The housing market in the UK is anticipated to face a period of stagnation in 2024.
With rising mortgage rates and an increase in housing supply, experts predict minimal growth in house prices over the upcoming year.
Current Market Conditions
A recent survey by the Royal Institution of Chartered Surveyors (RICS) highlights a decline in buyer enquiries and fewer agreed sales. There has also been an increase in price reductions.
Estate agents link this downturn to the surge in mortgage rates. For the first time since January, the average five-year fixed-rate mortgage has surpassed 5%. This hike has made it more challenging for potential buyers to secure affordable loans.
Builders and Market Response
Housebuilder Crest Nicholson reports a ‘softening’ in demand since Easter, primarily due to ‘volatility in mortgage rates’. The instability in mortgage rates has deterred prospective homebuyers.
Capital Economics’ senior UK economist, Andrew Wishart, notes that this dip in demand coincides with a significant rise in housing supply, the largest since 2013, aside from the post-lockdown period.
House Prices Remain Stable
Despite the increased mortgage costs, house prices have remained more resilient than expected over the past 18 months. This stability is attributed to a concurrent decline in housing supply.
Fewer people listing their homes for sale has helped maintain price levels. However, recent reports show a rise in new listings, which may lead to an excess supply and potential price dips over the summer.
Forecast for 2024
Andrew Wishart’s revised forecast considers the combined effects of increased housing supply and persistently high mortgage rates. He has adopted a more conservative outlook for 2024, predicting a mere 0.5% rise in house prices.
Wishart believes the market will soon experience surplus supply, which could lead to price drops.
Optimistic Perspectives
Conversely, some economists remain optimistic. Rob Wood, chief UK economist at Pantheon Macroeconomics, acknowledges the impact of higher mortgage rates but maintains a positive outlook.
He suggests that a reduction in interest rates by the Bank of England later this year could revive buyer interest. This revival could potentially drive house prices up by 3% in 2024.
Implications for Buyers and Sellers
For potential buyers, the fluctuating mortgage rates mean it could be a challenging time to secure affordable loans. However, as interest rates are predicted to lower, there might be better opportunities later in the year.
Sellers, on the other hand, might face a market with increasing listings, leading to stiffer competition and potential price adjustments.
Conclusion on Market Trends
While the current outlook appears bleak with minimal growth predicted, changes in interest rates and economic conditions could alter the scenario. The housing market in the UK remains a dynamic and evolving sector.
In summary, the UK housing market is set for a period of minimal growth in 2024, with high mortgage rates and increased supply being critical factors.
However, potential changes in interest rates could revive buyer interest and influence house prices positively later in the year.
