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House Prices in 2024
After the increase in mortgage rates, house prices began to widen the North-South Divide as the growth rate slowed. This eventually became a house price fall of -1.1%.
Property experts expect the number of homes for sale to commence a decline. This will be due to some sellers choosing to take their properties off the market to later relaunch in 2024 when the market steadies.
Rightmove’s property market forecast for 2024 estimates an average house price fall of 1% in new seller asking prices. This will be due to increased competition against the affordability pressures, with sellers determined to secure a buyer.
Tim Bannister, Rightmove’s property expert, agrees that there will be more competitive pricing in 2024. It will likely be “in areas where sellers are struggling to attract affordability-stretched buyers, or needing to sell quickly due to a change of circumstance, new job opportunity, or strong desire for a lifestyle change.”
The current house price fall is expected to carry into next year as repricing continues to balance to normality. Experts believe that a good level of demand will make significant price drops unlikely. House price fall predictions, in general, are looking modest.
Zoopla predicts inflation for house prices in 2024 to reach an average of -2.0%. As for house price predictions for the next 5 years, Savills has its own estimates. There will be a house price fall of 3% in 2024, but it will increase as affordability concerns ease through 2025 to 2028. By 2028, house prices are estimated to be approximately £45,000 higher while market demand recovers alongside buying power.
2024 Mortgage Rates
After the sudden increase in mortgage rates this summer to nearly 6%, they have been steadily falling since. For the second time since November, The Bank of England has held the base rate at 5.25%. Mortgage rates have certainly reached their peak.
Mortgage rates can now only reduce into next year as the BOE continues its efforts to lower inflation to the 2% target. According to the property market forecast for 2024, mortgage rates must fall further to below 5% for the market to thrive with activity and buyers once more.
Now that the BOE base rates have peaked, the property market outlook has improved. Buyers who held off moving house this year may resume their plans at the start of 2024. While these buyers can better plan for what is affordable for them, however, affordability in general for many buyers could remain stretched at the start.
However, these cuts and lower rates will not be as sudden as their climb in July 2023. In our property market forecast for 2024, mortgage rates will likely remain high for at least the first half of the year. This will limit some buyers’ spending power and delay their return to the market. However, financial experts predict the BOE will begin lowering the base rate close to the summer of 2024, which will aid the influx of returning eager buyers.
Zoopla predicts mortgage rates to reduce to an average of 4.5% by 2025, which will lead house prices to climb by 2% and increase sales above 1 million.
What do property market forecasts for 2024 say about buying? Insight from Money Week suggests that the General Election next year may leave buyers pausing plans while waiting for the outcome, delaying property sales and continuing uncertainty in the market. They also predict cash buyers to become more relevant over 2024, covering as much as 40% of sales, and home buyers to ultimately face more choices.
Buyers returning to the 2024 property market will be in a strong position in terms of choice, price negotiations, and taking time to choose the right home. The number of properties for sale will increase to pre-pandemic levels, meaning more choices for fewer buyers. This means that willing sellers can price competitively to attract attention and quickly secure a sale. According to Rightmove, such asking prices will reduce by 1% as they become more realistic to higher borrowing costs.
Rental Market in 2024
In the past 3 years, there has been a defining mismatch between supply and demand in private renting. During this time, rental prices have been an average of £3,360 per year. That is an increase of a third.
However, the rental market has started to cool. Ongoing supply shortages and higher mortgage rates suggest rental growth to continue ahead of increasing earnings.
Zoopla predicts rental growth to decelerate over 2024. This involves the market finding a balance between affordability pressures and growing supply. There will be a normal slowdown as we pass from 2023 into 2024. However, rental growth is forecast to slow from the current +9.7% to +5% by December next year. And, according to a 5-year forecast for rental prices estimated in October, a 22.2% total rent increase is expected by 2027.
London will lead the way in the rental growth slowdown over 2024, due to affordability pressures, as income and supply balances.
Rental demand in the UK is currently 11% lower YoY. However, this figure is 32% higher than the 5-year average. While the imbalance of supply and demand will not vanish next year, the property market forecast for 2024 rentals is looking to be more balanced than they have been in the last 3 years.
Property Market Forecast 2024
If the base rate eases from mid-2024 following their current peak, UK house prices will rise through the rest of the year – and continue by 6% over 5 years.
Overall, the price of properties depends on that of mortgages. Demand and sales will improve once mortgage rates in 2024 drop. Go.Compare’s property market forecast for 2024 suggests that house prices could increase by 5.92% by September if mortgage rates remain at their current level, but homeowners could see averages of 10.5% value added to their homes if mortgage rates drop just 1% to 4.3%.
Zoopla estimates property prices will reduce by 2% over 2024 if the base rate drops to 4.5% by this time next year. They also predict a total of 1 million sales, the same as this year, but suggest more if mortgage rates reach 4%.
However, for activity to ultimately return, either house prices must fall and incomes increase or mortgage rates reduce.
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