A market expert has warned house prices will underperform inflation over the next few years and drop 22 percent in real terms.
Richard Donnell, director of Research at Zoopla, warned Britons: “Anyone who’s buying a home between now and 2024, their buying power is down 20 percent.”
He was appearing on the Moving Home with Charlie Youtube channel to share his thoughts on how the housing market will change over the coming years.
Looking at the next few years, he said: “We’ve got this huge hit to buying power, you’ve got all these generations getting less well off than the one before.
“Mortgage rates can’t go any lower, they’ve gone up, let’s assume they’re going to stay at four to five percent for the next five or six years.
“The best house prices can do is rise in line with earnings or incomes, which might be one percent above inflation, but actually I think they’re going to underperform inflation and earnings for the next three to five years.”
Asked how much prices will fall by 2025, the researcher predicted they will fall by at least 10 percent nominally compared to today’s figures, which would be a real-terms fall of 22 percent, because of the impact of inflation.
Mr Donnell also warned there are many “lead weights” that will keep down house prices, such as potential changes to EPC regulations that may increase the costs of owning a home.
Analysts were surprised when inflation remained at 8.7 percent in the most recent figures, hitting the value of the pound in people’s pockets.
Britons face rising prices for everyday essentials with the cost of food still increasing above the overall rate of inflation while energy bills have doubled compared to a year ago.
These immediate costs may reduce the funds people have available to go towards buying a property.
Another concern for home buyers is the rising cost of mortgage repayments as the base interest rate increased again last week for the 13th consecutive time.
The Bank of England increased the base rate from 4.5 percent to five percent in its efforts to tackle inflation.
Experts are now predicting the base rate could peak at six percent further driving up repayments for people on variable rate deals.
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