We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
And London will bear the brunt of the decline with a 10 percent drop by 2024, while prices fall by five percent in the rest of the UK. Capital Economics says house price growth in booming areas has bounced back since the pandemic.
But the recovery could be short-lived as rocketing bills force mortgage rates to rise at their fastest rate since the 1980s.
If homeowners who cannot remortgage are forced to sell, or buyers are unable to get a loan, the number of properties for sale will rise and squash prices.
Analysts believe property values in the capital could fall six percent next year and a further four percent in 2024, with similar drops expected across the South-east.
They say because affordability is already so stretched there, London will be the first housing domino to fall as the cost-of-living crisis bites.
Last week, the Bank of England increased its interest rate from 0.75 percent to one percent – the highest level in 13 years – to contain rampant inflation.
But Capital Economics’ Andrew Wishart is forecasting a rate of three percent by next year.
He said: “If we are right, then we are on the cusp of the fastest increase in mortgage rates since the late 1980s.
“That caused house prices to fall by 20 percent. But the tight labour market, lower loan-to-value ratios, and a lower peak in interest rates mean the drop in prices should be less dramatic this time.
“We expect house prices to fall by five percent over the next two years, reversing a fifth of the increase since the pandemic began.”
London homeowners foot the biggest share of their take-home pay towards mortgage repayments than any other region.
First-time buyers spend more than half their earnings on their mortgage, compared with 37 percent in the South-west, 26 percent inWales and 19 percent in the North.
Lawrence Bowles, of estate agent Savills, said: “Affordability in the capital was already stretched – the recent rapid price growth we’ve seen has made it a lot worse.”
A recent survey of 2,000 people found three-quarters expected to be worse off this year as the cost of energy, food and fuel soared alongside tax rises through the National Insurance increase.
The average London household is expected to be £321 worse off each month, or £3,859 a year than the rest of the country, whose costs will rise by £252.
Source: Read Full Article