House prices will crash across the UK by the end of the year as values fall by 10 per cent, economists have warned.
Leading think tank The EY ITEM Club’s Spring Forecast predict that a reduction in house prices will result in the UK’s average prices being slashed from £290,000 to £261,000.
The firm believes that the changing influence of the property market on consumer spending means it is unlikely this fall in values will have a major adverse impact on the economy.
The group has also changed its forecast for a -0.7 per cent decline of the economy that it predicted in its January assessment, to 0.2 per cent growth.
It is unlikely this fall in house values will have a major adverse impact on the economy
PA
Experts added that the UK economy is "turning the corner" and the country is expected to avoid a recession.
The think tank also predicts that inflation will finish the year at less than three per cent, a sharp fall from the current level of 10.4 per cent.
However, the group warns that this does not mean prices will fall, but that they rise more slowly.
“The UK economy seems to be turning a corner, albeit very slowly," Hywel Ball, chairman EY UK said.
The report delivers good news for mortgage payers as it expects the fall in inflation will cause the Bank of England to start cutting interest rates at the end of the year.
In turn, the ITEM Club believe that this could lead to to cheaper energy, and new investment incentives, resulting in a 1.9 growth in the UK economy in 2024.
While the company suggests the economy will flatline in the first half of 2023, the outlook is set to improve from the summer.
Ball added: “Economic performance has been resilient, despite challenges in the latter half of 2022, but the significance of the upgraded outlook shouldn’t be overblown.
The outlook for the economy is set to improve from the summer
PA
“While easing, the economy’s challenges haven’t gone away overnight: inflation is still in double-digits and energy prices remain historically high.
“However, perceptions matter and the fact the economy has been able to outperform expectations could help stir a revival in business and consumer confidence.
"Of course, there is still room for economic surprises, but the balance of risks has become a little more favourable than the last forecast.
“And while subdued growth this year is far from ideal, falling energy prices and inflation, an end to rises in borrowing costs, and growing confidence, mean the economy has a chance to shed some of the gloom it has accumulated recently.”
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