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House Prices Predicted To Fall This Year

A ‘modest decline’ in house prices in 2023 has been predicted by the Nationwide in its latest house price report.

Prices could go down by around 5 per cent, it suggested. Double digit declines are not ruled out but don’t appear to be the most likely outcome. After all the ups and down of a hectic year for the housing market, 2022 ended with house prices having risen by a below- inflation 2.8 per cent in the previous 12 months, reported the Nationwide.

The rises earlier in the year had been negated by four months of consecutive falls. The December fall was 0.1 per cent with the slowdown being felt in all regions.

‘While financial market conditions have settled, mortgage rates are taking longer to normalise and activity in the housing market has shown few signs of recovery’, said Nationwide chief economist Robert Gardner.. ‘It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labour market widely projected to weaken as the economy shrinks’.

Longer-term interest rates, which underpin mortgage pricing, have returned towards the levels prevailing before the mini-Budget, said Gardner. ‘If sustained, this should feed through to mortgage rates and help improve the affordability position for potential buyers, as will solid rates of income growth’. Avoiding forced sales of homes is ‘the main factor that would help achieve a relatively soft landing for the housing market’, said Gardner. ‘And there are good reasons to be optimistic on that front’.

Meanwhile the latest Halifax house price index has painted a similar picture, putting the December annual rate of house price growth at 2 per cent, and the drop on the month at 1.5 per cent.

The fall in December was lower than the monthly decline of 2.4 per cent recorded in November’, Halifax Mortgages director Kim Kinnaird pointed out. ‘As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

‘As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8 per cent over the course of the year. ‘It’s important to recognise that a drop of 8 per cent would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels’.