What to Expect from the Property Market in 2024

The steady momentum in new sales that has developed over the final part of 2023 will continue into early 2024 alongside the usual seasonal rebound in demand over Q1 2024 as pent-up demand returns to the market. While mortgage rates are edging lower, affordability remains a key challenge for mortgage reliant households who are making home moving decisions. The impact of higher mortgage rates continues to be felt with half of those with mortgages yet to move onto higher rates from cheaper fixed rates agreed before 2022.

Despite the affordability challenges facing first time buyers they will be the largest group of would-be buyers in the next two years as the rapid growth in rent continues to motivate this group. Unsurprisingly average rents have risen faster than average mortgage repayments over the last three years.

Reflecting on the latest data from Zoopla, Tom Bill, head of UK residential research at Knight Frank, said: “Activity in the property market was stronger in November than September this year, which is not normally the case. Confidence is returning as inflation comes under control and there is growing downwards pressure on mortgage rates.

“The final weeks of 2022 were marked by the fallout from the mini-Budget, when the property market effectively closed three months early for Christmas. This year, it is stirring into life after a subdued summer and all the indications are that there will be a seasonal bounce next spring provided a general election is not called in the first half of 2024.”

Matt Thompson, head of sales at Chestertons, added: “December tends to be a quieter time of year in terms of property transactions but buyers have been more motivated this month to continue their search. Built up demand caused by this year’s economic uncertainty is a key reason for this delay in buyer activity and indicates that 2024 will start off with a very active property market.”

Source: Property Industry Eye

UK House Prices Rise for The Second Month in A Row

UK house prices rose for the second month in a row, up by +0.5% in November or £1,394 in cash terms, with the average house price now sitting at £283,615. Over the last year, despite the wider economic headwinds, property prices have held up better than expected, falling by a relatively modest -1.0% on an annual basis, and still some £40,000 above pre-pandemic levels.

The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand.

That said, recent figures for mortgage approvals suggest a slight uptick in activity levels, which is likely as a result of an improving picture on affordability for homebuyers, said Kim Kinnaird, Director, Halifax Mortgages.

Kinnaird continued, with mortgage rates starting to ease slightly, this may be leading to increased buyer confidence, seeing people more inclined to push ahead with their home purchases.

However, the economic conditions remain uncertain, making it hard to assess the extent to which market activity will be maintained.

Other pressures – like inflation, the broader cost of living, overall employment rates and affordability – mean we expect to see downward pressure on house prices into next year.

Source: Property Notify

Further Evidence The UK Property Market Will Finish the Year on The Front Foot

UK house prices rose by 0.2% in November, after taking account of seasonal effects.

This was the third successive monthly increase and resulted in an improvement in the annual rate of house price growth from -3.3% in October, to -2.0%.

While this remains weak, it is the strongest outturn for nine months.

There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity, comments Robert Gardner, Nationwide’s Chief Economist.

Gardner continued, in mid-August, investors had expected the Bank of England to raise rates to a peak of around 6% and lower them only modestly (to c.4%) over the next five years.

By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead.

These shifts are important as they have led to a decline in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing.

If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels.

While mortgage rates are unlikely to return to the lows prevailing in the aftermath of the pandemic, modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead.

Nevertheless, a rapid rebound still appears unlikely.

Cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, but consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries.

Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks to interest rates.

Inflation is declining, but measures of domestic price pressures remain far too high.

Policymakers have cautioned that it is too early to be talking about interest rate cuts.

Indeed, three of the nine members of the Bank of England’s Monetary Policy Committee voted to increase Bank Rate at its meeting in early November, though the remaining six preferred to hold at 5.25% for the time being, Gardner concluded.

Source: Property Notify

UK Property Market Catalysts for 2024

No one knows how hard the property wind will blow and from which direction but there are possible breaks in the storm next year to consider.

These are potentially moments of change when buyers emerge from hibernation to access their accommodation for the year ahead.

Rental renewals

After interest rates skyrocketed, post the mini budget fiasco, many found that the home that was just within their grasp, wasn’t affordable anymore.

This left many to turn back to rented accommodation, boasting demand at a time when landlords were struggling to keep up with their existing mortgage payments.

Rental increases cushioned some of the impact but landlords who’d over extended, faced with a loss-making investment, opted out, reducing supply and thus further increasing prices.

When wannabe buyers are faced with the prospect of renewing their rental contract at an even higher rate, some may reconsider buying if property prices have adjusted to a more manageable level. Lenders continue to trim rates and the purchase is for the mid to long term.

Despite increased affordability issues, according to Zoopla, the movers and shakers of 2023 were cash and first time buyers.

Many of these may well have had help from the bank of mum and dad, but they were the most eager buyers to step up and get off the rental merry go round and where possible, bag a bargain.

At present, rents may be more affordable than mortgages in some areas but for Londoners, high rents are driving them out of the capital into suburbia – a move that most reserve for later on in their lives.

Given cities attract the young, these worker bees who work longer, harder and earn less and now commuting further, may choose to buy if prices have adjusted enough to be within reach.

Deposits into high interest rates

For many who realised they couldn’t now afford a home or wanted to see how far prices would fall over the course of 2023, they potentially deposited what would have served as a household deposit into a savings account with a high interest rate.

If we look at the Bank of England’s Money and Credit report we can see spikes in deposit activity. For those who abstained for a year, come March/April any locked away money will once more become available.

Some will reinvest but others may look at house prices and current rates and make a move. Another peak will come around election time in September 2024.

A record £7.7 billion money was transferred into high savings accounts in Treasury-backed banks in 2023.

If some of this money was tied up for a year, there’s a possibility some may want their money available, post-election for a move.

Momentum will increase through 2025 making some prefer to move when there is less competition, if they can.

Rates creeping down

A decade of cheap money has ended. Leaving in its wake a giant inflated balloon and an affordability crisis.

In response, the bank of England hiked up Table Mountain for 22 months and is now taking a breather at 5.25%.

This has left interest rates at record levels, reducing property transactions by 17% when compared to September 2022 and 1% lower than August 2023.

To entice buyers back to borrowing, lenders have trimmed, not cut, rates. For many this still isn’t enough but for others any movement downward is encouraging.

The rationale being if they can afford to ride out the next year or two with higher rates, there is hope on the horizon of more manageable rates at around 3.5-4% ahead.

This alongside existing house price drops could provide further motivation for those with a decent sized deposit.

Source: Property Notify