The housing market is set to turn “sluggish” rather than experiencing a major slump, new predictions claim.
Agency and property consultancy brand JLL has issued its latest housing market forecasts, claiming the property downturn won’t be as bad as the 1990s or the global financial crises due to stricter lending policies, lower unemployment and a resistance by banks to repossess homes.
Its analysis said the key differentiator between now and the housing market crash of the 1990s was that unemployment was at around 10% compared with 3.5% today.
While unemployment is expected to rise in the coming 18 months, it is expected to hit 4.9%, below the average of 6.7% since 1971 and the past 10- year average of circa 5.2%.
It added that lending practices have improved since the 2008 financial crisis.
However, it does recognise that the pressure of higher mortgage rates and the cost of living crisis will hit first-time buyers and push down property sales and house prices.
It is predicting that overall transactions will fall to around 1m in 2023, with the number of viable first-time buyers declining to 200,000, from 325,000 since the financial crisis.
The transactions that do occur, JLL said, will be dominated by slightly more motivated but not financially distressed sellers faced with a higher proportion of ‘opportunistic’ buyers such as cash buyers.
Marcus Dixon, director of UK residential research at JLL, said: “These opportunistic buyers will not expect to pay asking price.
“But the vendors who are not distressed will only accept a fall in values to a certain level – i.e more of a discount than a fully blown correction and certainly not a crash.”
Dixon said this dynamic will create a sluggish market in which buyers and vendors haggle over price and ultimately less transactional activity occurs with the supply of new homes for sale gradually becoming constrained.
Against this backdrop, JLL is forecasting that UK house prices will fall in value in 2023 by 6% which equates to an average discount of £17,500 from the average UK house price of circa £290,000.
Dixon added: “Of course, as in any market, there will be winners and losers. Not all types of home, cities or regions will be impacted to same level. On a regional level JLL’s forecasts falls ranging from around 4% across Greater London to around 8% in Wales, the North East and Yorkshire & the Humber.”
Its analysis suggests house prices will grow 1% by 2024, 4% by 2025 and 5% in 2026 and 2027.
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