House prices could fall by a tenth next year as rapid inflation and the cost of living crisis destroy the property market boom, experts have warned.
Economists and a former government housing adviser have said that the toxic cocktail of rising prices, mortgage repayments, energy bills and taxes will bring an end to more than a decade of buoyant property values.
Russia’s invasion of Ukraine will increase these pressures, as it has forced up gas and oil prices. Last week, the oil price hit $105 a barrel, a level not seen since 2014. Petrol prices are forecast to surpass £1.70 a litre. This will further fuel inflation and increase the prospect of higher interest rates from the Bank of England, sooner than has been predicted.
Karl Thompson, of the Centre for Economics and Business Research, a think tank, forecast house prices will fall 1.5pc every three months after the summer, and then by 1pc year-on-year in 2023. Last year, homeowners saw their property wealth rise by a tenth. The average house earned more than a worker last year, rising £27,000.
Other analysts predicted bigger falls. Paul Cheshire, a former government adviser and professor at the London School of Economics and Political Science, said: “In a rational world, you would see a significant house price correction within six months to a year from now. That would be a fall in real prices of about 10pc.”