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Major agency brand predicts 12% drop in home sales next year

Hamptons is anticipating an 12% drop in property transactions across Great Britain next year as interest rate rises and the cost of living crisis hit harder for buyers.

Forecasts released by the agency brand today predict that home sales will bear the brunt of the downturn in 2023 as households sit tight.

Assessing the direction of interest rates, inflation and house prices over the next three years, the agent has predicted that there will be around 1.25m transactions in 2022, 9% more than in 2019 as the transaction backlog clears.


But as more interest rate rises and higher mortgage rates, plus other bills, hit the market, dwindling public confidence may hit the sales market, Hamptons predicts.

Its analysis said: “The delays to completions mean that the impact of higher interest rates and the cost of living are not likely to be visible in official transaction data until early 2023. 
While we expect prices to stay flat in 2023, we think transactions may take a hit over the year, declining to 1.1m.

“When underlying fundamentals change, such as interest rates, there tends to be a period of adjustment.

“During such times, more households are minded to stay put.”

It suggests that first-time buyers, who have been a key force in 2022 acquiring 26% of all homes sold, will be most severely affected, adding: “Such could be the impact on their ability to afford a home that it may return transactions back to 2013/2014 levels.  

“Meanwhile, cash purchasers in prime markets are likely to remain more resilient.”

The analysis suggests transactions should begin to increase in 2024 as households who delayed a move in 2023 take advantage of declining interest rates.  

Hamptons is predicting that transactions will rise to 1.2m across Great Britain in 2024 and will reach a post-Covid normal of 1.3m by 2025.

It said: “We believe that the number of sales will remain above pre-pandemic levels, partly because the number of households has grown.  

“Also, the British now place more importance on their homes, one of the lasting consequences of the pandemic, stimulating more moves.”

Assessing house prices, Hamptons is predicting annual growth of 5% this year but warns values will be flat in 2023 due to pressure on household income and could even drop if rates rise further than anticipated.

Its research highlights 2024 as a year of house price recovery, with prices rising 2% amid a General Election and the release of pent up demand from 2023.

The following year could see house price growth of 3% across Great Britain, Hamptons suggests.

Aneisha Beveridge, head of research at Hamptons, said: “The housing market has outperformed our expectations once again in 2022, but with a cocktail of risks on the horizon, growth is likely to stall next year. 

“Financial pressures are raining down on households as inflation bites and mortgage rates rise.   And it’s unlikely we’ve seen the worst of it yet, with rates expected to peak at the beginning of 2023.  This means price growth in the years running up to 2025 will add up to 2021 levels.

“All eyes are on interest rates as this will be the key determinant of house price growth in the coming years.  Given many mortgaged homeowners won’t have witnessed interest rate rises, it will take time for them to adjust.  While it’s likely that the base rate will remain lower than it has in the past, higher levels of mortgage debt will magnify the impact of even small rises.  If mortgage rates surpass the 5% mark, there’s a much stronger likelihood that house prices will fall.”

She suggested there should be fewer repossessions and forced sales than in previous downturns due to more stringent affordability testing in place since the financial crash and a record share of outright homeowners.

Beveridge added: “Low-yielding landlords are the group most likely to sell up as they come under pressure from rising mortgage costs and new legislation.

“Longer-term, we expect the market to return to its traditional cycle.  Price growth will begin to recover in 2024, with London leading the way as a new cycle dawns in 2025.  However, stretched affordability will mean we’re likely to see considerably less price growth than in the past.”


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