Joe Ricotta | Will London property rates go down in 2023?

submitted 2 years ago by jamesdwell to post

Although we cannot predict the future with certainty, recent increases in the UK-based interest rate have raised concerns that the market may crash, says Joe Ricotta.

Following the contentious September mini budget, a lot of mortgage lenders pulled out of deals and raised rates, which increased the cost of mortgages overall.

These consequences could become much more pronounced now that the basic interest rate was increased by the Bank of England to 4.25%. It is anticipated that this will decrease demand from prospective purchasers and lower home prices.

As per Joe Ricotta, the cost-of-living problem is one of several additional variables that might temper the rapid rise experienced in recent years. Most people now have less spare cash to spend due to record petrol and energy costs, rising inflation, and tax increases.

Although overall annual house price growth has remained high, house prices are currently declining month over month. The rate of increase in home prices may decrease further if demand weakens and individuals put down lower down payments.

However, this does not imply that real estate prices will plunge because in many parts of the UK, demand continues to outweigh supply. Additionally, as mortgage rates decline, buyers are once again entering the market.

House prices could decline rather than crash because of the high demand that would likely soften the impact.

Home price forecasts

Numerous housing market forecasts are still bullish because of the ongoing competition for space. High inflation and interest rates, however, are expected to have a dampening effect on the housing market.

Here are some forecasts for the future:

The government's independent forecaster, the Office for Budget Responsibility (OBR), anticipated that property prices will decline 10% during the ensuing two years in March 2023. According to the report, the hike in mortgage rates and the pressure on family earnings will produce a 20% decline in real estate sales during the same time.

Halifax forecasted that home prices will decrease by around 8% during the year in January 2023. However, it claimed that a decline of 8% would result in the average property's price returning to April 2021 levels, which are still significantly higher than pre-pandemic levels.

Robert Gardner from Nationwide predicted a more moderate decrease in home prices in 2023 of about 5% in December 2022. He said that the double-digit drops predicted by some forecasts would need a major worsening in the job market.

According to Lloyds Bank, home prices would decline by 8% in 2023 says Joe Ricotta. It has put aside £668 million to cover bad debt that can develop because of borrowers having trouble making their payments.

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