UK house price fall predicted to be second biggest in Western Europe

Ratings agency S&P Global has predicted UK prices will go down 3.5% in 2023, which is the steepest drop in Western Europe after Portugal, where the fall is expected to be 4.4%. 

Its analysis of the European housing market said house prices will be hit this year and next because of rapidly rising mortgage rates.

However, the ratings agency said prices would decline but not crash in most European countries this year and next but that there were “few if any prospects of a strong rebound through 2025”.  

It the UK it said prices will stage a modest recovery in 2024, rising by 2.7% after this year’s, putting its forecast at the more optimistic end of recent UK house price forecasts.

The Office for Budget Responsibility (OBR) published forecasts alongside the autumn statement last year forecasting a cumulative drop in house prices in the UK between 2022/23 and 2024/25 of 9.2%. 

Zoopla also believed house prices would fall this year in the UK, and in London between 5% and 8% because of stretched affordability of buyers. 

S&P Global noted while “residential construction was holding up well” in most of the Eurozone, in England housing starts were already down 10% from their peak in the third quarter of last year, according to government stats. Research firm Capital Economics has predicted this could get even worse, last autumn estimating housing starts will drop nearly 40% in the UK this year. 

The ratings agency said there was some positive signs Europe’s housing market would hold up, such as strong levels of employment and wage growth. 

It added: “Current wage trends suggest household purchasing power could recover as soon as early 2024”.