Are We At The Tipping Point For House Price Rises?
As house prices have risen dramatically to unprecedented levels over the last few years, Housing Industry Leaders hears how economists warn that house price growth may reverse over the next two years as interest rates increase.

Capital Economists (CE) have predicted that house prices will peak later this year, after successive months of increases since before the pandemic.

Starting in 2023, house prices are expected to drop by around 5% before a further decrease in 2024 by the same amount.

CE is an independent economic research consultancy and has stated that the decrease over the next two years will reverse the house price growth of around a fifth since the start of the pandemic.

Partially Good News For First Time Buyers Looking To Move Out Of Rental Markets

While this is welcomed news for first time buyers looking to get onto the property market for the first time, there are still issues surrounding help to buy thresholds for houses up to the value of £250,000.

These issues come as price growth this year will be stronger than previously anticipated due partly to limited amounts of available housing stock and will hit 9% year-on-year in the final quarter of 2022.

On top of house price changes over the next two years, rising inflation will lead to rising interest rates and hit prices from 2023 onwards. The forecast states a 3% fall in 2023 and a 1.8% drop in 2024.

First Signs The Market Is On The Turn Are Already Appearing

CE stated: “CPI inflation is on track to peak at 10% later this year and predicts average mortgage rates will rise from 1.6% at the start of this year to 3.6% in mid-2023.”

Continuing, it said: “The first signs that the market is on the turn are already appearing. Google trends show that visits to property websites dropped back to their lowest level since May 2020 this month, and the RICS housing survey suggested that quarterly house price growth will cool to zero by the third quarter.”

Despite the decrease in house prices, CE made it explicitly clear that the market is not expected to plummet as it did in 1990 and 2008, when prices fell around 20%.

Interestingly, Property portal Rightmove reported a ‘spring frenzy’ in the market, with house prices hitting a record high in all regions of England and Scotland for only the second time in 15 years.

In addition to this, the most recent data from Halifax showed house prices have risen for nine consecutive months in a row.