House prices ‘set to stall next year while rents continue rising’
Hamptons predicts 0% house price growth annually by the end of next year, but said rents will rise as landlords face higher costs.
House prices are likely to stall next year as inflation continues to bite and mortgage rates rise, but rental prices will continue to increase despite the affordability pressures on tenants,
House prices are likely to stall next year as inflation continues to bite and mortgage rates rise, but rental prices will continue to increase despite affordability pressures on tenants, an estate and letting agent has predicted.
Given the pressure on household incomes, Hamptons said it forecasts prices to be unchanged in the fourth quarter of 2023 compared with the same period in 2022, with 0% change across Britain.
Sales are expected to be hit next year, with a drop stemming from mortgaged buyers, particularly first-time buyers, according to the forecast.
The estate agent said 2024 could be a “year of recovery” helped by some pent-up demand from 2023.
We forecast that house price growth by the end of the year (in 2025) will be 3% across Great Britain, reflecting a rise in households’ real incomes
House prices are expected to be 2% higher in the fourth quarter of 2024 than in the same period in 2023.
Hamptons said the Bank of England base rate is likely to peak in early 2023, before falling slightly towards the end of the year or early in 2024, helping to ease mortgage costs.
It forecasts that house sales across Britain will rise from around 1.1 million next year to 1.2 million in 2024.
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The report said 2025 “will mark the beginning of a new cycle as the base rate returns to its new normal, likely to be around 1.75%” – the level at which the rate currently sits.
It said: “We forecast that house price growth by the end of the year (in 2025) will be 3% across Great Britain, reflecting a rise in households’ real incomes.”
Over the next four years, Hamptons said it expects prime central London to experience the strongest price growth, with the East of England and the South East following behind, as more flexible working patterns tie prices in the regions more closely together.
Despite affordability issues for tenants, Hamptons said it expects rental growth to outperform house price growth over the next four years, reflecting “the increasingly high-cost environment faced by landlords”.
Hamptons forecasts that rents will rise by 5% annually next year and in 2024, before slowing slightly to 4% in 2025.
The report said: “Lower rental yields in London will make it harder for landlords to absorb rising costs than their counterparts in the North.
“This is why we think the supply of rental homes in the capital looks set to shrink further, pushing up rents.”
Aneisha Beveridge, head of research at Hamptons, said: “With more stringent affordability testing in place since the financial crash and a record share of outright homeowners, we’re likely to see fewer repossessions and forced sales which were a key driver of house price falls in 2008.
“Low-yielding landlords are the group most likely to sell up as they come under pressure from rising mortgage costs and new legislation.
“Longer term, we expect the market to return to its traditional cycle. Price growth will begin to recover in 2024, with London leading the way as a new cycle dawns in 2025.
“However, stretched affordability will mean we’re likely to see considerably less price growth than in the past.”
Article sourced from Belfast Telegraph on 7th September2022 Original full article can be viewed by clicking link below
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