House prices predicted to fall by 10% in 2023

[MoHunter]

www.theguardian.com/money/2022/sep/28/uk-house-prices-predicted-fall-mortgage-interest-rate

Well that's a worry when we are close to exchange and completion on our next property!? 😭But I guess even in case of a reduction next year will likely recover again within a few years?
This will be our home for a good while, probably 10 years+ until children are grown. Sh*tting myself a bit but also desperate to move! Staying is not an option as I hate the town we live in.
Anyone else at a similar stage now worrying about this??

But, @Tiredalwaystired - your peers are people who also had the same blend of advantages and disadvantages you had. And younger people - their peers are their friends today. Some will find a way to success and thrive, others will moan about it.

Yes. They’ll be sorted into those with bank of mum and dad and those without.

I was a mortgage broker from 1987-2008. Fixed rates were always an option.

And also those with good jobs, and those without. And those with higher self confidence and risk appetite and those without. And those with stable long term relationships and those without.
Same as it ever was.

What’s a “good job”? Or is only “highly paid” a good job? Personally I believe nurses, teachers and other professionals deserve to be able to have a roof over their heads but you can forget it in some parts of the country on those wages.

Although I keep hearing how selfish and greedy those godawful nurses are to want to reclaim living standards. Perhaps this is why?

I took @Mark19735's post to be directed specifically at DHB, because DHB likes to make it sound like he has a choice to be a home owner and has chosen against it and thinks those of us who do things differently are thick.

I feel very sorry for those who have no choice to buy and are renting, often paying as much or more as they would on monthly mortgage payments but paying off someone else's mortgage not their own.

I'd like to see a reform of the housing market. But we all have to live with the situation we have with housing in the U.K., with rentals offering very little security and with a desperate shortage of housing stock. That's the reality and why since I'm fortunate to have the choice, I'm glad I'm a home owner

House prices are of course linked to affordability and supply. As interest rates rise, prices will inevitably fall. But as interest rates are predicted to peak this year, the fall in prices won't last too long.
I wouldn't be surprised if house prices fall by 10% this year. I imagine they will recover almost as quickly as they fall, as I think by the end of 2023 interest rates will be about to come down. This and the lack of supply of houses in the UK means house prices will never crash, however much certain posters would love that to be true.

''@Londongent · Today 15:18
House prices are of course linked to affordability and supply. As interest rates rise, prices will inevitably fall. But as interest rates are predicted to peak this year, the fall in prices won't last too long.
I wouldn't be surprised if house prices fall by 10% this year. I imagine they will recover almost as quickly as they fall, as I think by the end of 2023 interest rates will be about to come down. This and the lack of supply of houses in the UK means house prices will never crash, however much certain posters would love that to be true.''

But this is not just about interest rates. It is also about the wider cost of living crisis and the economy in general.

People have less disposable income because of high utility bills and the economy isn't doing that great following Brexit and Covid. Businesses are struggling.

That means people have less money to spend, and that includes money to spend on buying houses and taking on large mortgages.

Interest rates are just one part of the equation.

Most people don't buy houses with their spare cash lying around after the food shop has been paid for. For most people it is the very first entry, the biggest line in their budget. Housing is essential.
It is discretionary spending that suffers when there is a cost of living squeeze. People cut back on new bathrooms, foreign holidays. new cars. Notice how nobody is suggesting that two weeks in Alicante will see 30% price drops because interest rates have gone up.
The error lies in thinking that increased interest rates means the same house that a buyer was previously looking at will drop in price to meet the new affordability formula. That's not how it works. That buyer will no longer be able to afford that house at that price (true) but will find they have to broaden their search and find something smaller, further away, or less desirable to meet their straitened circumstances. The house they could have afforded last year will still sell - but to someone else (who themselves might have been able to afford something bigger, closer-in or better quality last year but no longer can). The price at which it sells may be lower, but will be much closer to the original listing price than a simplistic "interest rates triple, house prices drop by 66%" formula would suggest.
This holds true all the way up the pyramid until you get to the heady levels where people do genuinely buy houses with spare cash lying around after they've become bored of sports cars. People who buy houses off former rock stars. I'd venture that those people aren't browsing Mumsnet forums though.

