House prices expected to fall by 2% in 2024
Housing market sentiment has improved in the final weeks of 2023, with new sales recording a 17% upswing from the same period in the previous year, according to the latest data from property website Zoopla.
The platform also reported that there was a notable 19% spike in demand compared to a year ago when higher mortgage rates impacted market activity. The availability of homes for sale has also concurrently expanded, providing buyers with increased options and bolstering sales, as pricing alignment between buyers and sellers becomes more pronounced.
Consequently, Zoopla’s House Price Index reports a moderated annual decline in prices, settling at -1.1% in November 2023, down from the 7.2% figure a year earlier.
Looking ahead to 2024, Zoopla said the momentum in new sales witnessed towards the end of 2023 is projected to persist, coupled with the customary seasonal rebound in demand during the first quarter.
While mortgage rates are gradually decreasing, affordability remains a primary concern for households reliant on mortgages when making housing decisions. The impact of higher mortgage rates persists, with half of mortgage holders yet to transition to higher rates from previously agreed cheaper fixed rates before 2022.
Meanwhile, the slight dip in house prices throughout the year suggests that UK housing remains 10% to 15% overvalued by the end of 2023. This is expected to improve in 2024 as incomes rise and house prices experience a 2% decline over the year. Sales volumes are also anticipated to remain steady, reaching one million completions throughout 2024.
Despite the challenges in affordability confronting first-time buyers, they are expected to constitute the largest group of potential buyers in the next two years, driven by the rapid growth in rent, which has outpaced the increase in mortgage repayments over the past three years.
“The housing market has been more resilient than many expected over 2023, but it hasn’t been a surprise to us,” Richard Donnell (pictured), executive director at Zoopla, commented. “Mortgage regulations introduced in 2015 have stopped an over-valuation of housing, which is why the decline in house prices has been modest over the year.
“House price falls have been concentrated in the South and Midlands while prices are still slightly higher over the year in Scotland and Northern Ireland. UK housing still looks expensive by historic standards, which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align.”
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