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Four Reasons to Expect Falling House Prices in 2023

Geoff Riley

26th December 2022

The UK housing market has defied economic gravity for many years now, but 2023 is likely to be a period when average property prices drop. In this short video, I explore four reasons to expect a property recession. Much depends on the depth and persistence of recession in the UK and also when and where UK interest rates peak.

Here are four reasons to expect falling house prices in 2023:

1/ Higher mortgage interest rates

Mortgage interest rates have climbed and will stay high – millions face the challenge of adjusting to higher 2- and 3-year fixed rate mortgages during 2023. With falling real incomes, many will not be able to afford their mortgage payments. Around two million British borrowers must re-mortgage between now and the end of 2023, representing a quarter of all outstanding mortgages.

2/ Collapsing consumer confidence

Consumer confidence has collapsed to levels last seen in the 1970s. People have less money to save which makes it harder to find the money for a mortgage deposit. This drop in confidence is associated with one of the deepest cuts in real disposable incomes for decades – real wages are falling, unemployment is starting to rise, and the tax burden is at a seventy year high.

3/ Sellers are dropping their asking prices

Asking prices for properties have already started falling. Housing buyer demand has fallen by 40% in recent months as potential buyers have stepped back from the market. Sellers are having to lower their asking prices to tempt would-be buyers. According to a survey from Zoopla published in December 2022, sellers are accepting 4% discounts on asking prices to achieve a sale.

4/ Landlords face a squeeze - many may start selling

Landlords are getting nervous as the costs of letting out properties are rising. Some will look to sell – increasing supply on the market – and demand for –buy-to-let properties is likely to weaken as the economy heads into a prolonged recession.

Four Reasons to Expect Falling House Prices in 2023

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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