House prices in Yorkshire forecast to fall by 8.5 per cent next year but a remarkable bounce back is predicted

Yorkshire, the North West and the North East top Savills predicted five-year growth table with an 11.7 per cent increase, almost double the UK average. The West Midlands is next with 8.9 per cent followed by the South West with 6.2 per cent, the South East and East of England both with 3 per cent, leaving London bottom of the list with a 1.7 per cent decline in values by 2027.

This is on the assumption that interest rates gradually ease back from the middle of 2024. Savills the expect mainstream housing markets furthest from London, where mortgage affordability is least stretched, to be the strongest performers over their five year forecast period, with slightly less short term pressure on prices and more capacity for price growth during the recovery.’

“The housing market has remained remarkably strong through the first nine months of 2022, but demand dynamics changed over the autumn with the realisation that the Bank of England would need to go faster and further to tackle inflation,” says Ed Stoyle, head of residential sales at Savills in York.

“A new prime minister and fiscal policy U-turns appear to have reduced some of the pressure on interest rates, but affordability will still come under real pressure as the effect of higher interest rates feeds into buyers’ budgets. That, coupled with the significant cost of living pressures, means we expect to see prices fall by as much as 8.5 per cent next year during a period of much reduced housing market activity.

“There are several factors that will insulate the market from the risk of a bigger downturn as seen after the financial crisis. Borrowers who haven’t locked into five-year fixed rates had their affordability heavily stress-tested until August this year. This, combined with relatively modest unemployment expectations

and signs that lenders are looking to work with existing borrowers to help them manage their household finances, should limit the amount of forced-sale stock hitting the market next year.

“And looking longer term, the Bank of England’s relaxation of mortgage regulation over the summer has substantially enhanced the prospect of a price recovery but only as and when interest rates start to be reduced, once inflationary pressures in the wider economy ease.”

Meanwhile, the prime housing markets, the top 5 per cent to 10 per cent by value in each region, are expected to see smaller price falls and a stronger recovery than their mainstream counterparts, due to less reliance on mortgage debt. This will cushion them from the affordability concerns governing the mainstream markets.

Savills expect the value gap between Yorkshire and wider commuter markets will leave greater capacity for growth and our region to be one of the strongest performing regions over the five years to 2027.