HOUSE prices are always a hot topic and now more than ever people are wondering if we might see prices fall.
It is impossible to tell what is going to happen in the future, but there are a few things that could give a good indicator of where the market is heading.
How expensive it is to get a mortgage has a big influence on house prices, as higher rates mean people can afford to borrow less.
This can often pull property prices down as buyers do not have as much money to spend.
The BoE base rate, sometimes just known as Bank Rate, influences how much interest banks will charge on loans or pay out for savings.
The Bank Rate is set by the BoE's Monetary Policy Committee and remains at 5.25% as of September 21.
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Rates have risen relentlessly from their record low of 0.1% in December 2021 as the Bank tries to tame inflation.
Consumer price inflation was stuck at over 10% for more than six months, but it has been coming down slowly in recent months and stood at 6.7% in August.
While another hike means that mortgage rates are likely to rise again in the short term, experts say this should level out over the next few months as no further rate rises should be needed.
The other major factor is how secure we all feel in our jobs – when there's a worry that companies could make redundancies, people tend not to make big financial commitments.
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That means fewer people looking to buy homes, leaving sellers with fewer offers on their properties.
This is known as a buyer's market because if sellers need to move, they can be forced to accept a lower price.
If that starts happening everywhere – average house prices start to come down.
Below, we take a look at what could happen to house prices over the course of the year.
House prices
There are several different house price trackers, all of which measure something slightly different.
The official measure comes from the Office for National Statistics, which looks at the prices homes have actually sold for after they go onto the Land Register.
This is the most accurate of all the indices but the figures come out three months after the homes are sold so there's a big time lag.
Halifax and Nationwide both publish a monthly index, tracking the average prices of homes they provide mortgages on.
While they do adjust their figures to iron out big outliers, both lenders measure average house prices based on the properties they see.
That means neither takes into account the value of homes with no mortgage – which is around one in three properties in the UK.
Their numbers are also affected by how many mortgages they approve in a month and what sort of homes happen to have been sold.
Both indices publish around a month after their customers complete their home purchase.
Rightmove and Zoopla also release house price trackers each month, with their figures based largely on the listings from their own sites.
Rightmove's index looks at asking prices, which gives a good measure of what the market will do next but doesn't account for when homes are sold for less.
House prices now
Nationwide has just published its August index, which shows that house prices fell 0.8% month on month in August.
House prices are now 5.3% below the August 2022 peak and this represents an annual fall of around £14,600 on a typical home.
Halifax recorded house prices in August 2023 were 4.6% lower than the same month a year earlier.
Zoopla's latest figures show the housing market broken down by area.
According to its data analysis, house prices are falling mainly in the south of England, where values in the first half of the year have dropped 2.2% compared to a year earlier.
In fact, they say 80% of areas where prices are coming down have an average house price of over £300,000.
"Higher house prices mean larger mortgages, bigger deposits and a higher household income required to buy a home," explained Richard Donnell, research boss at Zoopla.
"The more the income needed to buy increases, the more households are priced out of the market, which reduces demand and pushes prices lower."
Rightmove said the average price of property going onto the market in July fell by 0.2% to £371,907.
The company's property science director Tim Bannister said: "Price trends have proved more resilient than most expected during the first half of the year, with average asking prices now 2.6% higher than in January."
Figures from the Office for National Statistics show the average UK house price was £286,000 in May 2023, £6,000 higher than 12 months ago, but £7,000 below the recent peak in September 2022.
Broken down by area, registered home sales show average house prices rose over the 12 months to May 2023, by 1.7% to £304,000 in England, by 1.8% to £213,000 in Wales, by 3.2% to £193,000 in Scotland and by 5% to £172,000 in Northern Ireland.
Nationwide calculates that first-time buyers with a 20% deposit still have to hand over 43% of their take-home pay to their mortgage lender.
It means it's even less affordable to get on the property ladder now than a year ago – and that's stopping buyers from buying and sellers from selling.
By Nationwide's count, it's left the number of homes changing hands down by 15% over the year.
Victoria Scholar, interactive investor's investment boss, said the housing market "is in the doldrums".
"Sellers are struggling to achieve desired offers and therefore are less willing to list their properties, particularly over the seasonally quiet summer period," she said.
Are house prices likely to go down in 2023?
Tom Bill, head of UK residential research at Knight Frank, said: "Higher borrowing costs have knocked sentiment and forced buyers to recalculate their budgets but the property market hasn’t slammed on the brakes."
The estate agency predicts that house prices will come down by around 5% in 2023.
But Tom said there were reasons to think things in the property market could improve between now and the end of the year.
"The Bank rate is nearing its peak, which means that while sentiment will remain subdued, it will only improve in the second half of this year," he said.
"That said, prices and sales volumes will come under pressure as the market descends from the highs of the pandemic and adjusts to the new lending environment."
Robert Gardner, Nationwide’s chief economist, said housing affordability remains stretched for those looking to buy a home with a mortgage.
And he said the amount first-time buyers need to save for even a 10% deposit is now equivalent to 55% of gross annual average income.
This means it's likely we'll see " modestly lower house prices" this year, he said.
Nathan Emerson, chief executive of trade body Propertymark, said estate agents were still seeing a steady number of properties going up for sale.
"Our member agents report a return to the normal pace in the market despite ongoing economic turbulence,” he said.
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Nicola Schutrups, managing director at Southampton-based mortgage broker The Mortgage Hut, said she expects "further falls in house prices" for the rest of 2023.
"But if inflation continues to come down and the jobs market remains strong, there’s still a chance for a soft landing,” she added.
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