Mortgage lender Halifax has predicted an 8% fall in UK house prices next year as the cost of living crisis, rising interest rates and higher unemployment pile the pressure on household finances.
“To put this into perspective, such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic," Andrew Asaam, homes director at Halifax, said.
He also noted that the forecast could be impacted by changes to Base Rate trajectory and unemployment levels.
Assam made the call in a sector review looking back at 2022 and ahead to next year.
He described 2022 as a “tale of two halves” with the year kicking off “with average house prices continuing to rise at pace, still supported by low interest rates and strong demand from buyers.”
He explained that “following such rapid house price growth, and the growing economic headwinds, a slowdown was almost inevitable” and “we saw this play out with a flattening of house prices over the summer, before the -2.3% decrease recorded in November.”
Looking ahead he noted “as the increasing cost of living puts more pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there’s understandably now more caution among both buyers and sellers.”
Next year “will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms” he forecast.
“We therefore expect that UK house prices will decrease by around 8% next year.”