House price growth to fall in 2023

The real estate company even suggests that, by the end of the year, the average house price will remain the same as it did in the fourth quarter of 2022. And if interest rates rise further than expected - which may be the case - house prices may fall. 

These declines are most likely going to be in areas where house price growth has been strongest over the past few years, and where a larger share of households have bigger mortgages. 

It believes the following year - 2024 - will likely be a year of re-balancing. This will primarily be driven by an anticipated easing of inflationary pressures, which means real incomes could rise for the first time in years - and, as the base rate is lowered to about two percent, mortgage costs should drop, aiding affordability. 

Hamptons has, however, dropped its two-year house price growth predictions from 2021 - going from 5.5% growth between 2023 and 2024 to two percent. 

Broken down by region, the areas where growth has been strongest over the past two years in 2023 may be more susceptible to small prices - including three northern regions and the midlands. 

Wales and Scotland, however, have the potential to “weather the storm” better than other regions as affordability is less stretched here, and a larger share of homeowners are mortgage-free. 

Meanwhile, in greater London it expects prices to remain flat, despite “sluggish growth” in 2022. This will be driven by the fact that households will be held back by higher interest rates due to high prices, with mortgaged owners in the capital being particularly mindful of rising rates. 

As a result, the gap between prices in London and other regions will be at its narrowest for some time. 

As for Prime Central London (PCL), Hamptons expects this area may prove to be an anomaly given the lack of growth in this market over the past five years with fewer affluent homeowners relying on mortgages. 

And, if sterling continues to weaken against other currencies, London property prices will become cheaper for international buyers - with it expecting PCL prices to rise by 1.5% next year. 

In 2024, as the current cycle comes to an end, it expects to see price growth of 1.5% to three percent in almost all regions. The north east may, however, lag behind because of the potential for higher unemployment. 

And this is the point where Hamptons forecasts London house prices will begin to marginally outperform other regions with a growth of three percent, buoyed by a five percent jump in PCL. The south east should be close behind with a rise of 2.5%.