House prices will continue to fall next year, says Halifax

House prices are expected to fall by 2 to 4 percent next year, according to forecasts from mortgage provider Halifax, the UK’s largest mortgage lender.

Household finances have come under pressure due to inflation and higher interest rates, making home buying less affordable for many. Halifax expects market confidence to partially recover with increased sales in 2024 as interest rates fall and affordability increases.

House prices were found to be more resilient than expected this year, falling just 1 per cent over the year to £283,615. In January, Halifax expected the price to fall 8 per cent this year.

Halifax believes this resilience is due to the fact that there are fewer properties for sale than buyers want. As a result, average house prices at the end of the year will be 3 per cent below the August 2022 peak, but still £44,000 above pre-pandemic levels.

The lender, part of the Lloyds Bank group, said expected uncertainty was high given the current economic climate.

Kim Kinnaird, director of Halifax Mortgages, said prices fell for six straight months from April to September before rising later in the year as the economic outlook improved.

“Higher interest rates and the resulting pressure on housing affordability caused many would-be homebuyers to consider moving in the past year. Mortgage applications across the market fell by a quarter and overall property transaction volume fell by almost 20 percent – both the lowest levels in at least a decade.

“As homeowners have been hesitant to move, there has been a natural decline in the number of homes available. With unemployment rising only modestly and many homeowners being protected from the immediate impact of rising interest rates by fixed interest rates, it is critical that there is not an increase in the number of “forced sellers” – those who feel pressured to sell but wish they could do better not to. This is usually due to financial pressure,” she said.

She said that across the country, some regions such as Northern Ireland (2.3 per cent) were still seeing increases, while other regions such as South East England (-5.7 per cent) saw prices housing costs continue to fall.

Inflation is falling and mortgage rates have peaked, but other factors will continue to weigh on household purchasing power next year, she warned.

In a separate report, mortgage provider Nationwide predicted a rapid recovery in UK house prices in 2024 is “unlikely”, saying they are likely to “fall by single digits or remain broadly flat”.

HSBC told clients it expected property prices to stop falling but did not forecast a rise. “Taking into account the dynamics of indicators and the slightly improved forecast for financing costs and living costs, we are now adjusting our forecast for property prices so that we do not see further declines in the future. But given ongoing availability constraints, we don’t expect significant growth either.

“We now see zero house price growth next year, meaning the 5% peak-to-trough decline is behind us (we were expecting a 6% drop last month). And in 2025, we expect property prices to rise by about 1 percent.”