According to the Cebr, 2023 is likely to be a challenging year for the UK housing sector, with peak annual contraction of 6.2% expected in the third quarter
UK house prices are expected to fall by 4.5% on average next year, however, this is still unlikely to make property more affordable for young buyers, new data has predicted.
According to the Centre for Economics and Business Research (Cebr), 2023 is likely to be a challenging year for the UK housing sector, with peak annual contraction of 6.2% expected in the third quarter.
This comes amid sharp rises in mortgage rates, significant cost of living pressures, an impending recession, and anticipated increases in unemployment.
While the recently announced energy price cap will bring some respite to households and businesses, these forces are nonetheless set to plague the economy for at least the next year, the Cebr said.
It has forecast that the fall in house prices will still make housing unaffordable for “generation rent”, and fail to reduce inequality.
A contracting housing market will bring economic pain for everyone, the economics consultancy said.
Property makes up an important proportion of national wealth. The latest English Housing Survey showed that two-thirds (65%) of households own their home.
According to data from the ONS Wealth and Assets Survey, aggregate property wealth in the UK accounted for over a third (36%) of total wealth between April 2018 and March 2020.
With housing wealth skewed to certain socioeconomic groups, and given the general appreciation of property values, its distribution has become more unequal over the past 15 years.
The share of housing wealth held by the least wealthy half of the population fell from 9.4% in 2006-2008 to 8.7% in 2018-2020, while that of the wealthiest fifth rose from 56.6% to 57.4%.
Although data on housing wealth inequality during the pandemic period is not yet available, the Cebr believes it is likely to have worsened in light of rapid price growth and an apparent ballooning of second home purchases.
The Cebr added: Given that frequently the biggest hurdle to get onto the housing ladder is the deposit, lenders’ tendency to push down loan-to-value ratios during periods of downturn means market accessibility at the lower ends is in fact set to worsen.
