A poll of mortgage brokers and estate agents from Newspage found that 58% expect house prices to fall by up to 10%.
The poll follows reports in the national media that house prices will drop by 30%. These stories came on the back of comments made by Chris Rhodes, chief finance officer at Nationwide Building Society, to the Treasury Select Committee.
While Rhodes did say house prices could drop by 30% he said this was a worst-case scenario and that a drop of up to 10% was more likely.
And brokers and estate agents seem to agree with 58% anticipating such a decline. 27% believe that prices will fall by between 10% and 20% while 8% expected a 20%+ decline.
4% of respondents said they were not expecting a drop, while 3% were unsure of what will happen.
Jukka Väänänen, CEO, Newspage, said: “These poll results suggest that most people in the property and mortgage world believe we are in for a house price correction rather than a crash.
“The consensus seems to be that we will be back where we were pre-pandemic before the Stamp Duty holiday and availability of ultra-cheap mortgage finance sent house prices spiralling upwards.”
Reaction
Hannah Bashford, director of Devon-based Model Financial Solutions:
“The past couple of years have seen house prices shoot through the roof, growing in double digits across the board due to the Stamp Duty holiday and the race for space triggered by the pandemic.
“This price growth was never sustainable and has ultimately proved a way of crippling the UK economy because people leveraged themselves up to the hilt on cheap money, and now money is no longer cheap.
“Add the cost of living crisis to the impending remortgage crunch and the only way house prices can go is down.
“I don’t believe that we will see a drop of 20%+ that some are predicting, as the economy would be on the verge of systemic collapse, with countless households in negative equity.
“But it’s inevitable that prices will need to come down so that people can meet the affordability assessments.”
Andrew Simmonds, director at Bristol-based Parker’s Estate Agents:
“Since the summer, I’ve been telling vendors that their house is worth what it was worth 12 months ago. I’ve lost instructions because they’ve said “nah”.
“This is mainly because of deluded competitors who feed them bull. Plenty have since come back to me saying “you were right”. I’m expecting average prices to be down 20% by March.”
Natalie Hines, founder at Sutton Coldfield-based Premier One Mortgages:
“I am starting to see a clear slowdown in purchase activity so I’m fully expecting a drop in prices in the months ahead, but by how much is anyone’s guess. I certainly don’t think we’ll see the 30% drop some are predicting, as that would put the entire economy on the brink, but a drop of some kind is inevitable.
“I work with a young demographic within the TV industry and they are waiting to see what happens following the latest interest rate announcements and ongoing cost of living crisis.
“A correction in house prices is what’s needed to help get first-time buyers on the property ladder. For many first-time buyers, at present, prices are simply out of reach. A house price correction could give them the leg-up onto the ladder that they need.”
Jon Halbert, mortgage and protection adviser at Ormskirk-based Key Financial Associates:
“House prices falls are a nailed-on certainty. As demand for property drops off due to the Bank of England’s rate hikes, sales will inevitably slump.
“But this alone will not reduce property prices. When people become desperate to sell and reduce the sale price of their home below that of the current market value, all the homes in the same street reduce in value to the same level.
“This is the domino effect that triggers house price falls. The rising cost of borrowing will force a growing number of homeowners to sell because their affordability on the new rates when they come to remortgage, coupled with the cost of living, will become impossible.
“Repossessions will also rise as a result of recent interest rate rises. If lenders relax their criteria around interest-only mortgages, many will be able to survive potential repossession.
“The biggest falls in value are always where the biggest rises were, typically in the south. Properties in the north will still be impacted but not as much, mainly because prices are on average lower.”
Dariusz Karpowicz, director of Doncaster-based Albion Financial Advice:
“I am not convinced that house prices will fall by as much as 30%, as some are predicting. That would be an apocalyptic event in the property market.
“Prices will undoubtedly stall and we could see drops of 10% in some areas but the lack of supply will act as a glass floor under property values.
“There is a significant shortage of skilled workers and labourers, which limits the number of properties that can be built, which in turn prevents prices from falling materially as there just aren’t enough homes.
“Demand will drop off for sure, but let’s not forget that there is an acute lack of supply.”
Malcolm Davidson, Director of Hull-based broker, UK Moneyman:
“Property prices have risen approx 20% since Covid, which is not sustainable. The so-called experts predicting extreme price falls without fail underestimate the demand for property in the UK.
“And especially the desire of tenants to get out of the overpriced rental market and own their own homes.
“Real crashes are predicted all the time but they’ve only ever happened about twice. Everybody is ultimately guessing, as nobody knows. Also, now that Help to Buy has ended, the impact of this is underestimated and re-sale values will be supported by its withdrawal.”
Dorian Payne, director of Swansea-based property developers, Castell Group:
“In very simplistic terms, prices will drop if demand starts drying up. Demand, for now at least, is still there and we are still not building enough houses as a country.
“However, mortgage affordability is clearly a material factor when buyers consider the price they can or are willing to pay for a property, so there will either be a levelling-off in prices or a drop to accommodate the new affordability era we are now in.
“The base rate increase is important, but does it necessarily mean mortgage interest rates are going to rise significantly? Keeping an eye on SWAP rates is also important as 5-year interest rates may not necessarily increase.”
David Robinson, co-founder and wealth manager at London-based Wildcat Law:
“House prices look set to fall more in line with the way they did in the early 1990s rather than 2008. The exception will be overpriced new build developments that will see significant falls.
“Expect steady depreciations in listed values but far deeper “real” cuts due to inflation. Due to the strength of the jobs market, we are less likely to see a steep drop over a short timeframe a la 2008.
