What Will Happen To House Prices In 2024?
Nobody wants to pay too much when buying a house, but how will house prices perform moving into 2024?
House prices are a key factor in the overall performance of the UK economy. They drive mortgage borrowing, stamp duty taxes and influence the number of property transactions taking place. They also trigger financial transactions to solicitors, estate agents, removal companies and surveyors. So rightly or wrongly, a strong property market is good for the wider economy.
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If prices are too high, demand dries up. This is due to a lack of people being able to afford a new property and the costs to move. Too low and owners may be unwilling to market their property, potentially at a loss, and therefore supply is restricted. A balance between supply and demand should keep everything running smoothly. In the UK, average house price is the accepted barometer for the market as a whole. It is a crude reference as it doesn’t take into account regional variations. Other reports provided by companies such as Nationwide and Halifax will include more detailed data.
Of course there are many other factors that influence supply and demand in the property market. These could be related to the interest rates and cost of borrowing. The deposit levels needed to buy a property are also a factor. Likewise high levels of national unemployment, inflation or a recession all affect the buoyancy of the market for property.
What were house prices doing in 2023?
In October 2023, which is when the Office for National Statistics (ONS) last released their house price index, the average house price was £288,000. This was down £3,000 since October 2022 or 1.2% overall. England and Wales both recorded drops but Scotland and Northern Ireland showed an increase. The next report is due in January 2024 and will show a limited recovery over the last 3 months.
In general demand fell throughout 2023. In part due to the cost of living crisis and the spiralling cost of mortgage borrowing. Sellers were no longer able to rely on offers in excess of the asking price. Sealing a purchase often required accepting less than the sellers were hoping to achieve.
Across England, only the North East recorded a modest increase in house prices. All other areas of the country witnessed a drop year-on- year. London and the East were the worst performing areas overall.
The final few months of the year saw marginal gains recorded in some areas. However. the projection is that this small recovery was not sufficient enough to arrest the overall slide in house values year on year.
What is 2024 looking like?
According to Halifax, house prices could continue to slide throughout 2024. In some cases by as much as 4.0%, but more likely by around 2.0%. A potential reason for this is the continued drag that high interest rates and inflation are having on personal finances. This is despite wage increases now keeping place with inflation due to its recent drop. An atmosphere of caution between both buyers and sellers is in place and could continue to stifle the number property and prospective buyers coming to the market.
A large number of mortgage holders will also be coming to an end of their existing fixed rate deals and potentially face a hike in monthly mortgage repayments. At this point they may choose to weather storm in the short term until considering a potential move when market conditions are more favourable.
Positive signs.
However there is a glimmer of light on the horizon. It is predicted that the Bank of England base rate of interest will be cut in 2024. If so, this will lead to a reduction in mortgage costs for new borrowers, and also a softening of the hit experienced by those refinancing away from low cost deals in 2024. Until this happens the pace of house price change is expected to remain slow and continue in a downward direction.
Once the mortgage rates and moving costs are a little lower than they are now, house hunters who may have placed their plans on hold due to tough conditions at end of 2022, may rekindle their search and we could see more property flow onto the market.
Even if an influx of housing stock enters the market, overall demand from first time buyers is expected to remain subdued. So the most likely outcome will be one where a buyers market is dominant and offer values will be negotiated hard to keep mortgage repayments and overall borrowing levels as low as possible.
So in summary.
Initial estimates at the time of writing this post are that house prices may drop a little further as we move into spring 2024. Price reductions may subsequently be reversed if the Bank of England were to trim their base rate of interest. This could be the catalyst for mortgage rates to drop to cheaper levels and generate fierce competition between the leading lenders.
It will most likely remain a buyers market for a little longer. At least until households adjust to higher living costs and mortgage rates have settled down. When negotiating on a property purchase price there should be a deal to be done. It appears as though the period of wildly inflated valuation expectations has finally passed.
Post compiled by Grant Carpenter CeMAP, CeFA – 15 years of regulated mortgage advice.
Please note that the content listed within this remortgage guide is purely for information purposes only and does not constitute advice.
