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House price growth has exceeded our expectations again in 2022. But with interest rates on the rise and an uncertain economic backdrop, how much longer can this be sustained?


Despite mounting financial pressures on households, house prices have continued on their upward path this year. The stock of homes available to buy has stayed low, and buyer demand has remained strong – even in the face of higher mortgage rates. The resulting competition has fuelled growth, particularly for houses. At their peak, data from the Office for National Statistics (ONS) on which we base our forecast, showed that annual price growth across Great Britain reached 12.9% in May, a 17 year high.

However, more properties are now coming onto the market, which may start to swing the scales. For the first time since the start of the pandemic, there were more homes available to buy in July than in the same month last year. Stock levels have been so low for so long, that, despite stock levels rising 11% year-on-year, they still remain a quarter below where they were back in 2019. And the latest data shows a deceleration of price growth, down to 7.8% in June. But let’s not get carried away. Demand is still elevated, and there were still 24% fewer homes available to buy in July than in the same month of 2019. As a result, sellers are in a strong position.

Although fewer homes (in England and Wales) may be selling for more than their asking price than during the market’s peak earlier this year, as many as 41% continue to do so. This is substantially higher than the 19% seen in July 2019. Given the length of time - currently 123 days – between a sale being agreed upon and its completion, we are unlikely to see the impact of more stock and higher mortgage rates on ONS price growth until early 2023.

Mortgage rates are going up rapidly, and we think prices will remain unchanged between now and December. Nevertheless, the average house price in Great Britain will still end the year 5% higher than at the end of 2021, exceeding the 3.5% we forecast last year.


The impact of rising mortgage rates is likely to be felt most keenly in 2023. Based on our forecast that the base rate will peak at around 2.5% early next year, mortgages will become noticeably more expensive.

Spiralling inflation will also reduce how much households can save and limit their capacity to borrow. This will depress house price growth. Yet there will be significant counterbalancing factors. The majority (54%) of households own their home outright and so are unaffected by mortgage rate rises. Stronger stress testing, introduced in the wake of the financial crisis and a tight jobs market will limit the number of forced sales, a key cause of house price falls in 2008.

We forecast that house price growth will slow throughout 2023. By the end of the year, the average house price is likely to remain the same as it did in the fourth quarter of 2022. If interest rates rise further than we expect, which may be the case if inflation proves particularly persistent, house prices may fall. Declines are most likely in areas where house price growth has been strongest over the past few years, and where a larger share of households have bigger mortgages.


In the wake of a cautious 2023, 2024 is likely to be a year of re-balancing. Inflationary pressures should ease, which means real incomes could rise for the first time in two years. As the base rate is lowered to about 2.0%, mortgage costs should drop, aiding affordability. As a consequence, house price growth should rise to 2.0% by the fourth quarter, although the uncertainty surrounding the outcome of an impending general election may dampen the mood.

In our 2021 forecast, we predicted that house prices would grow 5.5% between 2023 and 2024, but higher interest rates have derailed such expectations and lowered our 2-year forecast to 2.0%. As we also set out in our 2021 forecasts, we think 2024 will mark the end of the current house price cycle which began in 2008. The end of a cycle is normally characterized by a convergence of growth across regions, in the wake of a period when the North-South gap has narrowed.

By the time the current cycle ends in 2024, house prices seem set to have risen by 77%, with London leading the pack with a jump of 110%. However, this is around a third of the 256% growth during the previous cycle (1992 to 2007). The conditions appear to be in place for the dawn of a new cycle during which house price growth seems set to be more muted than in the 16 years between 2008 and 2024.


2025 will mark the beginning of a new house price cycle. The base rate is likely to settle at its new normal of about 1.75%. First-time buyers, the group hardest hit by higher rates, are likely to make a comeback, as affordability pressures ease.

We forecast that house price growth by the end of the year will be 3.0%, reflecting a rise in households’ real incomes. As a result, over the next four years house prices are set to rise 10.0% across Great Britain, against the 13.7% recorded between 2017 and 2020. The cause of this downward shift will be the new - and possibly permanent - move to a higher-interest rate era.

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Autumn Forecast 2022

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Autumn forecast 2022
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