House prices are expected to stall next year as inflation continues to drive mortgage rates up amid the cost of living crisis - but renters will see their costs increase.
The prediction comes from estate and letting agent Hamptons, who said that house price growth will only begin to recover in 2024. According to their forecast, house prices will go unchanged across the UK in the fourth quarter of 2023 compared to the same period in 2022.
But the estate agents have warned that there will be no similar pattern for renters, due to “the increasingly high-cost environment faced by landlords”. They predict rents will rise five per cent annually next year, and again in 2024, before slowing down slightly to four per cent in 2025, the Liverpool Echo reports .
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Hamptons added that 2024 could be a “year of recovery” for house prices due to demand from 2023, which they expect to be two per cent higher by the fourth quarter of 2024 compared to the same time the year before. According to their report, the Bank of England base rate is likely to peak in early 2023 before falling slightly towards the end of the year or early in 2024, helping to lower mortgage costs.
By the end of 2025 house price growth is expected to climb back up to three per cent across the UK, which will reflect a rise in households’ real incomes, the estate agent said. The report added that 2025 “will mark the beginning of a new cycle as the base rate returns to its new normal, likely to be around 1.75%”.
Aneisha Beveridge, head of research at Hamptons, said: “With more stringent affordability testing in place since the financial crash and a record share of outright homeowners, we're likely to see fewer repossessions and forced sales which were a key driver of house price falls in 2008. Low-yielding landlords are the group most likely to sell up as they come under pressure from rising mortgage costs and new legislation.
“Longer term, we expect the market to return to its traditional cycle - price growth will begin to recover in 2024, with London leading the way as a new cycle dawns in 2025. However, stretched affordability will mean we're likely to see considerably less price growth than in the past.”
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