“In some ways, this will be worse for the housing market as, just as in the early 1990s, we face a long and drawn-out period of difficulty.
“With many households holding significant levels of debt at record low levels of interest you can expect a steady flow of repossessions coming in 2023. The old adage of what goes up must come down is about to bite the housing market where it hurts.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Thursday of this week was a day to forget but I think that both the Bank of England and those predicting extreme house price falls are being overly negative. Without doubt we are in the jaws of a recession.
“It’s going to be painful, and people will lose their jobs and their houses. However, in six months’ time, inflation will be under control, interest rates will be high enough that a significant cut will stimulate growth and I expect a General Election will usher in a new Government with fresh ideas. In the meantime, house prices will fall.
“We have already started to see that this week. Estate agents in the capital have been hit harder than the rest of the country as higher rates affect these transactions more as the values are that much higher.
“Interest rates got hiked by the biggest amount in over 30 years this week, and more rises are likely over the next six months. I expect this to really dent the London property market.
“The more affluent agents, such as Knight Frank and Savills, have predicted a crash of 10% in London but I think it could be worse than this. I expect, in some areas, prices to fall by double this and transaction levels to reduce by over 50% as homeowners refuse to accept the new value of their home.
“The rest of the UK will see a drop of less than this as affordability is better and there will be fewer cases where property sales are forced. Overall, I expect average UK prices to drop 10% drop in six months and then stabilise before recovering quickly.”
Craig Fish, Managing Director at mortgage broker Lodestone:
“Without doubt house prices are going to fall. However, I don’t believe that we are going to see falls that correlate with the horror headlines that mainstream media are reporting.
“Over the past two years, property prices have grown beyond where they should have and I believe that any drop we see is simply going to be a correction back to the prices we saw in 2019/2020.
“Let’s not forget that no Government has solved the deep housing shortage from which the UK suffers and, as such, over the long term property prices will always hold up and increase.”
Mike Staton, director of Mansfield-based Staton Mortgages:
“While the base rate has increased again, I don’t think it will have much impact on house prices as sales dropped last month due to ridiculously priced fixed rates.
“Lenders base their rates on Swap Rates, and these have been set at a rate of nearly 5% for some time. Now we are starting to see some light at the end of the tunnel with major lenders reducing their fixed rates.
“We may even see some of the buyers who waited to see what happened with rates return to the market.
“The only thing that is certain at the moment is uncertainty and making a guess at house prices is a mug’s game.
“Claims of 20% and 30% dips are scaremongering tactics and unlikely to materialise. I think 5%-10% is realistic.
“The good thing we are seeing at the moment is estate agents finally giving realistic valuations to their clients, rather than valuations fuelled by greed and poor sales tactics to win an instruction.
“Unfortunately, house buyers and vendors take estate agents’ words as gospel as many have a great knack for pretending to be qualified surveyors and regulated, when in truth many are not.”
Scott Taylor-Barr, financial adviser at Shropshire-based Carl Summers Financial Services:
“While ‘the longest recession on record’ makes for a great and scary headline, there are two factors we need to consider: time and depth.
“A long recession that is very shallow, and has minimal impact on GDP, isn’t going to feel very different to where we are now.
“A long and deep recession would be devastating to the UK economy and no area of it would go untouched.
“At present all indications and predictions are that we will have a long, but quite shallow recession, so the impact on house prices is likely to be more of a correction back from the silly highs of the last two years than a huge property crash.”
Rhys Schofield, managing director at Derbyshire-based mortgage advisors Peak Money:
“My own personal opinion is that we may see the mammoth gains in house prices of the last two and a half years wiped out as the market equalises itself. That 10%+ annual growth was unsustainable.
“Whether that is bad news for you or not depends if you have bought in the past 2 1/2 years. If you have, potentially it is, but if you haven’t you aren’t really any better or worse off.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“If the housing market drops 30%, as some are predicting, Rishi can forget winning the next General Election and may as well join Matt Hancock on I’m a Celebrity.
“Regardless of how he performs against any other metric, he will be handing the keys to Number 10 to Keir Starmer.
“The number of people facing negative equity and repossessions would go through the roof. Our new PM is a clever guy. If anyone can find a solution to our current predicament that has been exacerbated by she-who-must-not-be-named, and he-who-wasn’t-around-for-long-either, it is Rishi.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“I think a fall of 20% or more over the next 18 months is entirely possible. Much will depend on how far interest rates rise and for how long, which of course depends on inflation, and how events unfold in Ukraine.
“If mortgage rates remain at 5%-6% for any length of time, we can expect big falls. Too many people will be unable to afford their mortgages, and affordability for first-time buyers will be severely curtailed.”
Lewis Shaw, founder of Teesside-based Riverside Mortgages:
“It’s very unhelpful when people throw out predictions of 30% house price crashes when it’s almost certain that won’t come to pass.
“After nearly three years of instability along with economic and political turmoil, we don’t need more outlandish claims further petrifying and alarming the public. So let’s put this in context. House prices rose by double figures during the pandemic.
“Therefore if they fall by 10%, most people will be in the same boat as they were back in 2020. We know we’re going into a bumpy recession, which will drag down inflation and solve that problem.
“Once that happens, the Bank of England will likely unwind the rate rises, the stormy seas will abate, and things will be on a more even keel.
“We need level-headed, matter-of-fact thinking right now, nothing more, nothing less. Keep calm and carry on. After all, as JM Keynes said, ‘In the long run, we’re all dead’.”
