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UK house prices expected to fall by 8% next year, says Halifax

According to a forecast by the lender Halifax, rising mortgage costs and the broader cost of living crisis will push house prices down by about 8% next year.

Halifax, which in November reported the largest monthly fall in house prices in 14 years, said the market was now rebalancing after years of conditions resulting in some of the biggest rises ever recorded.

The coronavirus pandemic also fuelled a mini-housing boom as flexible and home working led to increased sales of larger properties in more rural and idyllic settings.

“Following such rapid house price growth and the growing economic headwinds, a slowdown was almost inevitable,” said Andrew Assam, the home director at Halifax. “As the increasing cost of living puts more pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there’s understandably more caution among buyers and sellers, which has seen demand soften as people take stock.”

On Thursday, the Bank of England raised interest rates to 3.5%, the highest level in 14 years and its ninth rise in a row, a day after the rate of annual inflation eased slightly to 10.7%. Unemployment is also expected to rise to about 5.5%.

Halifax said that between the start of the pandemic in March 2020 and August this year, the average UK house price had increased by £55,000, almost 23%, to a record high of £293,992.

The bank said the 8% drop forecast for next year equated to the value of a typical UK house in April last year, meaning homeowners would not see all of their pandemic gains wiped out.

“There is still uncertainty around this forecast,” Assam said. “The housing market will continue to rebalance to reflect these new norms. 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.”

The average UK house price is currently £285,579, still up £12,000 from a year ago. As recently as June, house prices were riding a 12.5% annual increase, the strongest annual growth rate since 2005.

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