Rents could rise more than four times as fast as house prices between the end of 2022 and the end of 2026, according to a forecast.
Across Britain, rents could rise by 25% over the four-year period, compared with 5.5% growth in house prices, estate and lettings agent Hamptons predicts.
As mortgage rates gradually fall and households benefit from real income growth, Hamptons said it expects house price falls to come to a halt in 2024, with growth picking up in 2025 – which is thought likely by the property services firm to be the year when a new housing market cycle starts.
It expects just under a million house sales to take place across Britain in 2023, which would be down on 1.2 million completions last year.
Slightly lower mortgage rates and improved affordability in 2024 will encourage 1.1 million completions next year, it predicts.
This will be more akin to the 'u-shaped' downturn of the early 1990s than the 'v-shaped' crash and subsequent speedy recovery in 2008— Aneisha Beveridge, Hamptons
Meanwhile, a build-up of long-term supply issues combined with rising landlord costs will continue to put pressure on rents, Hamptons suggested.
A combination of lower rental yields and more landlords being reliant on finance will put added pressure on investor profits on London in particular, it added.
Aneisha Beveridge, head of research at Hamptons, said price falls this year are expected to be followed by a slow recovery as households adjust to higher rates.
She said: “This will be more akin to the ‘u-shaped’ downturn of the early 1990s than the ‘v-shaped’ crash and subsequent speedy recovery in 2008.
“On paper, the house price falls we forecast are minor in nominal terms. But high inflation for other goods and services means that in real terms, the average price of a home will have fallen around 11% between 2022 and 2024.
“This essentially reflects the correction caused by higher rates. It’s also why we expect prices to rise again in both real and nominal terms from 2025 as rates fall to their new normal and a new housing cycle begins.”
In the North East of England, Hamptons is expecting relatively strong house price growth of 8.5% by the end of 2026, while in Wales, house price growth is predicted to stall overall, at 0.0%.
Researchers explained that house price growth in Wales has already been relatively strong in recent years, while in the North East, there has been less price growth compared with some other regions. Housing affordability in the North East is also less stretched compared with some other regions, allowing some capacity for further house price rises.
Hamptons used Office for National Statistics (ONS) and Bank of England data for its forecasts.
Here are Hamptons forecasts for house price growth in percentage terms over the four years between the end of 2022 and the end of 2024:
– London, 11.5%
– East of England, 9.0%
– South East, 9.5%
– South West, 5.5%
– East Midlands, 5.0%
– West Midlands, 4.0%
– North West, 1.5%
– Yorkshire and the Humber, 1.5%
– North East, 8.5%
– Wales, 0.0%
– Scotland, 3.0%
