Hamptons provides forecasts on house prices, transactions, and interest rates
Further interest rate increases will cool the housing market, and house prices will flatline by the end of next year, residential estate agent Hamptons has predicted.
“The housing market has outperformed our expectations once again in 2022, but with a cocktail of risks on the horizon, growth is likely to stall next year,” Aneisha Beveridge, head of research at Hamptons, said.
In its Housing Market Forecast report, Hamptons stated that the current year will end with house prices rising by 5% year-on-year and the number of housing transactions in Great Britain hitting 1.25 million.
However, given the pressure on household incomes, Hamptons expects prices to flatline in Q4 2023, and if rates rise further than anticipated, it believes that prices will most probably fall.
“Financial pressures are raining down on households as inflation bites and mortgage rates rise,” Beveridge noted. “And it’s unlikely we’ve seen the worst of it yet, with rates expected to peak at around 2.5% in early 2023, before falling slightly towards the end of the year or early in 2024.
“All eyes are on interest rates as this will be the key determinant of house price growth in the coming years. Given many mortgaged homeowners won’t have witnessed interest rate rises, it will take time for them to adjust. While it’s likely that the base rate will remain lower than it has in the past, higher levels of mortgage debt will magnify the impact of even small rises.
“If mortgage rates surpass the 5% mark, there’s a much stronger likelihood that house prices will fall.”
Read more: House prices and trends – Nationwide reveals the latest.
According to Hamptons, transactions will bear the brunt of the downturn in 2023, and the drop in sales will stem from mortgaged buyers, particularly first-time buyers. It is expecting transactions to return to 2013 and 2014 levels, and is forecasting around 1.1 million completions across Great Britain in 2023.
The London-based property services company considers 2024 “a year of recovery” as it anticipates a degree of pent-up demand from 2023 and falling interest rates. It forecasts that prices will rise 2% by Q4 2024, and transactions to return to 1.2 million by the end of that year.
Hamptons said 2025 will mark the beginning of a new cycle as the base rate returns to its new normal, likely to be around 1.75%. It predicts prices to rise by 3% across Great Britain, with London outperforming other regions at 5%, while transaction numbers will bounce back to 1.3 million, surpassing the pre-pandemic average.
“Longer-term, we expect the market to return to its traditional cycle,” Beveridge remarked. “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.”
