January 9, 2023

Chart of the Week: How far might UK house prices fall?

by Fathom Consulting.

Several weeks ago Fathom flagged up evidence from the Royal Institute of Chartered Surveyors survey that UK house prices were beginning to tumble. Recent data from Nationwide and Halifax have since confirmed that prices are in the sharpest decline since the Global Financial Crisis, the early days of the pandemic aside. The Halifax index records prices 4.3% and the Nationwide index 2.5% below their August peaks. How much further can we expect them to drop? In Fathom’s Global Outlook, Winter 2022[1], finalised in early December, we described a central scenario for UK house prices that saw them fall by a little over 20% over the next two years. This central scenario assumed that mortgage availability remained unchanged. We also considered a range of alternative scenarios where the Government took steps to increase mortgage availability; but even in the most optimistic scenario it was hard to avoid double-digit falls in house prices. In the event that mortgage availability falls, house prices may fall even further. Our forecast is based on the more comprehensive Land Registry index. Nevertheless, the behaviour of the more timely Nationwide and Halifax indices, which measure prices at an earlier stage in the transaction process, suggests our forecasts are on track.

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[1] Key charts from Fathom’s Global Outlook, Winter 2022 will be available to Refinitiv readers on Chartbook soon.

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