Now is the time of the year when forecasts for property prices over the next year start coming in thick and fast. So this week we will round up a few forecasts from different experts. And try to come to some conclusions about where UK house prices might be heading in 2023 and beyond.
Forecasting property prices is never an easy thing to do. And forecasts are very often wrong in normal times. But there are many additional factors to take account of at the moment.
Inflation and the cost of living is surging ahead and wage rises are nowhere near to keeping up with them. As well as affecting affordability this also affects market sentiment. It prompts those who might be considering moving, plus the all-important first time buyers, to reconsider.
It’s very difficult to assess exactly what impact tax rises might have on the market too.
After a decade of ultra-low interest rates, rates and so mortgage costs are now rising – with further rises likely. Fixed rate mortgages have delayed the impact of these on the market so far. But more and more cheap mortgage deals will be coming to an end in 2023 and 2024.
So now let’s take in some forecasts for property prices:
Knight Frank’s latest UK House Price Forecast has revised down their previous forecasts for the sales market over the next two years. They confirm that rising inflation and interest rate hikes are key factors in this.
They now forecast that house prices will fall by 5% overall in the UK in 2023 or 6% in London.
They forecast further price falls of 5% overall in 2024 or 4% in London.
Knight Frank believe prices will start to rise again from 2025 onwards. But over five years total house price growth will only be 1.5% overall and just 0.5% in London.
UK House Price Forecast 2022: prices to fall as mortgage costs rise
Savills’ latest Residential Property Market Forecast suggests that prices in the mainstream market will fall by 10% overall in 2023.
They say that prices will then begin to rise – by 1% in 2024, 3.5% in 2025, 7% in 2026 and then 5.5% in 2027. This will mean that over 5 years there will be a net rise in house prices of 6.2%.
Savills believe that London mainstream market house prices will fall more sharply, and rise more slowly, than elsewhere. They say London prices will fall by 12.5% in 2023 and 1% in 2024, and then begin to rise again but by 2027 they will still be 1.7% lower than today.
They suggest that house prices in the North East, North West, Yorkshire and the Humber, and Wales, could actually do reasonably well overall over five years and will be around 11% up compared to today.
Savills UK | Residential Property Market Forecasts
The recent JLL UK House Price Forecast suggests that house prices are ‘set for a correction, not a crash’ in 2023. They believe that the impact of difficult economic conditions will to some extent be reduced due to an ‘absence of distress’ in the market and the fact that fewer sellers will sell.
They suggest that house prices will fall 6% in 2023, and then grow 1% in 2024, 4% in 2025, and 5% in both 2026 and 2027 so that cumulative growth will be 8.9% over five years.
JLL point out that price falls will not be the same across all property types and all regions and suggest that price falls will be slightly more in the regions than in London.
JLL UK House Price Forecasts - Housing set for a correction, not a crash
So what might we conclude from these different forecasts?
It seems almost certain that house prices will see a fall – for the first time in 15 years or so – in 2023.
But in reality it may not be all that severe. The high gains seen over the last year or two will not be wiped out. By the end of next year prices will still be higher than they were in early 2020. And they could still be higher than even the most optimistic forecasters back in 2020 would have predicted.
2023 and possibly 2024 may be a good time for home owners (and investors) to sit tight if they can. It could be a very uncertain time to try to sell a property. On the other hand, buyers and investors who are still willing to buy and can afford to do so may be able to get a good deal next year.
Over five years the more pessimistic forecast suggests that prices will be broadly flat compared to today. There won’t have been a price crash, nor anything like it. The more optimistic forecasts suggest that houses will be more expensive in five years than they are today, and in some cases by a strong (in the circumstances) margin.