Knight Frank has issued a more gloomy forecast for house prices this year, saying they will fall 7%, and a further 4% in 2024.

The agency had previously said there would be 5% drop in 2023, and a similar reduction next year.

The Bank of England kept the base interest rate at the same level last week, and mortgage rates have been falling in recent weeks.

Volatility

Tom Bill, head of residential research at Knight Frank (main picture), says: “Now, some stability appears to be on the horizon. The Bank of England held at 5.25% in September after inflation fell by more than expected, and we have updated our house price forecasts to reflect the recent changes.

The volatility this summer means that we now expect UK house prices to fall by 7% this year”.

“The volatility this summer means that we now expect UK house prices to fall by 7% this year, more than our forecast of -5% in March,” he says.

“Next year, we expect prices to fall by 4%, less than the 5% we forecast earlier this year, as the economy stabilises, and speculation turns to when the first (small) rate cut will come.”

Uncertainty

The number of people moving from lower fixed-rate mortgages will not fall in 2024, Knight Frank says, but the economic backdrop should be more stable.

However, a General Election is likely in 2024 and uncertainty ahead of any vote usually suppresses demand.

In the rental market, the current supply-demand imbalance shows no sign of reversing, Knight Frank says.

“We therefore expect rental prices will continue to increase over the upcoming three months and have revised up our rental growth forecasts for 2023 to 6.5%, with a further 5% growth forecast in 2024.”

Housing market ‘facing 5-6% hit this year…and next’, leading agent predicts

Picture: LondonProperty.co.uk