The housing market has been a volatile one in the past three years, buffeted by shifting levels of buyer demand and an ever-changing economic landscape. The coronavirus pandemic had a hand in creating record increases in property values, while the ensuing cost-of-living crisis had a depressive impact on prices. In the aftermath of a winter of economic tumult, and a significant rise in the cost of mortgages, many prospective and existing homeowners are looking to the future; what does the housing market hold for the next five years?
Predictions for the UK Housing Market
2023
2023 is already partially through, but the remaining months of the year are expected to witness some essential shifts with regard to property value – predicated on the movement of the economy in the coming quarter.
In late 2022, economists were predicting that inflation would fall back down to manageable levels, something which hasn’t quite been borne out in the last financial quarter. Falling inflation was supposed to alleviate pressure on spending, but at the expense of higher rates of interest.
The impacts of this on house prices are complicated, based on multiple variables including the interplay of government and the Bank of England. As things stand, house prices are predicted to slump, with lower affordability and higher mortgage rates for the average household remaining. The rate of that slump differs from expert to expert, but could be as high as 10%.
2024
2024 is expected to bear out in similar fashion to 2023, albeit with inflation rates more or less curbed. House prices are not predicted to bounce back with any degree of quickness, in part due to negative pressure on inflation but also due to the nature of fixed-term mortgage products. Still, new mortgages are expected to come down a little, which – alongside the legal costs associated with purchasing a home – render the market slightly more affordable for new buyers.
2025
2025 could well be an interesting year for property markets and the wider economy. If not in 2024, a general election is expected to have taken place by January 2025 – an election in which Labour are expected to win out over the Conservatives, resulting in the first handover of political power to another party in 15 years.
With the Conservatives having presided over significant failures, not in the least of which was Liz Truss and Kwasi Kwarteng’s inflationary mini-budget, Labour is expected to bring a level of security back to the economy, and a brief boost in the economy will be experienced as a result. It is here that house prices may return to positive growth, if slow.
2026 and Beyond
By now, any predictions relating to the economy or house prices are wildly susceptible to change, but there are some key suggestions that could well be realised regardless of the next General Election winner. For one, much of the global instability that has interfered with regional property markets – chiefly, Russia’s invasion of Ukraine and the resulting sanctions on many businesses and partnerships – will be largely resolved. International economic climates are expected to have cooled, and outside investment in property could well return – leading to a return to ‘the norm’ for the UK’s property market even in spite of Brexit.
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