Decade of flat house prices?

It's hard enough trying to predict what's going to happen in 6 months, let alone 10 years! What we do know is that the era of super cheap borrowing has ended; this will naturally have a dampening affect on house prices, particularly in the short term as households adjust to higher mortgage payments. However, let's not forget that property is a real asset - therefore, as wages and prices rise, we can also expect house prices to increase as well over the medium term.

I don't think UK property prices are capable of staying flat for 10 months, let alone 10 years. Whilst property prices are falling slightly, we must remember that we saw two years of record-breaking growth previously, so we would have a long way to go to even get back to 2020 prices. Interest rates are not the issue, interest rates have been at this level many times before and property prices still rose, the thing that creates growth or constriction is confidence in the market. Currently, people want to buy property, even at the current cost of borrowing, what is holding them back is the thought that property prices may fall further. At some point, those people, maybe one by one, maybe all at once, will decide they've waited long enough and move back into the market, at which time others will be encouraged to do the same and that return of confidence will see property prices rise again. At least until the next crisis dents consumer confidence again.

As a brokerage that has always championed first time buyers I think we'd welcome a few years of relatively steady house prices to allow incomes to catch up. Moving away from a world where the ladder gets pulled up further and further from would be buyers. No one really benefits from runaway price growth other than lenders, speculators and people exiting the property ladder entirely.

Nominal house prices, the price you pay, are likely to fall until mid-2025 at least in my opinion. Possibly by 20 percent peak to trough. Of course, real prices, adjusted for inflation, will fall even more. Perhaps 30 percent.

There are three main reasons. First, property prices react very slowly to mortgage rate increases and economic changes, and house price data lags several months behind what's happening in the market at present. And right now, these are the worst market conditions since the Global Financial Crisis.

Second, inflation may not fall back to the Bank of England 2 percent target for another year or more. Even then, the base rate may not fall much below 4%, meaning 4-5% mortgage rates are probably the new norm.

However, the main problem is that house prices are simply too high. They were sustainable when mortgage rates were two percent or less. They certainly aren't now.

Our national obsession in the UK is house prices and what they are doing. The reality is that looking at National House Prices is pointless. The UK housing market is made up of a mass of Regional and Local markets many of which run counter to one another. There's further differentiation when it comes to property types. In many parts of London prices for houses have increased significantly over the past 10 years whilst prices for many flats have stagnated. Whilst the shock of increased base rates has knocked the market sideways nationally, the reality is that base rates have simply returned to the norm. Whilst there is uncertainty and questions around affordability the major influence on house prices remains the shortage of property and the shortage of the right types of property. Whilst national house prices will probably stagnate over the next 5 years, there will be markets where demand for property remains high which will continue to drive prices higher.

No, long-term prices will increase as they have done over several years. Although property prices may likely stay flat over the next 1-2 years, I fully expect them to increase much higher over 10 years.

House price forecasts have historically been unreliable and fraught with danger when voiced publicly so it's no surprise that cautious predictions of stagnant growth are most common currently. Yet, though this stands as the prevailing stance on a UK-wide basis, regional disparities will almost certainly yield significant differences.

For example, in Scotland, where the rental and sale markets face scarcity and prices remain modest versus the broader UK, robustness is likely to persist. Especially in the sub-£250k bracket propelled by feverish fand unrelenting first-time buyer activity, substantial growth in 2024 is definitely plausible.

On a national scale, excluding London and the southern regions, similar growth projections seem reasonable and as the initial shock of escalated rates wanes, and the higher rates normalise, the future for 2024 and beyond could be a lot more positive than some predictions suggest.

Facing a series of headwinds, the UK property market stands at a crossroads. With interest rates at a 15-year high, the full brunt of their impact remains to be seen. Stubborn inflation at 6.9% could force rates up to 6-7%, exacerbating affordability woes. Most UK mortgages won't reset until 2027, deferring immediate pain but queuing up a future crisis. Additional turbulence comes from dwindling new entrants in the buy-to-let sector and a decline in overseas investment, especially from China and Russia. UK house prices are already 10 times annual earnings, and with rents rising, the question of sustainability looms large. Brexit's uncertainties compound these challenges. Those on fixed-rate mortgages may find temporary relief, but these are ticking time bombs set to reset at higher rates. We're not merely looking at stagnant prices; factoring in inflation, a real-term decline over the next decade is plausible. Never has the market's fragility been more apparent.

The number of houses sold in the UK this year is on track to be the lowest since 2012 and mortgage approvals fell almost 10% in July with prospective buyers finding affordability checks increasingly challenging. Such numbers are inevitably being reflected in falling or stagnant house prices. Households are being squeezed in simple daily living costs including food, travel & utilities which is going to be the case until real terms wage rises begin to take effect. If rates remain stubbornly high it is likely that we will remain in a tug of war between affordability and pent up demand with the likely outcome being a stalemate. Wage rises will help with income multiples with the lenders but in a scenario where interest rates are high this would be likely because inflation remains high therefore meaning that daily expenses have continued to rise. Given this scenario we would expect prices to remain nominally flat and fall in real terms, arguably the natural cycle of any true healthy market.