UK home prices could slump as much as 5% next year as unemployment rises and government incentives end, according to mortgage lender Halifax.
House prices surged the most since 2016 this year as demand for more space, state support for wages and a temporary reduction in a property transaction tax offset the economic damage from the Covid-19 pandemic. That won’t last, Halifax said on Monday.
“The post-summer surge in house prices is unlikely to be sustained,” said Managing Director Russell Galley. Because of “lower levels of demand,” market “activity is likely to slow.”
Even so, a decline of that magnitude would only partially reverse the 7.6% increase in average prices seen over the past 12 months. Halifax also warned that there is a high level of uncertainty around the forecast.
Its view is at odds with that of property website Rightmove, which said last week that asking prices will climb 4% in 2021 due to a backlog of demand and rush to move before the tax reduction expires at the end of March.