Strong relationship between house price and GDP growth stretches back to 1980s
By Alexander Parish
There is a very strong relationship between GDP growth rates and house price growth – this relationship stretches all the way back to the early 1980s.
Assuming this historic relationship holds true, we can expect house price growth to slow later this year, as GDP growth subsides.
Over the last few months there has been a rapid change in the global geopolitical climate and the outlook for the UK economy. UK GDP growth is forecast to be weaker by the end of 2022 and lasting into 2023.
The 30 or so economists who contribute to the consensus forecasts compiled by HM Treasury currently believe that GDP growth will slow to 1.3% in 2023.
Whilst house price growth over the year to end Q1 was the strongest since 2004, house price growth will likely be lower by the end of 2022. Current consensus forecasts suggest lower growth but not price falls.
Source: Dataloft, Nationwide, HM Treasury Consensus Forecasts May 2022, ONS