Cluttons: Pandemic house price gains won’t be wiped out

Prices will fall during this year, but the outlook differs depending on location, according to Cluttons.

A first quarter update from the agency brand suggests that UK and London house price growth continues to slow and is set to dip into negative territory this year “amid more muted buyer demand and higher mortgage costs.”

But director of research and insights Gráinne Gilmore suggests that even with house price declines, the value gains registered during the pandemic are unlikely to be fully eroded.

She said the market had been helped by the Stamp Duty holiday and the pandemic encouraging people to reassess how and where they want to live.

The end of the Stamp Duty holiday and higher interest rates and mortgage inflation will put “further downward pressure on values during this year as demand levels recede,” Gilmore said.

Although the pace of house price growth has been slowing across the country for the past six months, the research suggests, the “localised nature of the housing market” means that this will show up as different growth levels on a regional and more local level.

Gilmore added: “In markets where the house price to income ratio is less stretched – making them more affordable compared to the UK average, and very popular during the pandemic – price growth is slowing from a much higher rate

“We expect the average house prices across the UK to fall by 8% this year.

“Even with this decline, values will return to 2021 levels, and the rise in house prices registered during the pandemic will not be fully unwound.”

The analysis also highlights that the prime London market has not registered the same level of growth as many other areas of the country over the past three years.

It is predicted that this area will register a “more modest decline” in values this year with some buyers seeing value in the market.

This is echoed in research by prime central London buying agent Eccord, which suggest the family house market, worth £5m to £12m in the capital’s prime postcodes is proving resilient at the start of 2023.

Motivated by the need for more living space, larger gardens or a more convenient school commute, active buyers are price sensitive and conscious of seeking good value, Eccord claims.

However, the research cautions that there is still a disconnect with seller expectations, due to the discretionary nature of many family house sellers, and smaller discounts are being secured.

In contrast, the flat market in central London is said to be struggling, with buyers impacted much more heavily by higher mortgage rates and job uncertainty, the research claims