It's started! UK house prices collapse 12.5% with 'far worse' to come

He said: "Most people have missed it but we're actually already into one of the most significant price drops in decades.

"From 2020 house prices went almost vertical, growing 20 per cent or more a year.

"What goes up quickly tends to come down quickly too, but we've only seen a total fall in nominal house prices of 4-5% so far.

"That's why it looks like this is just the start and there's another 10 or 15% to come - or maybe even more given we were already at all-time highs going into 2020.

"I'm not saying there aren't further falls to come, there almost certainly are. But house prices have actually already fallen by far more than 5%. That's because we're measuring it with the wrong tool "

The bestselling author added: "The pound itself is falling in value, because of inflation.

"When the price of everything - food, fuel, house prices - has gone up and isn't coming back down, that's the same as saying the value of the pound has fallen.

"If we correct for this and hold the value of the pound constant - by looking at things in real-terms - we see a very different picture.

"In real-terms, property prices in the UK have already fallen by 12.5%, which means prices are actually back to where they were in 2014.

"People pay their mortgages with their salaries and investors are looking at the returns they make based on rents.

"So if wages, rents and everything else are higher - because of the pound losing value - and property prices are staying the same, they're actually falling.

"With inflation running at 8 per cent or more, if property prices just stay where they are for another year, which seems optimistic by most forecasts, you'd end up with a real-terms drop of more than 20%.

"If they fall a bit, rather than just bumping along sideways - which you have to say is likely - then in 12 months time you could have a deeper real-terms fall than we did in 2008.

"Make no mistake. We're not waiting around for a crash. It's happening. And it's probably going to keep on happening for at least another year."

It comes as Zoopla claimed 42% of buyers are now negotiating a discount when buying a home, with an average acheived reduction of 3.8%.

Meanwhile Lord Lamont told GB News today that the Government faces tough challenges in bringing down inflation which he said could last years.

The former Chancellor said: “There are two points with regards to the current level of inflation. First of all, there is now an element of domestically generated inflation.

“Services’ inflation which was not affected quite to the same extent as other things is now increasing.

“Wage demands have been rising much faster too - much faster in this country than in the United States or continental Europe.

“With regards rising energy prices and food prices, you can't alter that, the alternative is to alter the supply. You have a supply deficiency or shortage of energy at an affordable price.

"You have a shortage of food at an affordable price. You can't increase the supply to bring the price down again very quickly.

“We have pressure in the labour market. The labour market is extremely tight in this country, but in order to get more people out into work, that takes time it might takes years.”

Earlier this week house builder Barratt Developments warned of a slump in house builds as it said cost-of-living pressures and rising mortgage rates were impacting homebuyer demand.

The housebuilding giant is forecast its build completions would tumble by as much as 23% over 2023-24, to between 13,250 and 14,250 in 2023-24.

Prices for private sales in its forward order book have also dropped sharply, down 8.7% at £342,900 on average, partly down to the group’s use of incentives to boost demand.

Barratt saw demand tail off after last October’s mini-budget market chaos sent mortgage rates soaring, before recovering a little in its third quarter, though it said reservations “slowed more than normal seasonal trends” from mid-May to the end of June.

Its weekly net reservations per outlet dropped to 0.55, against 0.88 the year before, while completions slumped 12.8% in the six months to June 30, taking its overall for the year down 3.9% to 17,206.

The group said forward orders have also dropped sharply, at 8,995 homes worth £2.2 billion as at June 30, down from 13,579 homes at a value of £3.6 billion a year ago.

First-time buyer demand has been impacted the most, it added, plunging 49% year-on-year due to the ending of the Help to Buy scheme and soaring mortgage rates.