Will there be a house price crash?
UK HOUSE prices fell in 2023 as higher interest rates and the cost of living hit household budgets - but is a crash on the horizon?
Recent figures from the Office for National Statistics (ONS) reveal the average cost of a home fell from £291,000 in November 2022 to £285,000 12 months later - a £6,000 drop.
It comes after a succession of Bank of England base rate hikes, with the figure peaking at 5.25% in August last year.
The central bank took the measure to slow runaway inflation, but it also impacted prospective home buyers' confidence as mortgage rates soared, in turn driving down the price of properties.
This is because a higher base rate is usually passed on to households by banks through savings and mortgage rates.
Mortgages rates have stabilised in recent months, as the BoE holds the base rate at 5.25%, with a number of lenders cutting mortgage rates in the new year.
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Experts have also been predicting the base rate to fall as early as March, after inflation slowed towards the end of last year.
This, in turn, would likely see mortgage rates fall, driving up demand for houses and their price.
But recent figures from the ONS reveal inflation for December rose by 0.1% to 4% in December, a surprise spike.
It could mean the base rate doesn't fall as fast as expected, keeping house prices from rising.
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Will there be a house price crash?
The last time property prices crashed was during the global financial crisis in 2008.
UK house prices reached an average of £190,032 in September 2007 and had dropped to £154,417 by February 2009 - a fall of more than 18%.
They did not regain that peak until August 2014. But what about house prices now and will they crash?
David Hollingworth, from broker firm L&C Mortgages, said despite major market volatility last year causing house prices to fall, he didn't expect a crash any time soon in 2024.
He said: "It will take time but lower mortgage rates should help to encourage buyers that put their plans on hold last year to come back to the market.
"The lack of available property has supported prices to now but as confidence builds we could see activity pick up this year.
"December's inflation figures will dampen the expectation for a base rate cut to be imminent but shouldn’t be enough to send mortgages rocketing, although it could potentially apply the brakes to rate reductions.
"There’s still uncertainty but overall things the outlook looks more positive and there’s little to suggest that house prices are set to crash."
On Monday, lender Knight Frank said it did not expect house prices to crash in 2024, but rise by 3%.
Nick Mendes, from broker firm John Charcol, added: "With inflation falling and interest rates falling to more affordable levels this has created an early sense of confidence and optimism amongst first time buyers and home movers.
"As a result, I don’t expect to see a reduction in property price for 2024. Instead I expect to see an increase between 2%-4%."
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