Will house prices drop 25%?

A 25% fall in nominal house prices is entirely possible, given current mortgage rates, the cost of living, and signs we're heading into a recession. Adjusted for inflation, we could be looking at 35%. Affordability of credit and inflation-adjusted wage growth have always been the key drivers of house price inflation. Both have gone into reverse. Only a rapid and unlikely decline in mortgage interest rates, or further government support for the housing market, will stop property prices falling rapidly from here on in.

Sentiment is a massive influence on how any market performs and agenda-driven scaremongering around house price crashes - if left unchallenged - can most certainly have an impact and potentially self-perpetuate into any market.

The reality however is that imbalance between supply and demand in the UK housing market should mean that although - after unprecedented growth - a softening followed by a period of flatness is highly likely, house price armageddon is not.

Regional variations and market nuances will always exist but the majority of lenders predicted falls of between 5-10% by the end of 2023 and signs are that these predictions may prove to be closest to the mark on a national level and towards the lower end of this scale in Scotland specifically.

With an election looming in 2024 and inflation hopefully finally under control by then, those hoping for or predicting a house price catastrophe over the next couple of years may well be sorely disappointed.

A 25% drop in house prices seems a huge amount and would leave homeowners worried when coming up to refinance, especially if they took out a high LTV mortgage whilst rates were low, they could now be in position of negative equity. I do expect a drop in the house prices due to higher rates as very few people can afford to mortgage properties when they are still priced so highly. Often landlords keep the property market afloat during times of high rates however rates are so high now that in order for Landlords to mortgage their properties they would have to increase rents to an absurd amount. Landlords do not want to do this as they know how hard times are for tenants at the moment with the cost-of-living crisis. As such if no one can afford to mortgage their properties this has to drive the prices down.

House prices are likely to correct as the cost of living, most notably mortgage payments rise in tow with interest rates to stave off super inflation.

Food, energy and housing are fundamental to an operational society. If all three increase in cost beyond the means of the average Jo(e) the demand will drop seeing a dramatic correction in prices.

The bottom of the drop will be obvious as cash-rich investors swoop in and buy up the below-value market stock, inflation will start to drop to a manageable level and interest rates will fall accordingly.

House prices are likely to correct as the cost of living, most notably mortgage payments rise in tow with interest rates to stave off super inflation!

Food, energy and housing are fundamental to an operational society. If all three increase in cost beyond the means of the average Jo(e) the demand will drop seeing a dramatic correction in prices.

The bottom of the drop will be obvious as cash-rich investors swoop in and buy up the below value market stock, inflation will start to drop to a manageable level and interest rates will fall accordingly.

Imagine six terraced houses in a row all going on the market at the same time. This will have a knock-on effect for house prices. But there are still areas of the UK where demand outstrips supply. And whilst there may be a slight knock in house prices due to people buying at a lower-rung on the housing ladder, it's unlikely to see house prices dropping as much as 25% as an average of all property across the nation.

No, thats a huge amount. Imagine £4m houses suddenly being £2m... The owners would riot! I can see a drop coming, but I think 10% at most. The housing market is still doing ok. Its not all doom and gloom as advertised. First-time buyers, for example, don't care what's happening, they just want a house. Others are sick of renting, especially with the numerous rent rises that have happened. The only concern I have is for those who have bought with a tiny deposit and then the houses lose value... They are in negative equity and possibly trapped. Let's hope they were placed with a competitive lender who offers good product transfers.

A 25% drop is very unlikely, we are seeing strong demand for people purchasing in prime central London.

Although mortgage rates will have an influence on the decision to purchase, most clients are proceeding, in some cases at a slightly lower budget than they were previously looking at.