HOUSE PRICES EXPECTED TO DROP BY 5% IN 2023
The property market, which has witnessed significant turbulence in recent months after years of soaring prices, is predicted to stabilize in 2023, but with a downside: property values are expected to decline by approximately five percent.
Nationwide's latest House Price Index revealed that prices took a hit, dropping by 1.4 percent in November, following a 0.9 percent fall in October. This downward trend reduced the annual price change to 4.4 percent between November 2021 and 2022, significantly lower than the double-digit growth seen earlier in the year.
According to Robert Gardner, Chief Economist for the building society, this downturn can be attributed to the surge in mortgage rates, which led to a drop in mortgage applications as homeownership became increasingly unaffordable for many. Gardner noted that when rates spiked to six percent, the monthly payments for a typical first-time homebuyer reached nearly half of an average worker's take-home pay.
However, there is a glimmer of hope on the horizon. Gardner mentioned that financial market conditions are gradually stabilizing, and mortgage rates are beginning to return to normal, albeit at a slower pace than anticipated. Still, the property sector faces challenges like the potential for declining real earnings, rising interest rates, a weakening labor market, and a shrinking economy.
Gardner remains cautiously optimistic, stating, "There is still a good chance that we can achieve a relatively soft landing next year with activity stabilizing modestly below pre-pandemic levels and house prices edging lower, perhaps by around five percent."
As for mortgage rates, Gardner believes that the recent surge in individuals opting for fixed-rate loans has likely peaked.
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