UK House prices are expected to fall 5% next year, according to Zoopla, with London prices slipping as much as 8%.
Quarterly price growth has slowed rapidly, said the online real estate company, which expects prices to fall in early 2023.
Buyer demand, it said, is roughly 50% lower than this time last year, while new sales agreed are 28% lower.
Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown believes the UK faces the real prospect of quarterly price falls in 2023.
“The cost-of-living crisis is biting down hard on our finances and rising mortgage rates have put off all but the most determined of buyers,” said Morrissey.
“Added to this, the prospect of a looming recession is enough to make many people delay a house purchase for the foreseeable future.”
“The sense of nervousness is palpable as we head into the New Year as people wait for signs of house price falls before making their move. In one bright spot among the gloom”
Zoopla also forecasts interest in “affordable, accessible urban areas” including Bradford and Crewe to rise.
“Affordability will be key -though rural and coastal areas are seeing demand fall, there is demand for more affordable urban areas such as Milton Keynes, Bradford and Coventry as people become increasingly office-based again so they will likely to be more resilient to price falls,” said Morrissey.
“Committed buyers may still be able to get their dream home as there are signs many would-be sellers are willing to be a bit more flexible on asking prices, so those willing to haggle could still get themselves a good deal.”
In the long-term, price falls coupled with an increase in wages and lower mortgage rates could improve affordability and help bridge the gap, getting more people on the housing ladder.
UK house prices had begun to fall in the second half of the year, with the average house prices by 1.4% in November, according to figures from the Halifax building society.
Halifax also predicts that UK house prices will fall by 8% in 2023.
“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.