24 Nov HOUSE prices could remain stable for months despite doomsday predictions by the Office for Budget Responsibility
HOUSE prices could remain stable for months despite doomsday predictions by the Office for Budget Responsibility that they are set to plunge by 9%.
The National Association of Property Buyers say there are reasons to be optimistic – mainly due to the “steady stream of committed buyers” helping to prop up prices.
Spokesman Jonathan Rolande said: “Anyone predicting widespread house price drops could well be jumping the gun – there are reasons to be optimistic.”
Mr Rolande’s comments come days after the Office for Budget Responsibility (OBR) warned house prices are set to fall 9 per cent over the next two years on the back of the highest mortgage rates since 2008.
The average rate paid by homeowners will peak at 5 per cent in the second half of 2024, according to the OBR as millions of homeowners find themselves on more expensive fixed-rate loans over the next few years. This is up from an average of two per cent last year and would mean £335 more a month in repayments on a £200,000 mortgage.
The OBR said “significantly higher” mortgage rates plus the wider economic downturn would cause house prices to fall nine per cent to £264,000 by the third quarter of 2024, taking them back to October 2021 levels.
Prices are then expected to begin rising faster than incomes at 2.6 per cent a year from 2025.
Commenting on the OBR’s predictions, Mr Rolande said: “A 9% fall over two years may well be correct but it is impossible to predict with certainty, one way or the other – external factors such as Brexit, the Pandemic, Ukraine, Truss and Kwarteng’s Budget, all affected the market in drastic and quite unknowable ways. Whilst a 9% drop over two years only brings us back to where prices were at the start of 2022, when also measured against general inflation up around 10%, in real terms the value lost could be even higher.
“Interest rate rises are the easiest culprit to blame here but it is the combination of these along with the higher cost of food and fuel that is really causing the issue. Some tactical intervention by the government could change things and set the market on a steadier path, but with money being so scarce in Whitehall, that is looking unlikely.
He added: “There is a flee from BTL property that could further speed a descent – landlords are often more willing to take a financial hit if they must and so discount sales prices more heavily when they choose to get out. This undermines prices – the cheapest home in the street sets the new benchmark. A flood of new property to the sales market also increases supply, further driving down prices.
“Right now we have a return to some balance – property will sell at a sensible price and more competitively pitched mortgages are appearing. Committed buyers are still taking the plunge. “This is all part of the ebb and flow of property. My biggest fear is a return to the stagnation of say 2008 where there were too many sellers chasing too few buyers – prices simply tumbled, year after year.”
