House prices to crumble as much as 5% on Trumpflation
House prices will fall by as much as 5 per cent this year as ‘Trumpflation’ drives a cost of living squeeze and higher interest rates, according to a bleak report.
Deutsche Bank said the fallout from war in the Middle East could dent the appetite for purchases from first-time buyers as well as home movers.
‘The Iran conflict has likely put an end to any hopes of an imminent housing market recovery,’ said Deutsche Bank’s chief UK economist Sanjay Raja.
It is the latest sign the conflict is causing shockwaves that are reverberating through the world and are being felt in the UK.
It also comes after lender Halifax reported a 0.5 per cent month-on-month fall in house prices in March, blamed on the conflict.
The war has choked off energy supplies from the Middle East, pushing up global oil and gas prices, with major knock-on effects throughout the economy.
Bleak outlook: House prices will fall by as much as 5 per cent this year as ‘Trumpflation’ drives a cost of living squeeze and higher interest rates
They came home to roost for President Donald Trump yesterday when official figures showed US inflation rising to 3.3 per cent in March – the highest year-on-year rate since May 2024.
It was up from 2.4 per cent in February, marking the biggest leap in the annual rate of inflation for nearly five years.
Month-on-month inflation tripled from 0.3 per cent to 0.9 per cent. A surge in fuel prices was mostly responsible. The rise in inflation will also do nothing to boost Trump’s hopes of an interest rate cut by the US Federal Reserve.
The Bank of England, meanwhile, expects inflation at around 3.5 per cent for March, up from 3 per cent the month before.
Consumers have already seen the cost of filling up a typical petrol car rise by £14 since the war started, and a diesel car by £27. Energy bills are expected to rise by more than £200 from this summer, and industry forecasts suggest food inflation could climb to 10 per cent this year.
Deutsche Bank’s Raja said that prior to the conflict, it had ‘high hopes’ for a housing market recovery, with interest rates on their way down and inflation falling.
But it now expects ‘downward forces to dominate in coming months’ and for house prices to fall by between 3 per cent and 5 per cent.
Since the war broke out, inflation fears have sharply altered interest rate expectations. That has meant that even with the Bank of England base rate unchanged, fixed-term mortgage rates for two-year and five-year deals have been rising.
Raja said: ‘Higher rates could dissuade first-time buyers and others from transacting in the housing market.’
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