Following the ill-fated mini-budget of September 2022 and subsequent rising interest rates throughout 2023, some experts have predicted that house prices could fall between 5-10% in 2024.
The Office for Budget Responsibility (OBR), which is a treasury department working independently from the government, takes a less gloomy view and thinks that house prices will grow by 0.9% this year and then fall by 4.7% in the final quarter of 2024.
This will bring the average price of a home in the UK to around £266,000. According to the OBR, following the government’s recent autumn statement, house prices are only likely to reach their late 2022 peak levels by the second half of 2027 because house prices are sensitive to “changes in interest rates and household income growth”.
As a result of this, the OBR suggests that the housing market will remain slow. This is compared to that experienced during the covid pandemic prompted SDLT holiday and market momentum thereafter. Similarly, LIoyds, the UK’s largest mortgage lender, expects prices to drop 4.7% this year and then by a further 2.4% in 2024. They also forecast that longer-term growth will be steady with prices rising to around 0.6% by 2027.
Will There Be a Housing Crash?
Savills Estate Agents predicts that as mortgage rates remain steady and consumer confidence returns, house prices should significantly increase by 7% in 2026. So far this year, house sales are set to be at their lowest point for a decade, but despite this there is continued demand for sensibly priced housing supply, meaning the housing market is not likely to crash.
According to the Halifax Bank, although house prices remain lower than a year ago, they did actually rise for the first time in six months during the month of October 2023, as did mortgage approvals.
House Prices to Fall In 2024?
Many experts were disappointed with Jeremy Hunt’s autumn statement because he didn’t propose to cut stamp duty in order to stimulate the housing market. So, while the Bank of England continues to battle with inflation, homeowners will continue to face the higher cost of borrowing.
The latest figures show that the average two-year fixed mortgage at a LTV of 95% is approximately 6.03%, so despite the falls in house prices, the average price of a house in August remained high and there was little difference from the previous 12 months.
The overall message from lenders and monetary experts is that house prices will continue to tick down in 2024, but still remain high. We are unlikely to see house prices creeping upward again until 2025 and beyond.
Housing Market Opportunities in 2024
During the pandemic, the property market experienced a remarkable surge in activity, leading to a substantial hike in property prices fueled by heightened demand. However, it’s crucial to recognise that this surge was an anomaly in the broader context of the past decade. Over the last 12 months, the market has reverted to more typical levels of activity, resulting in a moderation of prices.
Despite this adjustment, 2024 holds promise for both first-time buyers and existing homeowners looking to make a move on the property ladder. The key lies in maintaining a realistic approach to pricing for both buyers and sellers. While the past year has seen an uptake in mortgage rates, the Bank of England’s decision to freeze the base rate in its last two reviews has led to lenders intensifying competition. This competition is expected to translate into more attractive mortgage products with increasingly competitive rates.
Zoopla recently released figures showing average seller discounts reached a five-year high of £18k, or 5.5% from the asking price in November. While sellers may be invested, emotionally as much as financially, in maximising their sale returns, the market will show those willing to negotiate will more likely find suitable buyers. That being said, buyers must also realise that the majority of sellers do not need to sell at any cost and while the acceptance of an offer below the asking price is realistic, sellers won’t be pushed to accept low-ball offers.
It’s worth noting that, while the current trend leans towards more favourable mortgage conditions, prospective buyers should stay vigilant for potential changes. If the Bank of England resumes its rate hikes in 2024, those holding out for reduced house prices might find any potential savings offset by increased mortgage borrowing costs.
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