Predicting house prices is like trying to catch a leaf in the wind

This comment is from an episode of The Home Stretch podcast, hosted by Holly Hibbett from The Guild of Property Professionals, which offers a deep dive into the current dynamics of the property market. In this insightful episode, Hibbett is joined by distinguished guests Anthony Codling, Head of European Housing and Building Materials Research at the Royal Bank of Canada, and Christopher Watkin, Property Stats writer for UK Estate and Lettings Agents.

The conversation kicks off with a reflection on house prices, where Codling admits that despite his prediction of house prices falling between 8% and 10% during 2023, the latest Halifax data revealed that house prices actually went up by 1.7%, highlighting the resilience of the market. “I’m always happy to be wrong on house prices when I take a negative view, but I thought it's fascinating that those scare scenarios we had following the mini budget, have not come to pass and with every passing day seems to become ever less likely. Even the lenders are reducing their negativity towards house prices. So, I think that's a positive start for 2024,” Codling comments. 

Speaking about the difficulty of predicting where house prices will go, Watkin adds, “I always think predicting house prices is like trying to catch a leaf in the wind. You can follow the patterns, you can understand the science, but ultimately a sudden gust can change everything. Housing markets are influenced by so many variables like the economy, interest rates, government policy, even sentiment, and I think the key isn't to predict with exactitude what the price is, but to understand the fact as well enough to make educated estimates and hedge against uncertainty.”

Codling and Watkin go on to discuss several factors that helped bolster prices in 2023, such as rising wages and the limited supply of homes for sale. The discussion also covers various other aspects influencing the property landscape, from the impact of mortgage affordability testing to the role of lenders in maintaining market stability.

Watkin shares his perspective on the challenges faced by estate agents, emphasising the importance of adapting to changing market trends. The podcast also delves into the recent mergers within the industry, including the notable collaboration between The Property Franchise Group and Belvoir, signalling positive shifts in the market.

The episode provides valuable insights into the intricacies of house prices, mortgage rates, and transaction levels. Codling predicts a 5% increase in house prices for 2024, accompanied by a 20% rise in transactions. He anticipates a significant drop in bank rates, ending the year at 3.75%. “I think transactions are going to be up significantly this year. I think they're going to be back at the normalised level which we've seen for a number of years, excluding the impact of COVID. Around the 1.2 million mark is what I'm anticipating, so from just above a million for 2023. And I think the bank rate will end the year 3.75%, down from 5.25%. So huge falls. That said, I do think the period of ultra-low interest rates is over. To be honest, since the credit crunch it's been unusually low. Until the credit crunch, I would say that your benchmark for normalised mortgage rate was 6%,” Codling comments. 

Watkin adds his perspective, expressing agreement with Codling’s predictions while highlighting the potential influence of external factors such as elections and government policies. The podcast concludes with a real-life anecdote illustrating the importance of skilled agents in navigating the current property landscape.

Listeners are invited to tune in to The Home Stretch podcast to listen to the full episode to gain a comprehensive understanding of the evolving property market, featuring these two ‘data kings’.