Property prices to fall but rents set to increase

A DRASTIC collapse in the property market is unlikely to happen this year according to a property expert.

Chris Hodgkinson, managing director of House Buyer Bureau, doesn’t foresee a house price crash, but does expect property values to decline quite significantly over the coming year.

A combination of high inflation, lower wage growth and rising interest rates have inevitably placed huge pressure on household budgets, creating a weakening in the market.

Zoopla says the impact on pricing will be felt more keenly in the higher value markets of the south of England.

Some prices have risen by a fifth since the start of the pandemic in 2020, so according to Paula Higgins of the consumer group Home Owners Alliance, there will be a “correction, rather than a crash”.

Chris Heath, managing director of Cube Homes also thinks we are more likely to see a gradual dip, as people will always need to move at key points in their life, regardless of the state of the housing market.

Savills, however, forecasts that buyers will be either ‘needs based’ or ‘downsizing’ to release capital, while others will bide their time for the next 12 to 24 months to get the right house at the right price.

It is not all doom and gloom however, according to the experts who are analysing the markets for the coming year. The pound has risen against the dollar and the price of diesel on the forecourts is beginning to fall.

First-time buyers can take advantage of the land tax incentive which enables them to avoid paying stamp duty on the first £425,000 on a new home until 2025.

A relaxation on mortgage restrictions also means that loans will be easier to apply for and choices will be more varied to suit each borrower’s circumstances.

For the private rental sector, however, it is a different story. Rental prices are likely to rise to combat the overall cost of living which is adversely affecting landlords. This will impact both new and existing lettings.

Benham & Reeves expects the cost of renting to climb by as much as 10 per cent this year, while others suggest an increase of between five to eight per cent.

Many experts are criticising the government’s policies which they see as an attack on the nation’s landlords. These policies include changes to capital gains tax thresholds from April and reducing the ability of landlords to safeguard their own investments with regards to Section 21 eviction notices.

Other local licensing and council tax charges will inevitably reduce the already low supply of rentals to the market by inhibiting further investment in this sector.