"Housing is essential." - Can you tell us about the last time you heard of a homeless person viewing property for sale? You were lied to about a housing "shortage", the lie was designed to get you into deep mortgage debt.

"People who buy houses off former rock stars. I'd venture that those people aren't browsing Mumsnet forums." - That wasnt the point being made (but you already knew this) - The point being made was that even "sought after" property will bend to the will of Mr. Market, but you want us to believe that YOU will dictate your property price to Mr. Market? That is laughable in its naivety, but no doubt a viewpoint that many on here will suck up as a "given" for people with bumper mortgage debt, LOL.

Whitesnake did well for themselves then.

Yes, but it seems people on here will just make stuff up to try and pretend that it is going to be OK to hold massive mortgage debt through a tightening cycle, someone the other day was saying that there is no help available for renters to pay their rent if they lose a job! You can see how gullible people could be suckered into the mortgage Ponzi by believing that people pontificating on forums are somehow "experts", when in reality mostly they are talking shite?

We’re as “expert” as you are my dear DHB. We’re all just giving our opinion based on our own experience. Oh wait, you don’t t have any house buying experience 😆

Remember when the BoE said that we wouldn’t have excess inflation, then it wouldn’t go much over 2%, then when it did that it would only be transitory?

Historic macroeconomic data suggests that rates will not be returning to where they were anytime soon, even though inflation is expected to drop whilst entering a recession.

Why? Because leading and lag indicators. Leading indicators affect the treasury and gilt markets and swap rates which in turn affect the BoE base rate and mortgages.

History says that once inflation is embedded into the economy, it has never been controlled unless raising the base rate over the rate of inflation. (Volcker had to resort to this in the last inflationary cycle in the 70’s)

What that means is that it’s probable that there will be a secondary inflationary spike during the recession (stagflation), which will cause rates to stay higher for longer (possibly increase) and rates are set by the lead indicators.

Im guessing a lot of it came from his time in Deep Purple, but who knows, even writing "Stormbringer" doesnt let you dictate the price your house sells for it seems.......

en.wikipedia.org/wiki/Stormbringer_(album)

Well they were going in the golden age of music, so singles, LPs, CDs, no streaming, though that would have hit their resales. Also all the massive stadium gigs, merchandise.
Apparently he was a bit of a ‘ladies man’, so he’d have lost millions in divorces, like Phil Collins.
But at least he kept the house!

He did dictate the price his house sold for. His terms were clearly that he was prepared to accept an offer of $6.8 million in April 2021 after 2 years on the market. Had he not instructed his agent and his solicitors to go ahead with the sale, the house might still be on the market. The power was all his. Nobody forced him to accept a price he wasn't prepared to accept.

What you seem to think is that the reference in the article to an earlier asking price of $9.85 million back in 2019 'proves' something. It does not. It is a sign the the agents in 2019 were over-optimistic, perhaps. But it doesn't mean anything more than that. Because the $9.85 million figure wasn't mathematically derived, it was a guess. A bad one, as it turns out. But only ever that. It was clearly not worth that at the time, and so it is axiomatic that it hasn't 'fallen' in value since. It fetched exactly the price that was needed to persuade Mr Coverdale to sell it in 2021. That is it's true worth. Now, what the lucky buyer's assessment of fair value is, and what would be needed to tempt them to sell tomorrow - that's anybody's guess. But the only person whose opinion really matters is that new owner.

@DeadHouseBounce - do you get just as excited by all the red stickers in the Christmas sales telling you that the £60 jumpers are all 50% off? Do you tell your other half that because you bought three, you've actually saved £180! You must be a marketing department's dream customer ...

