Quick overview
- UK house prices will remain stable in 2023, defying previous expectations.
- Interest rate cuts would enhance purchasing power.
- London's property market is outperforming national trends.
The UK housing market will face an unexpected period of stability this year, contrary to predictions made just three months ago. This resilience is largely due to ongoing supply constraints coupled with expected interest rate cuts later in the year. A recent Reuters poll highlights these positive expectations, indicating that British house prices will stabilize and not decline. This is a refreshing shift after a period of slowdown in the real estate sector, which saw a rebound as mortgage interest rates began to fall.
UK house prices: 3% growth by 2025, 4% by 2026
Looking to the future, the market's trajectory looks promising. First, house prices are expected to maintain their current levels throughout 2023. In addition, growth of 3.0% in 2025 and 4.0% in 2026 is expected. These forecasts are consistent with moderate inflation expectations, which expect interest rates to gradually decline During the next three years. Moreover, London, a perennial hotspot for foreign investment, is poised for stronger growth. Specifically, it is beating national averages with an increase of 1.7% this year and further gains are expected through 2026. Finally, the current average property price in the UK is £362,839. This highlights the affordability challenge for many, especially when considering the down payment needed to get a mortgage.
The rise of European banks is fueling the UK property market
The broader financial landscape provides context for housing market dynamics. The resurgence of European banks, recovering to more than 24% of global revenues in 2023 from the lows of 2019-20, coupled with the steady performance of UK institutions such as Barclays and HSBC, underscores a broader trend of financial stability and growth. This banking recovery bodes well for the real estate market, which could improve lending conditions and support home price stability and growth.
