UK house prices are falling: can we expect the same here?

Since the big smash-up of 2008, the British and Irish property markets have roughly shadowed each other, rising more or less consistently in the face of supply constraints and, more recently, on the back of pandemic-related buying. That’s not to say the markets are the same - the undersupply here and the knock-on pressures on the rental market seem quantifiably worse. But the broad trends have run in parallel. Until now.

While the Irish market appears to be slowing — still growing but at a reduced rate —, the UK market has gone into reverse on the back of higher interest rates and the worst cost-of-living squeeze in decades. According to the UK mortgage provider Halifax, UK house prices are on track to drop 8 per cent this year, the first annual drop since 2011, after declining for four months in a row to December. Halifax said prices are now falling in every region of the UK.

While headline property price inflation here appears to be softening — also in the face of rising interest rates and a squeeze on household incomes —, the industry isn’t predicting a period of negative growth or a correction in prices. Most estate agents forecast prices will continue to rise in 2023, in contrast to the UK and other jurisdictions, underpinned by strong demographics and ongoing supply issues.

Prices will also be underpinned, they say, by the extension of the Government’s help-to-buy scheme, the new first-home shared-equity scheme and a loosening of the Central Bank’s lending rules. The industry has a vested interest in talking up the market and has been badly wrong in its predictions in the past.

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The Bank of England has also raised interest rates nine times in the past year, significantly more times than the European Central Bank, leading some analysts to wonder whether the Irish property market is as insulated from the uptick in interest rates as the industry here makes out and whether the UK is simply further down the road of interest rate hikes than Ireland.

Conversely, inflation has all along been higher in the UK and the economic outlook decidedly worse. But the question remains, is the Irish property market lagging the UK’s or diverging from it?