percent, as forecasted by the market commentators. However, it is essential to keep in mind that real estate markets can be influenced by various unpredictable factors, and actual results may differ from predictions.

Will 2024 be a good year to buy?

The house price forecast for the period of 2023 to 2028 indicates a mix of fluctuations and potential recovery in the UK housing market.

For 2024, the Office for Budget Responsibility (OBR) expects a further decline in house prices, forecasting a 10 percent fall. This suggests that 2024 might be a favorable year for potential buyers as prices are projected to continue decreasing.

Looking ahead to 2025, estate agency Savills predicts that average house prices may begin to recover, provided that inflation continues to fall and the Bank of England reduces its base interest rate. This potential recovery could signal a turning point for the housing market.

Savills is optimistic about 2026, forecasting a bullish seven percent house price rise, indicating a potential period of growth for the market.

In 2027, the OBR suggests that average prices could increase by 3.5 percent, further indicating a positive trajectory for the housing market.

However, it’s essential to consider a more conservative outlook as well. Oxford Economics has predicted that UK house prices may not return to their 2022 levels until 2028, implying that the recovery might take longer than some other forecasts indicate.

In summary, the house price forecast for the next five years suggests that prices may start rising again after the decline in 2023. However, the growth might be slower compared to the significant increases witnessed between 2008 and 2022. For prospective buyers, 2024 could present a good opportunity to enter the market at potentially lower price levels, but it’s essential to keep a close eye on the market trends and consider multiple factors before making a decision.