Economists have warned that house prices are set to fall in their biggest decline since the financial crash. The markets are on course for a “correction” due to rising borrowing costs and an expected recession.
The Times revealed that two thirds of economists it surveyed forecast that house prices will fall by more than four percent in 2023.
The majority of those asked warned that the fall will reach near double digits which will see the worst year for the housing market since 2009.
Sanjay Raja, Chief UK economist at Deutsche Bank said: “A double-digit price fall would not be surprising.
“If typical mortgage rates remain above five percent, together with an unprecedented squeeze on household incomes, it is hard to see how house prices can avoid taking a significant hit in 2023.”
As the country tackles its worst rate of inflation in four decades, at 10.7 percent, borrowing costs have been increased.
With interest rates at their highest level since 2008, homeowners face an average increase of £3,000 to their mortgage payments this year, the Bank of England has said.
Following 10 years of house price growth, another economist predicted that the markets will see a “correction” to overvalued house prices.
House prices are 30 percent overvalued based on affordability metrics, Andrew Goodwin at Oxford Economics said.
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“The UK lacks a credible growth plan and suffers from policy instability due to continuing weak and poor governance”, said John van Reenen from the London School of Economics.
The rate of inflation is a lasting puzzle for economists amid uncertainties about how fast and far it will fall over 2023 after hitting a high of 11.1 percent last autumn.
Over half of the respondents of the survey said consumer prices inflation would be between 3.5 percent and five percent by the end of the year while 40 percent believe inflation will stay above 5.5 percent.
Other responses from the survey addressed other issues which will be key in 2023 with over 40 percent expressing their belief that the UK and the European Union will finally iron out the hangovers of Brexit this year by resolving the Northern Ireland protocol disagreement.
