Housing guru: Prices set to fall by a FIFTH

Rightmove founder fears ‘deep recession’ as soaring mortgage rates put homes out of reach

THE founder of Britain’s biggest property website is predicting a house market slump that could see prices plunge by up to a fifth.

Harry Hill is an industry veteran who set up FTSE100 property giant Rightmove and sold estate agency group Countrywide for £1billion a year before the 2008 banking crisis.

He said he is ‘nervous’ about a ‘potentially deep recession’ and how the economy would emerge.

House prices are already falling at their fastest rate in more than two years, Nationwide Building Society said last week.

Excluding the pandemic, property values have not dropped as sharply since the financial crisis more than a decade ago.

Mortgage approvals – an indicator of future borrowing – are also at their lowest level since the pandemic, according to the Bank of England.

Hill told The Mail on Sunday: ‘My view on the housing market is that it’s going down in every direction. Transactions are going to go down. Prices are going to go down.

‘The only question is by how much? Intuitively it feels like double figures on both, starting now.’

He said if Britain slides into a recession leading to a deterioration in trade and business, ‘we could see 20 per cent price reductions’. Hill added: ‘Then that starts to hurt people a lot.’

Monthly mortgage repayments are set to double for many of Britain’s 1.8 million homeowners who are due to refinance next year. Hill said the higher borrowing costs could prompt many of those with mortgages to put their properties on to the market, which would trigger a reduction in prices.

He said some borrowers could expect to see their mortgage costs soaring ‘from £1,000 to £3,500 a month’.

‘People in blue-collar working class areas – in places like Manchester, Liverpool and Darlington – are already struggling quite badly,’ he said.

‘The thought that these people are going to be less well off in the next 10, 15 or 20 months is not going to be good for any market, and certainly not the housing market.’

But Hill added that most homeowners are unlikely to be plunged into negative equity – which happens when the value of a property is less than the price originally paid.

He pointed out that the housing market has had ‘a brilliant run’ in recent years, so most property values remain well above purchase prices.

Hill’s forecasts are unusually gloomy for an estate agency stalwart – and worse than most commentators. But his opinions are significant in view of his previous successes in the industry. He built up Countrywide into the largest group of estate agents in the world before selling to US private equity firm Apollo in 2007.

In 2000 – while running Countrywide and when the internet was in its infancy – Hill led the formation of Rightmove with a £2million investment.

He remained its chairman until 2008. Today Rightmove is the UK’s leading property listings portal with a stock market value of £4.6 billion.

Hill is not alone in predicting falling prices. Economists at the EY ITEM Club, which uses the Treasury’s forecasting model, expect property values to drop 10 per cent next year.

The Government’s spending watchdog last month predicted that house prices will fall 9 per cent over the next two years as affordability issues weigh on demand and prices.

Nationwide said last week that prices fell 1.4 per cent in November, compared with the previous month. The building society said the average property price fell to £263,788 from £268,282 in October, with the market looking set to ‘remain subdued’ in the coming months.

The National Institute of Economic and Social Research calculates that 3.8 million households will see their monthly mortgage repayments rise by an average of £400 if interest rates, currently at 3 per cent, peak at 4.5 per cent in line with market expectations.

NIESR estimates that would wipe out the savings of 1.4million households by the end of next year.

Hill, now semi-retired, is considering a stock market comeback. He has Rightmove’s struggling online rival Purplebricks in his sights.

Activist investor Adam Smith has proposed that Hill should replace City veteran Paul Pindar who has presided over mounting losses as the chairman of Purplebricks. Shares in the company have slumped by a staggering 97 per cent in five years.