UK House Prices Predicted To Drop

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UK House Prices Predicted To Drop
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Delaying your property sale could cost you thousands as UK house prices predicted to drop

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The latest research from the homebuying platform, Yes Homebuyers, has highlighted a potential drop in UK house prices over the coming year and analysed exactly what the pounds and pence impact will be for homeowners and sellers.

UK House Prices Are Expected To Fall

Recent projections from the Office for Budget Responsibility (OBR) have suggested that UK house prices will fall by -1% by Q4 2022.

While this may sound marginal, it could well be a best-case scenario for UK homeowners as the stamp duty holiday and furlough scheme both come to an end with the difference between selling today and selling this time next year bringing a significant hit to the wallet.

Yes Homebuyers has analysed the OBR data to calculate the impact that such a price drop would have on UK house prices and has discovered that delaying a house sale for a year or so could result in a loss of up to £5,000.

It comes as no surprise that the impact of a -1% price drop would hit hardest in London. If the OBR projection is correct, by Q4 2022, the average London house price will be £487,438; a loss of £4,924, or £615 every quarter.

In the South East, a -1% price drop would bring the average price down to £333,582, a loss of £3,370, while in the East of England, prices would drop by £3,026.

House values will decrease by more than £2,000 in the South West (£2,749), West Midlands (£2,119), and East Midlands (£2,080), while dropping by more than £1,500 in the North West (£1,801), Wales (£1,795), Yorkshire & Humber (£1,780), and Scotland (£1,636).

On a local authority level, it’s the boroughs of London that are going to see the most severe price drops. Nowhere will be hit harder than Kensington & Chelsea where the average house costs more than £1.3 million. A -1% price drop would, therefore, result in a loss of £13,210.

In the City of Westminster, prices would fall by £9,027, Camden would see an £8,058 fall, and prices in the City of London would decrease by £8,003. Elsewhere in London, namely Hammersmith & Fulham, Richmond-upon-Thames, Islington, Wandsworth, and Hackney, prices will fall by more than £5,000.

The only local authority area to feature in the top 10 and not be found in London is Elmbridge, a district of Surrey so close to the capital that it borders the aforementioned borough of Richmond.

What Goes Up Must Come Down

Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented:

“The housing market has enjoyed a real boom since early 2020. But, what goes up must come down, and house prices are no different. They are currently so inflated through high demand and lack of supply, that it would take a miracle for them to remain this high for any extended period of time.

“This means we’re facing an inevitable drop and those looking to sell their home would be wise to act quickly instead of waiting. With some house purchases taking up to 500 days to complete, it could even be that time has already run out to sell for a high price on the open market.

If you want to sell your home quickly in current market conditions, a quick sale platform such as Yes Homebuyers could be your best bet of doing so. The only other option is to tough it out in the current market where sales are dragging on for an extremely long time and an impending house price drop could be far more considerable.”

Table shows the potential drop in UK house prices at national and regional level

Location AveHP - Q4 2020 AveHP - forecast Q4 2022 Forecast price drop (-1%) to Q4 2022 Average decrease per Q (total 8 Qs)
London £492,362 £487,438 -£4,924 -£615
South East £336,951 £333,582 -£3,370 -£421
East of England £302,635 £299,608 -£3,026 -£378
South West £274,917 £272,168 -£2,749 -£344
West Midlands Region £211,922 £209,803 -£2,119 -£265
East Midlands £207,951 £205,871 -£2,080 -£260
North West £180,100 £178,299 -£1,801 -£225
Wales £179,479 £177,684 -£1,795 -£224
Yorkshire and The Humber £178,031 £176,250 -£1,780 -£223
Scotland £163,569 £161,933 -£1,636 -£204
Northern Ireland £147,535 £146,060 -£1,475 -£184
North East £137,435 £136,061 -£1,374 -£172
England £263,382 £260,748 -£2,634 -£329
United Kingdom £246,827 £244,359 -£2,468 -£309

Estimated drop in house prices based on the latest OBR forecast (March 2021)

OBR forecast was applied to current average house prices sourced from the latest UK House Price Index (May 2021)

Table shows the top 10 areas that could see the largest potential drop in house prices

Location AveHP - Q4 2020 AveHP - forecast Q4 2022 Forecast price drop (-1%) to Q4 2022 Average decrease per Q (total 8 Qs)
Kensington and Chelsea £1,320,957 £1,307,748 -£13,210 -£1,651
City of Westminster £902,686 £893,659 -£9,027 -£1,128
Camden £805,831 £797,773 -£8,058 -£1,007
City of London £800,304 £792,301 -£8,003 -£1,000
Hammersmith and Fulham £734,837 £727,488 -£7,348 -£919
Richmond upon Thames £690,189 £683,287 -£6,902 -£863
Islington £671,703 £664,986 -£6,717 -£840
Wandsworth £619,074 £612,883 -£6,191 -£774
Elmbridge £618,379 £612,195 -£6,184 -£773
Hackney £590,121 £584,220 -£5,901 -£738

Estimated drop in house prices based on the latest OBR forecast (March 2021)

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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