Economists and property analysts, surveyed by Reuters ahead of Nationwide’s data release, predict a 4% decline in British house prices for 2023 compared to 2022, a slight increase from the 3% estimate in a previous survey. The most pessimistic forecast foresees a 10% drop. The outlook for 2024 suggests stable prices, with a modest 3% rise anticipated for 2025. This shift reflects growing concerns about the housing market’s trajectory, with factors like rising interest rates and weakening demand causing experts to revise their expectations. The housing market, once on a rapid ascent driven by the pandemic, now appears to be facing a period of adjustment.
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In August, British property values experienced their most significant yearly drop since July 2009, with a 5.3% decrease compared to the previous year. This decline was primarily attributed to increased interest rates, which dampened buyer demand, according to mortgage lender Nationwide. Additionally, there was a substantial monthly decline of 0.8% in August, the sharpest monthly decrease since March, as indicated by Nationwide’s data.
The Bank of England has implemented 14 interest rate hikes since December 2021, bringing them to 5.25%. Financial markets anticipate yet another rate increase this month, pushing it to 5.5% Mortgage approvals had consistently remained approximately 20% lower than the levels observed in 2019, and it appears that this trend will persist.
However, Nationwide anticipates that the housing market will experience a gradual decline rather than a sharp drop, describing it as a “soft landing.” This expectation is based on their projection that unemployment will not surpass 5%, and nominal wage growth is strong.
Prior to reaching their peak in September 2022, British house prices had surged by more than 25% since the start of the COVID-19 pandemic, driven by increased demand for larger living spaces, historically low interest rates, and temporary tax incentives.
A recent Reuters survey of economists and property analysts, released before the Nationwide data, indicated that participants anticipated a 4% decrease in house prices for 2023 when compared to 2022. This prediction was slightly higher than the 3% estimate from a similar survey conducted in June. The most pessimistic forecast in the poll projected a 10% decline. Looking ahead, respondents in the poll expected house prices to remain stable in 2024 and then increase by just over 3% in 2025.
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