Price comparison site, Reallymoving, has projected that house prices across England and Wales will experience a decrease of 4% in the final quarter of 2023. If this forecast holds true, it implies that the average property price, which was £336,999 in the third quarter, would drop to approximately £323,594 by the end of Q4.
Underlying Factors for the Decline
A combination of economic pressures seems to be the driving force behind this predicted downturn:
- High Inflation: Inflation, a measure of how quickly prices are rising, has remained stubbornly high, standing at 6.7% in September. This means the cost of everyday goods and services has been increasing, putting pressure on household budgets.
- Cost-of-Living Crisis: With the general cost of living going up, many people are finding it harder to save or allocate funds towards property investments.
- Rising Mortgage Rates: Higher mortgage rates naturally make borrowing more expensive. As a result, potential homebuyers might be hesitant to take on a mortgage or may qualify for a lower loan amount.
Rob Houghton, the mind behind Reallymoving, offers insight into the buyer’s perspective. He notes that buyers in Q3 have been committing to lower property prices compared to Q2, suggesting that sellers are readjusting their price expectations to secure sales. Given the financial strains buyers currently face, particularly due to high interest rates, it was only a matter of time before the prices they’re willing to offer began to dip.
A Silver Lining for First-Time Buyers
For those aspiring to own their first home, this price softening might be a welcome trend. First-time buyers made up 53% of all home purchases in Q3, marking the highest percentage in over a year. Houghton believes this trend might continue, especially if there’s a hint of falling interest rates in the horizon. The decrease in property prices, coupled with the potential for more favorable lending rates, might provide a more accessible path for first-time buyers to enter the market.
Regional Variations
While the general trend indicates a decline in house prices, it’s essential to note that the impact varies across regions:
- Wales is predicted to experience the most significant quarterly drop, with a decrease of 9.8%.
- The North East and West Midlands are next in line, with projected decreases of 8.2% and 8.0% respectively.
In contrast, some regions are bucking the trend:
- Scotland and the South West of England are outliers, with anticipated price increases of 1.0% and 0.6% respectively.