The Brief: The housing market is set for a correction instead of a crash, according to JLL. The group forecasts a 6% drop in property values next year owing to the high cost of living, inflationary pressure and an anticipated recession.
Why It Matters: Other groups predict a deeper dive of housing prices compared to JLL. Credit Suisse expects a fall between -10% to -15%, while Capital Economics issued a -12% estimated drop by 2024. Nationwide states that the average price of a property has sunk to £268,282 from £272,259.
Finanze® Foresights: Headlines that state a looming housing market crash make news reports more engaging. But JLL is a bit conservative with its estimates since we’re still seeing signs of a correction (which is technically a 10% drop below peak value). This does not mean that the UK property market is not vulnerable anymore to an imminent crash in values. Mortgage rates have already reached 6%, more than double since December 2021. In case a housing crash eventually transpires, we can expect a buyer’s market but only for those with enough cash to offer sellers. This is because first-time buyers face borrowing costs that remain high and will most likely be priced out of the market anyway. But as we head into a correction for now, we expect sellers to hold off plans of putting their homes in a cooling market, while housing associations are at a losing end when they gamble on the open market.
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