Property prices in the UK will remain strong and keep rising right through to 2024 and beyond, according to a leading accountancy firm report, released this week. 

Instead of plateauing or falling, the EY report predicts growth slowing to 1.8 per cent in 2023 and 1.2 per cent the following year. 

Property rises almost seven per cent higher than GDP

It goes on to insist that a housing crash is highly unlikely even despite the squeeze on household budgets (UK inflation rose to a 40-year high of 9.1 per cent in May), fall in government support and escalating interest rates. When compared to GDP growth over the past couple of years, the report says, the housing market has fared so much better, with a ‘real’ price rise of eight per cent compared to 1.2 per cent. 

That’s because in March 2022 the average property had risen by £48,000 (21 per cent) in just two years. The lower figure of eight per cent is when inflation is taken in to account.

Nationwide analysts show less optimism 

Interestingly, the Nationwide building society – whose monthly house price index is due any time now – isn’t issuing a forecasting house price report due to the ongoing upheaval in the economy. Upmarket property firm Knight Frank show no such reservations – the have increased their forecasted house price growth figure from five per cent to eight per cent for this year.

Analysts at the Nationwide don’t predict as buoyant a market as either EY or Frank Knight. Looking at mortgage figures they see a decrease in activity, with approvals down by 3,500 to 66,000 in April compared to the previous month. Borrowing was down £4.1bn from £6.4bn for the same period. In both cases this was lower than before the onset of the pandemic in March 2020.

Why EY report remains positive for market

The Bank of England base rate has, of course, gone up post-pandemic – five times recently, pushing up mortgage costs for those on variable rates (or about to be). But, argues the EY report, existing home owners tend to be older and with higher salaries. They are also more likely to have been savers during the three periods of lockdown – a nest egg that can be converted into a bigger mortgage deposit.

Also, during previous recessions, house prices tended to fall when unemployment rose, forcing reluctant householders to sell their homes after a job loss. Today, unemployment is at its lowest in 50 years – 3.8 per cent in April and the lowest since the 1970s – sparking no such fears. 

Supply of housing too is in short supply. And that’s not just down to the number of New Builds – older homeowners are holding on to their property for longer, insists the report. As a nation we are living longer than previous generations. This also means fewer larger three and four-bedroom properties coming on to the market (not everyone wants to downsize). 

Add to that the fact that many of the smaller one and two-bedroom properties belong to buy to let landlords. They tend to be more interested in holding on to property for long-term capital appreciation.

Then there is the undisputable fact that although mortgage rates are rising, they are still historically low.

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