- Trade body Propertymark says a drop in house prices is ‘inevitable’
- It said inflation needs to fall further for homes to become more affordable
- Inflation defied expectations of a dip in December, rising from 3.9% to 4%
A drop in house prices is ‘inevitable’ following the latest inflation figures, a top property trade body suggests.
Propertymark claimed that many homeowners would continue to struggle to buy while interest rates remained at their current levels.
The trade body’s Nathan Emerson said interest rates would need to drop and for this to happen, inflation would need to come down further.
Property insiders agreed that it is likely to be a ‘bumpy ride’ ahead for the property market
Mr Emerson said: ‘A drop in house prices is inevitable and natural when finding a balance in affordability during turbulent economic times.
‘We want to see affordability further improve for homeowners and in order to achieve that, inflation rates will need to get closer to the Government’s 2 per cent target, which in turn will impact the Bank of England‘s ability to begin reducing interest rates from February onwards.
‘We would also hope the Government looks at options to increase housing supply in a market in order to keep up with growing demand.’
The latest inflation figures showed a rise in December after increases in tobacco and alcohol prices.
The headline CPI rate defied expectations of a dip in December, rising from 3.9 per cent to 4 per cent.
At the same time, the latest figures from the Office of National Statistics found that house prices recorded their fastest annual fall since 2011 in November.
According to the data, the average sold price fell by 2.1 per cent in the 12 months to November 2023.
The typical home was worth £285,000, which was £6,000 lower than a year earlier.
The headline CPI rate defied expectations of a dip in December, rising from 3.9 per cent to 4 per cent
Property insiders agreed that it is likely to be a ‘bumpy ride’ ahead for the property market.
North London estate agent Jeremy Leaf said: ‘On the ground, there are signs of an improvement in confidence, translating into more viewings and offers, on the back of falling inflation and mortgage rates.
‘However, the latest inflation figures show that we can’t take anything for granted: there is still a long way to go and it is likely to be a bumpy ride.’
The typical home was worth £285,000, which is £6,000 lower than a year earlier, according to the latest data
Meanwhile, Anna Clare Harper, of sustainable investment adviser GreenResi, said: ‘Softer pricing is not a surprise, because higher interest rates are a more significant determinant of affordability for buying and owning a home than house prices.
‘Demand is down because it is harder to afford to buy or own a property for those reliant on mortgage finance.
And Frances McDonald, of Savills estate agents, said: ‘Looking ahead there are encouraging signs that buyers are gaining confidence as mortgage rates fall, but a more significant improvement in market conditions will likely come once a Bank of England base rate cut on the horizon, something that could now be pushed out given today’s surprise inflation figures’
