The Brief: Following this week’s mortgage cost hikes, Knight Frank has revised its UK house price forecast to -5% next year and in 2024. It also added that the property price growth in the second half of the pandemic will retreat, with prime central London suffering a -3.0% decline in prices next year.
Why It Matters: Knight Frank’s previous forecast release in June anticipated UK annual house price growth to hit a modest +1.0% next year and +2.0% in 2024. Yesterday’s release saw sharp declines in prices with Greater London dropping by -6.0%.
Finanze® Foresights: The forecast reversal speaks highly of the gloomy outlook that most property companies in the country recognise since the financial markets’ swift reaction to the government’s fiscal measures. Weakening prices are a result not only of the withdrawal of mortgage products that was prompted by the high volatility in the UK gilt market, but also by the cost-of-living crisis and the uncertainty in the entire economy. The upward push on prices in the previous months due to subdued overall home supply and rising inflation has become negligible because of the fixed-rate mortgage hike brought about by the five-year swap rate’s upward movement.
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