Hamptons has released a new four year forecast for the UK residential property market, estimating that rents will increase more than four times faster than asset values between now and 2026. Below is a summary of the report.
2023: Peak interest rates result in small price falls, but few signs of a crash
Using the Office for National Statistics (ONS) House Price Index, which tracks all completed sales, Hamptons expects the Index to show that the average property in Great Britain will cost 2.5% less at the end of this year, compared to the end of 2022. The firm states: ‘Higher mortgage rates, worsening affordability and general economic uncertainty have all weighed on price growth this year. In reality though, it’s likely that completion prices will have fallen a little more than what’s reflected in the ONS index.
This is partly due to the lag between a sale being agreed and its completion. The sales agreed around July this year, when mortgage rates peaked, will likely form completions during the final quarter of 2023.’
However, Hamptons adds that in real terms (adjusted for inflation) house prices are likely to fall by a fairly significant 7.4% this year, compared to a real terms falls of 10.6% in 1990 and 16.5% in 2008. ‘The likelihood of a notable real terms fall this year is one of the reasons why we do not expect another decrease in cash terms in 2024, particularly if mortgage rates continue to decline.’
The Southern regions, where affordability is most stretched and where higher rates have hit hardest, are set to see the biggest price falls this year. These include the South West (-4.0%) and East of England (-3.5%) and South East (-3.0%).