Will house prices fall in 2024?

The property market has shown resilience this year, but what is next? 

With inflation having eased, but still not quite at the Bank of England’s 2% mark, you may be wondering how this could affect property prices.* What exactly is in store for the housing market next year? Is it a good time to buy or invest in property?

These are topics at the forefront of many of your minds, whether you’re a landlord, a seller or a buyer. Here’s all you need to know…

But, before we look forward, let’s recap on what’s been happening in 2023.

Are house prices going up or down?

After a slight lift in average asking prices in October (+0.5%), Rightmove’s November House Price Index reported a fall of -1.7%, reaching a UK average of £362,143. None of this is unusual at this time of year, as we expect a seasonal decrease in house prices, as sellers become more competitive and eager to sell before the New Year.

When exploring Rightmove’s data on house price inflation at a more regional level, Wales experienced a monthly decrease of -1.6% and an annual increase of 0.1%. This is further supported by Halifax data showing that the average house price in Wales has decreased by 3.9% when compared to last year.† In Scotland, the most resilient region in the UK, Rightmove reports a -0.9% monthly change and a 1.9% year-on-year increase. Again, Halifax reports a similar trend, with Scotland’s average house price having decreased by only 0.2% year-on-year.† David Plumtree, Connells Group Estate Agency CEO, comments that “when looking at the smaller picture of year-on-year or month-on-month, it’s easy to see a cooling of the market and assume this is bad news, but when we zoom out and consider the data we have over a number of years, we can see what’s actually happening.”^^

Many predicted large house price falls in 2023, but even with the challenges of increased interest rates impacting buyers and sellers alike, the housing market has shown surprising resilience - especially in Scotland. First-time buyers and cash buyers have been leading the way on this and are still finding their dream homes, making up 2 in 3 sales – a trend that will be interesting to follow in the next year.† Colin Bradshaw, CEO of TwentyCI (a property data insights and analytics company) comments that “the property market’s ability to adapt and evolve is what’s keeping the wheels moving. There are some optimistic signs on the horizon, with confidence from buyers and sellers on the rise alongside increased competition in the mortgage market.”**

How will house prices change in 2024?

As we move into 2024, the property market is due to balance out, as the market and consumers adjust to higher borrowing costs.† The slight up-tick in house prices experienced in October and the Bank of England keeping the Base Rate at 5.25%,*** may have been somewhat of a reassurance to sellers, buyers and landlords alike, further nodding towards a more stable housing market. This is further supported by Rightmove’s data, showing that buyer demand is in line with 2019’s level, which they partially put down to “two consecutive Base Rate holds”.†

Based on this year’s performance, even with the high mortgage rates, high levels of inflation and lower household buying power, there are signs that the property market in 2024 could continue to show resilience.† According to Zoopla, house prices are expected to fall by 2% throughout 2024, but buyer affordability is bound to increase, which will help slow the decrease in house prices.†

What’s happening with rents, and why are they so high?

If you’re a landlord, you’ll be more interested in rental prices and tenant demand. This year, demand for rental properties increased by 77%‡ which, together with many tenants and would-be first-time buyers staying put, increased the pressure on rents, driving them up to the current UK average of £1,279 pcm.† Any Government legislation may of course also affect the rental market, for example, in England the Renters (Reform) Bill will have its effect on the English market, but that is yet to be seen, as it is very much still a work-in-progress.

Rent growth continues, with an average annual increase of +8.9% for the whole of the UK. Average rents in Wales are 0.5% higher than last month, and 7.7% higher than November 2022, reaching £867 pcm. In Scotland, the region with some of the strongest rental growth over the last year, has seen a slight decrease in month-on-month rents, with HomeLet reporting an average decrease of -3.2%. However, this decrease pales in comparison to Scotland’s average annual increase of 12.5%.†

Are people still keen to move?

Consumer surveys indicate that many are eager to move, but are waiting to see what will happen in terms of mortgage rates and the trajectory of house prices.† Seeing that 2023’s market performed better than many predicted or expected, buyers, sellers and investors can feel more confident in terms of the future. The Boxing Day Spike is bound to also show its effect, as online visits to Rightmove go into the millions after Christmas Day, making it an excellent time for buyers to be on the market.^ Find out more about the Boxing Day Spike here.

How will raising interest rates help tackle inflation?

Inflation is a measure of the cost of living. The Bank of England is raising rates to try and bring it down to a target of 2%. In theory, if we raise interest rates, borrowing becomes more expensive for us all and so we spend less and save more. Getting inflation under control means putting upward pressure on mortgage rates and, also, house prices.

Sources:
*https://www.ons.gov.uk/economy/inflationandpriceindices
**Zoopla HPI Forecast edition; TwentyCI Q3 2023 Report
† Zoopla HPI [10] ; Rightmove HPI [11] ; Halifax HPI [10] ; Homelet [11]
‡ Goodlord industry report, 2023
***Bank of England
^Rightmove Google Analytics, Daily sessions on Rightmove 1st Dec 2022 – 28 Feb 2023
^^Connells Group 2023

MKT/UKON/261023.1