Economists have warned that house prices will fall in their biggest decline since the financial crash. Markets are headed for a “correction” due to rising borrowing costs and an expected recession.
The Times revealed that two-thirds of economists surveyed predicted house prices would fall by more than four per cent by 2023.
Most of those polled warned that the decline will reach close to double digits, marking the worst year for the housing market since 2009.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “A double-digit price drop would not be surprising.
“If typical mortgage rates remain above five percent, coupled with an unprecedented reduction in household incomes, it is hard to see how house prices can avoid a significant impact in 2023.”
As the country grapples with its worst inflation rate in four decades, at 10.7 percent, borrowing costs have soared.
With interest rates at their highest level since 2008, homeowners face an average increase of £3,000 in their mortgage payments this year, the Bank of England has said.
After 10 years of house price growth, another economist predicted that markets will see a “correction” of overvalued house prices.
House prices are 30 percent overvalued by affordability metrics, said Andrew Goodwin of Oxford Economics.
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“The UK lacks a credible growth plan and suffers from political instability due to weak and poor governance,” said John van Reenen of the London School of Economics.
The inflation rate is an enduring puzzle for economists amid uncertainties about how quickly and how far it will fall in 2023 after peaking at 11.1 percent last fall.
More than half of survey respondents said consumer price inflation would be between 3.5% and 5% by the end of the year, while 40% believe inflation will remain above 5% .5%
Other survey responses touched on other issues that will be key in 2023, with more than 40 percent expressing their belief that the UK and the European Union will finally resolve the Brexit hangover this year by resolving the protocol disagreement Northern Ireland.