A credit rating firm has predicted that UK property prices would drop down by 10% over the next two years.
According to Moody’s, excessive inflation and a rise in lending rates will have a direct impact on the housing market.
The current economic climate will “trigger a correction” in housing values.
According to Moody’s Investor Service, “persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market.”
In the United Kingdom, inflation was 8.7 percent in April, casting doubt on predictions of a more significant price drop.
In March, the CPI was 10.1 percent.
Recent inflation figures caused a rise in market interest rates.
Investors were forced to price in more rises in borrowing prices ahead of the Bank of England’s projected raise.
Moody’s also cautioned that a bigger decrease in home values of roughly 21% might have serious consequences for the UK economy.
According to the research, “the UK sovereign would enter a six-quarter recession in the second half of 2023.”
“Unemployment would reach 6% by the end of 2024, remaining below its peak during the global financial crisis.”
The property market has been in turmoil since ex-Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng presented their mini-Budget last October.
Mortgage rates increased as a result of the mini-Budget.
However, many analysts predict a drop in house values this year as the Fed’s interest rate rises translate into higher mortgage payments.
Halifax and Nationwide house price indices indicated year-on-year decreases for the first time since 2012.
According to a Reuters survey released last week, economists and real estate professionals believe house prices would decrease by 3% this year before plateauing in 2024.