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London house prices forecast to fall 12pc as interest rates surge

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London house prices forecast to fall 12pc as interest rates surge
London house prices forecast to fall 12pc as interest rates surge

Property prices in the South East will fall by 9 percent over the next two years, which equates to a £35,190 reduction in the price of the average property.

The house price falls in the South West and East of England will be larger than in the rest of the country.

Andrew Wishart said that areas where house prices are highest relative to incomes are most vulnerable. The North and Wales are likely to see the smallest falls, while London and the South East are likely to see the largest falls.

Since December, the Bank of England has made six consecutive interest rate rises, bringing the Bank Rate to 1.75 percent and triggering the fastest rise in mortgage rates since 1995 Financial markets are pricing in a Bank Rate peak of 3.5 percent in early 2023, with further rate rises in the future.

If mortgage costs go up, would-be first-time buyers will leave the market. Mr Wishart said that even cash buyers would be deterred by the slump in sentiment.

He said that the housing market activity will plunge to its lowest level in over a decade.

One market will be immune. The wealthy buyers who purchase in the capital’s priciest postcodes are less exposed to rising mortgage rates and London’s affordability crunch as they are typically part of the global super-rich

Capital Economics expects a 2 percent drop in prime central London next year and a 1 percent rise in 2024.

International buyers who were largely absent during the Pandemic are returning to chase the currency play of a weak pound, which will further underpin the PCL market, according to Andrew Burrell, of the firm.

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