Economists warn that home prices will not rebound even after the recession ends

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New projections show that the worst of the UK house price declines will not arrive until 2024, just as values ​​in other countries are beginning to stabilize.

Moody’s has warned that house prices will fall very sharply in the United Kingdom over the next two years compared to other developed economies such as Germany, France and the United States.

The credit rating agency said a combination of high inflation, explosive house price growth recorded during the pandemic property boom, and a large share of borrowers on short-term fixed-rate mortgages means the UK is particularly vulnerable to a longer housing downturn.

Moody’s said: “We expect the Bank of England, which faces the responsibility of bringing down stubbornly high inflation, to maintain a hawkish stance on monetary policy until 2024. The effects of interest rates on UK housing demand are thus likely to be sharp and prolonged. “

It expects UK house prices to fall 4% through 2023 and then 6% through 2024 – that would be the worst performance across the nine western countries tracked by Moody’s, which includes the US and Europe’s largest economies.

Although it expects Germany to see an even larger 5.7 percent drop in house prices this year, the downturn there will be short-lived, with a decline of just 1.6 percent in 2024.

The United States will see nominal house price growth of 0.2 percent in 2023 and a decline of 3.8 percent in 2024.

Although early indications are that UK mortgage rates are starting to stabilize after two months of skyrocketing growth, analysts don’t expect a major drop in material soon.

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