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House Prices Predicted to Decline in 2024, While Experts Dismiss Crash Fears

A group of specialists, assembled by the personal finance comparison website, predicts that UK house prices will experience a decline of up to 10% by Autumn 2024. The panel, comprising academics, economists, and mortgage and savings experts, engaged in discussions and predictions regarding the base rate for the remainder of 2023 and its implications for the UK economy.

The consensus amongst the experts is a forecasted drop in house prices. “73% believe that house prices will fall between 5% – 10%, with more than half expecting prices to fall between 5% – 7.5%, and 18% predicting a more substantial drop of 7.5% – 10%.”

Charles Read, a fellow in economics at the University of Cambridge, anticipates a decline of 5% – 7.5%. He explained that “sharp rises in interest rates since the end of 2021 has reduced affordability of mortgages and new house purchases, pushing down prices”. David McMillan, professor in finance at the University of Stirling, foresees a steeper reduction of 7.5% – 10%, citing “squeezed” household incomes as a contributing factor.

David Hollingworth, associate director at L&C Mortgages, is optimistic about buyer confidence. He said, “as the rate outlook improves and mortgage rates stabilise and continue to improve, that could see buyer confidence begin to improve into next year which will likely see a soft landing.”

Despite the anticipated decrease in house prices, the experts largely dismiss the possibility of a housing market crash. “8 out of 11 (73%) predicting the UK will avoid a crash of this kind.” Luciano Rispoli, a senior lecturer in economics at the University of Surrey, noted the resilience of housing demand, stating, “Despite higher interest rates, housing demand is still strong and supply structurally low.”

However, Sam Miley, managing economist and forecasting lead at CEBR, was the sole expert foreseeing a market crash. He identified “high borrowing rates and a downward pressure on demand” as primary contributors to this scenario.

The expert panel unanimously agreed that the Bank of England will maintain the base rate at 5.25% on November 2, 2023, with 91% predicting it will hold steady until year-end. Kostantinos Lagos, senior lecturer in business and economics at Sheffield Hallam University, mentioned that the impact of monetary tightening may not be fully apparent yet. David Hollingworth added that the Bank might adopt a “‘wait and see’ approach for the time being.”

The possibility of a recession in 2024 has also been discussed, with 46% of the experts believing it could occur if the base rate does not decrease by the end of 2023. David McMillan considers a recession likely, pointing to “zero growth since emerging from the Covid-19 bounce-back”. Conversely, 27% of the panel does not anticipate a recession, citing the UK’s economic resilience.

In conclusion, the findings suggest a period of adjustment for the UK housing market with declining prices but a low likelihood of a crash. The potential for a recession remains uncertain, with experts advocating for measures to boost confidence in the economy.