Two of the United Kingdom’s leading mortgage lenders, Nationwide and Halifax, have painted a sobering picture for the residential property market in the coming year. Both institutions predict a sustained downturn in property prices, albeit within a moderate range.

The economic challenges coupled with significantly higher mortgage rates have led Nationwide to estimate a 2% decline in property prices. Meanwhile, Halifax’s projections are even more cautious, anticipating a drop ranging between 2% to 4% throughout 2024. This forecast is influenced, in part, by the persistent imbalance between supply and demand in the housing market.

Kim Kinnaird, director of Halifax Mortgages, pointed to several economic factors contributing to this projected decline. “Economic growth is expected to remain weak, with rising unemployment and frozen tax thresholds limiting increases in take-home earnings,” Kinnaird stated. “When considering the cost of living pressures and the sustained elevated levels of interest rates compared to two years ago, it’s likely we’ll continue to witness a mild downward pressure on house prices.”

Despite suggestions that the Bank of England’s rate hikes might plateau, Robert Gardner, chief economist at Nationwide, remains cautious about the housing market’s near-term prospects. “While cost of living pressures are showing signs of easing, consumer confidence remains lacklustre, and new buyer inquiries reported by surveyors remain subdued,” Gardner explained. He further highlighted concerns about potential upward risks to interest rates, emphasizing that while inflation is decreasing, domestic price pressures persist at elevated levels.

The Office for Budget Responsibility (OBR) strikes a more pessimistic tone, forecasting a steeper decline of 4.7% in property prices for the upcoming year. Additionally, the OBR’s estimations indicate that property prices might not rebound to their autumn 2022 peak until as late as the end of 2027.

These predictions collectively paint a challenging landscape for the housing market in the coming years, signalling continued uncertainty and caution among both consumers and industry experts alike.