Halifax predicts 8% drop in house prices in 2023

Halifax

The lender’s housing market review has forecasted that higher energy bills and rising employment will put pressure on people’s budgets and push prices down

Halifax is predicting an 8% decline in house prices next year. The lender’s housing market review has forecasted that higher energy bills and rising employment will put pressure on people’s budgets and push prices down.

Its prediction remains on the low end of the scale, with other commentators suggesting drops ranging from 10% to 20%.

Andrew Asaam, homes director for Halifax, said: 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 – particularly following recent market volatility – which has seen demand soften as people take stock.

Looking ahead to next year, it will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms. Though the limited supply of properties for sale will continue to support prices, the pandemic-driven surge in demand has receded, and we’re emerging out of more than a decade of record low interest rates, he said.

He highlighted that unemployment is expected to rise and reach around 5.5%, which may be low by historical standards but will be challenging for many people.

Asaam added: While inflation as a whole may be close to or at its peak, household energy bills are likely to rise again, putting more pressure on household budgets.

We therefore expect that UK house prices will decrease by around 8% next year, he said.

He said: 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.

He cautioned that there is still uncertainty around this forecast, with the trajectory for base rate, now expected to peak at 4%, and unemployment levels key to determining any future changes.

The review was a tale of two halves for the property market this year.

It was buoyant in the first half of 2022, as pandemic-driven shifts in housing preferences and low interest rates kept transaction demand elevated, but prices flattened off from mid-year and fell towards the end as the increasing cost of living put more pressure on household finances and rising interest rates pushed up mortgage costs, Halifax said.

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