The housing market has been so unstable this last year, it is hard to predict what will happen in 2024 – whether house values will continue to fall and mortgage rates rise or if there will be a plateau as loans stabilise?
Here we look at what 2023 was like for the property market, and if experts believe trends will continue or change next year.
Property market in 2023
The year began with mortgage advisors only being able to offer sky-high rates following the government’s Mini Budget in September 2022, which caused the pound to drop and interest rates to surge.
As a result of fewer people being able to afford mortgage rates, there was less demand to buy properties, which has resulted in falling prices.
Indeed, according to the Halifax House Price Index, values dropped by 3.2 per cent from October 2022 to October 2023, which is the equivalent of around £10,000 on the average property in the UK.
When it comes to the buy-to-let market, however, landlords have fared well, as first-time-buyers have not been able to get on the property ladder. Therefore, the demand for rental properties has grown, which has meant rents have increased.
This has been good for those who own their assets outright, but those with mortgages on their properties have still been subject to high mortgage rates. This meant their profit could have been wiped out, despite the higher rents.
With all this in mind, what are the predictions for the property market for 2024?
The property search website Rightmove has predicted asking prices will be a further one per cent lower than they currently are, due to the rising competition between sellers.
Tim Bannister from Rightmove stated: “The underlying level of good demand at the right price makes it unlikely that we will see a more significant drop in prices next year.”
This year has shown that buyers are still keen to get on the market, in spite of mortgage costs, which has helped to stop prices from plummeting.
However, vendors can expect to wait an average of 66 days to find a buyer, which has increased from 45 days last year.
To make a property more appealing to buyers, Mr Bannister advised making the asking price more competitive instead of having to reduce it later on down the line.
“Pricing right at the outset maximises the initial impact among local buyers and gives new sellers a much greater likelihood of a successful sale,” he added.
With regards to mortgage rates, Rightmove estimated affordability will still remain challenging next year. It believes interest rates will continue to be elevated, which will mean homebuyers will not be able to afford as much property as they had wanted.
This, in turn, could force house prices to come down, putting buyers in a better position to negotiate on price.
Property website Zoopla also predicted house prices will continue to fall next year, estimating they will decline by two per cent in 2024.
It stated that sellers will continue to adjust their asking prices according to demand, which will be dependent on mortgage rates and affordability. As long as rates remain high and the cost-of-living crisis continues, buyers will want more for their money when purchasing a home.
Thanks to the Bank of England projecting that inflation will fall to around two per cent in 2025, this could improve household finances, which will boost buyer demand beyond next year.
Executive director of research at Zoopla Richard Donnell noted that mortgage rates of between four and five per cent are still low, even though they are much higher than Brits are used to.
He said that if they remain at this level, it is likely house price growth will remain “in the low single digits for the next one to two years, below the projections for growth in household incomes”.
There could also be fewer buyers next year, thanks to political unrest due to an expected General Election. Buyers are also more reluctant to move at the moment, as they are worried house prices will continue to fall and they will be left in negative equity.
Lloyds Banking Group predictions
Lloyds Banking Group is more pessimistic about the state of the property market, estimating that house prices will have fallen by as much as 4.7 per cent this year and 2.4 per cent in 2024, Money Week reported.
It stated that values are unlikely to pick up again until the following year, which could put vendors off selling their properties until 2025 to avoid losing money on their assets. Having fewer homes on the market could also help to drive up prices, as there is more competition among buyers.