Property Market Analysis

UK house prices show steepest fall since February 2021

PwC, who conducted a survey that reports that 56% of FTSE 100 CEOs received a percentage salary increase for 2022 in line with, or below, the workforce level. The big change, which drove pay back to pre-pandemic levels, was bonuses. Only 5% of FTSE 100 CEOs received no bonus for 2021/22, down from 22% in 2020/21. And the average annual bonuses for 2021/22 increased to 86% of the maximum opportunity, which is above historical pre-covid levels.

London property market forecasted to drop an estimated 10 per cent

House prices in London are set to fall by 10 per cent over the next two years after the Chancellor’s mini-Budget sent the mortgage market into meltdown.

Higher interest rates and mortgage repayments, tighter lending and the cost-of-living crisis could mean “a year of pain” for first-time buyers and existing mortgage-holders while sales plummet and prices slide.

Forecasts published today by estate agent Knight Frank predict a fall in the average house price across the capital of 10 per cent over two years, taking values back to where they were at the start of 2021.

Kwasi Kwarteng’s emergency fiscal package was deemed to be “inflationary” and “reckless” by property analysts and even 12 days on, the industry is still struggling to predict how high interest rates will climb. Those mortgage products which were pulled off the shelves last week are still being repriced — adding to the chaos.

Knight Frank’s head of residential research, Tom Bill, told Homes & Property that the UK was in a state of disorientation. “Over the summer we were already anticipating rising interest rates to deal with global inflation caused by rising fuel costs and the war in Ukraine. Currently it looks as though the mini-Budget will push interest rates even higher. But we will re-evaluate as the picture becomes clearer,” he says.

‘A year of opportunities’

For first-time buyers, high loan-to-value mortgages will be less readily available and more expensive to service, making the home-ownership dream harder to attain. As interest rates rise, so too will mortgage repayments, stopping second and third steppers from being able to upsize into a bigger family home. “Those on variable rates will feel the pain immediately,” says Lucian Cook, head of residential research at Savills. “We will see the house price growth of the last two years unravel,” he adds. The most recent house price outlook from Savills in June forecast a one per cent fall in prices in London in 2023 in response to the incremental interest rises that were expected.

But the one per cent is no longer “reflective” of the market, says Cook. He is waiting for official interest rate estimates from the Office for Budget Responsibility to make his next set of predictions in November.