Strutt & Parker maintains 2023 house price forecasts in wake of steadying mortgage markets.
The economic outlook for the local and global economy has worsened as the ongoing geopolitical situation causes more disruption to global energy and food markets. Considerable uncertainty remains, including a potential threat from China of another Covid outbreak. The cost-of-living crisis persists in the UK, with inflation remaining at over 10% in December 2022.
Several support packages have been put in place by the government. However, the Autumn Statement focused on higher taxes and decreased government spending, which will put further constraints on household budgets. Inflationary pressures, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt as well as being more vulnerable to economic shocks.
UK prices ended the year at 4.8% growth, after six consecutive quarters of annual growth above 10%. This was just below our forecast (5%-10%). Our previous commentary forecast price changes of between-5% and 0% for 2023 and a five-yearly outlook of 10%-15%. Agents have been expecting prices to drop down from their recent peaks, and this has partly been seen in this quarter’s drop of over 5%. As such, our previous forecasts are retained.
PCL prices ended the year at 0.8%, at the bottom end of our forecast (0% to 2%). QoQ growth was negative (-0.6%) for the second quarter in a row. Our previous commentary forecast price changes of -3% to 3% for 2023 and a five-yearly outlook of 10% to 15%. Agents report that there are still strong supply issues, and that the PCL market is more robust to shocks than other markets. Historically, prices have not moved by much, and this is expected to continue. Therefore, our previous forecasts are retained.
PCL lettings growth has been particularly strong, ending the year at 11.7% growth, in line with our forecast (10% to 15%). Quarterly growth, however, dropped below 1% after three consecutive quarters of growth above 3%. Agents report that there are still supply shortages but that the market may see a price softening as rising rents become less and less affordable. Agents expect increases, but not as high as we have been seeing for the past few quarters. Given this, the previous forecast is downgraded slightly to 5% to 10%in 2023 and 20% to 30% in the five-year outlook.
Read the full quarterly research here.