The price gains of recent years have left housing looking expensive and commercial property looking fully-valued. The good news is that interest rate rises on the scale that we anticipate are unlikely to be enough to push either market into a major correction this year or next. Nevertheless, rising rates will mean that, in real terms, property prices are now more likely to fall than to rise. And higher rates will also keep transaction activity subdued in both the residential and commercial markets.
This Focus is an adapted version of a presentation given to the Capital Economics UK Forecast Forum “Will the economy sink or swim in 2018?” in London on 25th January 2018.
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