Economists predict ‘double digit house price correction’

Two thirds of economists expect house prices to fall by more than 4% this year while others are expecting a more drastic 30% drop, research reveals.

A poll by the The Times newspaper has warned 2023 could be “the worst year for the housing market since 2009.”

Highlighting issues of record high interest rates and borrowing costs, Sanjay Rata, chief UK economist at Deutsche Bank, told the paper: “A double-digit price fall would not be surprising.

“If typical mortgage rates remain above 5%, together with an unprecedented squeeze on household incomes, it is hard to see how house prices can avoid taking a significant hit in 2023.”
Andrew Goodwin, at Oxford Economics, added that house prices were 30% overvalued based on affordability metrics. 

He told The Times: “The number of forced sales should be limited by the high share of fixed-rate mortgages and low peak in unemployment, but a correction in prices looks likely.”

However, Zoopla executive director Richard Donnell rebutted claims of a market correction.

He wrote in a LinkedIn post: “The sales market has more supply as demand drops and sales volumes decline 28% year-on-year.

“Inventory levels are recovering fast and the big question is whether these homes are priced to sell for the first half of 2023. 

“More choice will certainly add to the pricing slowdown / reset in the coming months. We don't buy the double digit price fall narrative and think prices will fall. by up to 5%, perhaps less in more affordable markets.”