House prices in Wales set to fall over the next year say economists as cost of living crisis bites
House prices in Wales are set to fall over the next year as the cost of living crisis begins to bite, economists have said.
The Centre for Economics & Business Research said that house prices in Wales would fall up to 4%, after seeing the highest growth in house prices during the pandemic due to a ‘race for space’ out of urban areas.
Karl Thompson from the CEBR said that as costs rise the Bank of England was likely to raise interest rates, increasing the costs of mortgages.
“Higher inflation will lead to bigger falls in house prices,” he said. “Downvaluations are red flags we are reaching some kind of turning point in the market.”
At the moment prices were continuing to rise as “sellers are overambitious, but people are desperate to complete a sale so they overbid,” he said.
House prices in the UK would rise another 4.8 per cent in the short term but fall 2 per cent across the year, the CEBR said.
Wales faced a bigger fall because house prices had surged faster than any other part of the UK during the pandemic. The average Welsh house price hit a new record high of £211,942 this month, or a 14.1% jump on this time last year, Halifax said.
Russell Galley, managing director of Halifax, said that in the long-term “we know the performance of the housing market remains inextricably linked to the health of the wider economy”.
He added: “There is no doubt that households face a significant squeeze on real earnings, and the difficulty for policymakers in needing to support the economy yet contain inflation is now even more acute because of the impact of the war in Ukraine.
“Buyers are therefore dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year.”
‘No quick fix’
The huge rise and potential fall in prices comes as campaigners call for the Welsh Government to do more to control surging house prices in Wales as many are priced out of buying or renting in their own communities.
In February the Welsh Government announced that the maximum tax hike on second homes is set to be raised to a whopping 300% in an attempt to cool the housing market.
The move is to tackle the negative impact vacant houses, holiday lets and soaring property prices are having on local communities.
It is part of a series of measures set out in the Co-operation Agreement between the Welsh Government and Plaid Cymru.
Councils across Wales will be able set the premium at any level up to the maximum, from April 2023.
The maximum premium councils can charge at the moment is 100%, which means the new measure could lead to a possible tax rise of 200%.
It will be possible to apply different rates for second homes and long-term empty dwellings.
Climate change minister Julie James said: “We want people to be able to live and work in their local communities, but we know rising house prices are putting them out of reach of many people, exacerbated by the cost-of-living crisis we are facing.
“There is no easy answer or quick-fix solution. This is a complex problem that requires a wide range of actions.
“We continue to carefully consider further measures that could be introduced, and these changes are the latest steps we are taking to increase the availability of homes and ensure a fair contribution is made.”
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No surprise there. Good chance for W.G. to obtain second homes at better rates (though still ludicrous!) People of Cymru, especially of pension age, should be able to live in our most lovely spots. And demolish whole areas which are real slummy.
While at it, we need to get farmers planting more spuds and other essential crops. The world is changing and we need to face reality, and not some wokey Wales dreamland.
Forget wokey wokey…….here’s wakey wakey!