Property prices across Britain will have fallen 6 per cent by the end of 2023 and 3 per cent the year after, figures from real estate group JLL suggest.
However, it said the housing market had remained ‘more resilient than expected’ in the face of rising interest rates and cost of living pressures, meaning the falls will be ‘less significant’ than at the height of the 2008 global financial crisis.
More stringent lending rules post-2008 and higher levels of equity mean that while the housing market has come under pressure, ‘we are yet to see significant signs of distress,’ it said in a report.
UK house prices: Property prices across the UK could fall 6% by the end of 2023
The group expects UK property prices to bottom out in 2024, but maintains there will be annual falls in most markets at the year-end.
After that, it says house prices will start to rise again in 2025.
The report added: ‘We are forecasting a return to growth in our 2025 forecast as fixed rates begin to fall and we have more certainty on the outlook.’
On mortgage deals, JLL expects fixed rates to become cheaper as the prospect of further rate rises recedes, but says households will still face higher rates than many are used to for some time.
Separate data from the Bank of England last month revealed mortgage approvals for house purchases, which is an indicator of future borrowing, fell from 45,400 in August to 43,300 in September, marking the lowest level since January.
A lack of homes coming to the market for sale looks set to remain a thorny issue.
JLL said: ‘JLL predicts that this undersupply will worsen further, with a cumulative shortfall of 720,000 homes between 2023 and 2028.’
Marcus Dixon, a director of UK residential research at JLL said: ‘Despite the uncertainties faced by the UK property market, we have seen resilience and stability over the past year.
‘Looking ahead, we forecast a bottoming out of prices in 2024, with single-digit annual falls likely.
‘The UK housing market still faces challenges in terms of supply, with a cumulative shortfall of 720,000 homes expected between 2023 and 2028.
‘Addressing these structural barriers is crucial for achieving meaningful increases in supply and mitigating affordability issues.’
Figures from Nationwide published on Wednesday showed house prices defied expectations by rising 0.9 per cent in the month of October, though they remained 3.3 per cent down on the same period a year before.
The average home increased in price from £257,808 in September to £259,423 in October according to the index, which is based on its own mortgage lending.
Nationwide said prices were likely to remain ‘subdued’.
JLL said: ‘Thirteen months on from summer 2022 peak, house prices are down by 5.3 per cent according to figures from Nationwide.
‘This compares to a fall of more than 13 per cent at the same point following the 2007 peak.’
Rents rising: The cost of renting a home could increase by 5% in 2024, according to JLL
Rental costs rising for tenants
While house prices might be going down, JLL said tenants face further spikes in rental costs over the coming years.
It said: ‘The imbalance between rental stock and tenant demand drove rental growth to double digit highs in 2023.
‘Over the next five years, we expect the lack of new rental stock – through fewer new home completions and a more challenging interest rate environment, will mean we see rental growth exceed wage growth.’
JLL expects rents rents to increase across the UK by 5 per cent in 2024.
Rental growth is expected to be higher in London, as greater competition for stock and affordability challenges in the sales market bolster demand.
From 2025 onwards it thinks lower mortgage rates will result in an increase in tenants moving into owner occupation, taking some of the heat out of the market.