House Prices are projected to fall – Should you be looking to sell or buy?

After two years of rocketing house prices, the property market is returning down to earth. House prices in October fell for the first time since July of last year. Nationwide, Halifax, and Savills all predict that house prices will likely fall between 8 and 15 per cent next year. Savills also expects that sales will reach their lowest levels since 2011. According to Nationwide's index, the average house price fell from £272,259 to £268,282.

So, should people look to move or wait until interest rates and property prices come down and bag themselves a bargain? We discuss some of the factors to consider if you weigh up on whether to stay or to go:

One house will always be worth one house:

Everyone ideally wants to sell high and buy low. Timing the market is tricky; if, for instance, the market was to fall by over 10 per cent, it's not just the house you are buying that would have fallen in value but also the house you are selling.

Negative equity could be a concern for some:

Negative equity means the home is worth less than its owner has borrowed to pay for it. If they sell up, they will owe their mortgage lender the difference. It will also be a problem if the homeowner is coming to the end of a fixed-rate deal. They could be unable to re-mortgage and be forced onto the lender's standard variable charge.

Resolution Foundation estimates that if house prices fall by 8 per cent, some 190,000 households will fall into negative equity. A much higher fall of around 18 per cent would result in 600,000 households finding themselves in negative equity.

Interest rates:

Last week, the Bank of England (BOE) announced that it was raising interest rates by 0.75 per cent, taking the bank's base rate to 3 per cent. It is the biggest hike in the base rate since 1989. After the mini budget in September, some of the UK's largest banks reacted by taking their deals off the market. According to Moneyfacts, the average two- and five-year rates stood at 6.46 per cent and 6.30 per cent. Mortgage rates are expected to return to normal in April 2023 and remain very high.

Should you sell your home and wait to buy until prices fall?

Anyone with a house on the market will be keen to sell as soon as possible. Savills expects that 190,000 fewer people will buy a home next year compared to this year. The bank warned that interest rates and inflation are yet to peak, making home buying more expensive in the future as interest rates rise. And multiple experts predict a double-digit fall in property prices along with high-interest rates.

If you are amongst the small proportion of the public who doesn't need to take out a mortgage, now is a good time to buy as prices are falling. However, it might be a good idea to wait until next year when prices are expected to hit their lowest.