Despite stagnation in house price growth across the UK property market, a housing market crash is not on the cards according to the latest forecasts.
While the outlook for house prices remains uncertain, a panel of experts from a recent survey have explained why the market overall will be buoyed by ongoing high levels of demand, which outpaces housing supply in most parts of the country, staving off the possibility of a housing market crash.
In the survey of economists, academics, mortgage experts and savings experts, fintech company Finder revealed that most respondents predicted that the current house price correction would continue into autumn 2024. However, the majority of those surveyed believe a housing market crash will be avoided.
Predictions on what will happen to UK house prices vary, with the highest proportion of respondents (55%) indicating prices could fall by between 5% and 7.5% by Q3 2024, with this trend being mainly linked to the base rate and mortgage rates remaining at their current levels.
A further 18% expect prices to fall by just 0% and 2.5% over the next 12 months, while the same amount also believe they could go down by between 7.5% and 10%. The smallest proportion of panel experts (9%) indicated prices could drop by between 2.5% and 5%.
Reasons to bet against a housing market crash
Despite these predicted potential house price falls, which of course will vary widely depending on factors such as location and property type, the overall consensus in Finder’s survey was that a so-called housing market crash was not on the horizon.
Strong housing demand and supply remaining “structurally low” were the reasons cited by Luciano Rispoli, senior lecturer in economics at the University of Surrey, as to why we are unlikely to experience a crash after some initial house price falls.
Kate Steere, deputy editor at finder.com, also alluded to the fact that the current house price falls come immediately after a significant acceleration in prices across much of the UK just after Covid, and therefore a house price correction was to be expected; rather than a housing market crash.
She pointed out that the housing market is “now in a period of adjustment, where prices have fallen and will continue to fall from their previous highs.
“But the fundamental concept of a shortage of supply and solid demand will stop house prices from spiralling downward.”
Will buyer confidence grow?
In the current environment, some buyers will naturally opt to wait and see what might happen with house prices. However, data from a number of sources has recently shown that appetite is certainly still there for many in the market who are keen to proceed with buying and selling.
The outlook of David Hollingworth, associate director at L&C Mortgages, is that while house prices are likely to fall, this should not be significant overall, and confidence among buyers is likely to increase as we move into 2024.
“As the rate outlook improves and mortgage rates stabilise and continue to improve, that could see buyer confidence begin to improve into next year which will likely see a soft landing,” he said.
The poll was taken before the Bank of England’s latest announcement (2nd November) in which it held interest rates at 5.25%, after having done the same in September. This outcome was predicted by 100% of Finder’s expert panel.
Similarly, 91% of the panel said they believe the base rate will remain at 5.25% by the end of 2023. Thankfully, even prior to the latest decision, many lenders have been slashing their prices and introducing new products to their shelves, meaning pressure on borrowers has begun to ease slightly from the summer highs.
The outlook for the next UK inflation announcement is also positive, and this could further add confidence to the sector to prevent a housing market crash.
