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Will house prices fall 2023?

House prices will slump in 2023 as high mortgage rates crunch buyers' budgets and bring sales to a 12-year low, analysts have warned. From peak to trough, values will fall by 12pc, according to both Capital Economics and Oxford Economics research consultancies.

telegraph.co.uk - Why house prices will nosedive in 2023 – and how far they will fall

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House prices will slump in 2023 as high mortgage rates crunch buyers’ budgets and bring sales to a 12-year low, analysts have warned. From peak to trough, values will fall by 12pc, according to both Capital Economics and Oxford Economics research consultancies. Lloyds bank, Pantheon Macroeconomics and the Centre for Economics and Business Research have each forecast an 8pc fall. Nationwide building society expects a 5pc drop – but in a worst-case scenario, it said values could plunge by 30pc.

Sceptical readers may cite previous forecasts for house price falls during the pandemic which never materialised. But the outlook for 2023 is very different – apart from anything else, it is clear the downturn has already begun. So how will soaring rates affect the market and how far might house prices fall?

Growth is fast being eroded

Between August and November, the average UK property shed £9,963 in value – a drop of 3.6pc, according to Nationwide. The house price growth that was recorded this year is now being eroded fast. Home values in November were up only 3.2pc compared to at the start of the year, as the curve of the pandemic property boom starts to nosedive. Transaction levels are also about to tank. Savills has forecast that there will be only 870,000 sales in 2023, the first time the number has dropped below 900,000 since 2011. That is a fall of nearly a quarter, compared to the total recorded to date in only 11 months in 2022. There will be 606,000 fewer sales than in 2021. While it is slightly too soon to see big falls in price indices and sales figures, there are lead indicators that show a clear downward trend. There were 58,977 mortgage approvals for home purchase in October, according to the Bank of England. Excluding the months in 2020 when the property market was in lockdown, this was the lowest number recorded since June 2013, when the market was still recovering from the global financial crisis.

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