@Mark19735 pmsl that you think DHB has ever seen a female naked

Prices don't matter if you buy and sell in the same market

That's not quite true ... possibly if you are just changing location (but even then, prices determine stamp duty). But if you are ascending the property ladder, or down-sizing, then the gaps between the rungs are further when prices are high, and smaller when prices are low. And if you are converting that differential to cash (for the downsizers) or debt (for the second-steppers), once converted that sum has an impact on your cashflow for a long, long time.

I actually agree with DHB and others that lower prices would be beneficial to many in society - particularly the young. Where we differ is in our belief that lower prices must inevitably come to pass based on some economic headwinds. I think people will sell for lower prices only when it is preferable to every other option they have ... and we are nowhere near that stage yet.

Are you referring to 2022 or 2023 when you say 'this year'? House prices have already fallen by 10% in 2022. They will fall more in 2023. There is no suggestion at present that interest rates will come down by the end of 2023. In any case, we are likely in recession now which will become apparent next year. General economic conditions are expected to worsen significantly next year with high inflation and negative growth, job losses and generally difficult times. Not the sort of conditions where house prices are likely to recover quickly.

Empirical data suggests that one does not need forced sales for house prices to go down or vice versa. Look at any advanced economy such as :

Australia: Has already had >10% YoY decline thus far and the economy is expected to clock >3% GDP growth. Just today IMF came out with a warning of a 'sizeable bust'

^www.theguardian.com/australia-news/2022/dec/27/imf-sees-potential-for-imminent-sizeable-bust-in-australias-housing-market^

US: Just reported third monthly decline in prices and the economy still has red hot labor market with solid wage growth over the year.

^www.wsj.com/articles/home-prices-fell-in-october-for-fourth-straight-month-11672150911?mod=hp_lead_pos7^

One could go on about about countries such as Sweden, Canada, New Zealand etc , all of which have had c10% or more price declines with their respective economies not in recession yet.

Therefore, while it is nobody's case that there will be masses of people in negative equity soon in the UK, there is no reason to believe that UK will remain untouched from price declines (BTW prices have already declined >3% since August 2022). And of all OECD countries, UK has the worst economic forecast and has had slowest rate of rate increases.

Froth has definitely come off or will come off soon from the market. The days when sellers would just add 50k-100k to the price has gone. Most people will do fine. Just the people with 5-10% deposit and those that bought recently may suffer.

@Mark19735
'Most people don't buy houses with their spare cash lying around after the food shop has been paid for. For most people it is the very first entry, the biggest line in their budget. Housing is essential.
It is discretionary spending that suffers when there is a cost of living squeeze. People cut back on new bathrooms, foreign holidays. new cars. Notice how nobody is suggesting that two weeks in Alicante will see 30% price drops because interest rates have gone up.'

You are taking things entirely out of context. Of course housing is essential but upgrades and large houses are discretionary during hard times in the same way that fancy cars upgrades are. Potential buyers are not currently homeless. They are living in smaller houses that they own, renting or living with family. Their housing needs are met. Buyer demand has already plummeted due to rises in mortgage rates and cost of living and this will only get worse as confidence wanes. Wealthy people with plenty of cash are generally not stupid enough to want to buy in a rapidly falling market either.

'I think people will sell for lower prices only when it is preferable to every other option they have ... and we are nowhere near that stage yet.'
But you have left out the buyer's perspective. Buyers will only buy is it is preferable to every other option too.
It isn't a one way street.

I have deliberately left out the buyer's perspective because it doesn't count.

A bidder is only a participant in the housing market when a seller accepts their offer. For that to happen, that bidder must make an offer that the current owner feels is worth their while. For any bidder to be the one who's offer is accepted, their bid needs to be preferable to every other potential bidder at that time. That remains true in a falling market, just as it ever was in a rising one.

And again you make assumptions. This time you assume that there is more than one bidder. This is far, far less likely in a falling market.
What is much more likely is that there will be forced sellers who are far more desperate than the one potential buyer.