Predicting the trajectory of UK house prices after a positive 2024 kick-off

Despite facing a challenging year, the prospects for the UK's real estate sector seem set for improvement. The housing market in the UK is revealing signs of revitalisation with increased numbers of prospective home buyers and potential sellers. Recent studies indicate a bolstering confidence regarding future property prices, as mortgage rates decreased from a peak 15-year high last year, albeit there is potential for a fall in house prices projected in 2024.  

Several analyses propose the continued depreciation of house prices could potentially lead to more aspiring homeowners ascending the property ladder, regardless of its negative implications for existing homeowners desiring an escalating property value. We examine two key property price indices, Zoopla and Halifax, to evaluate if the encouraging kick-start to house prices in 2004 will sustain. 

Are house prices slowing down?

The Halifax reports an average UK house price of £291,029 in January, reflecting a 1.3% rise (£3,785) from December 2023. Notably, this is the fourth month in a row that prices have increased. The yearly growth rate currently stands at 2.5%, the peak since January of the previous year. Buyers' and sellers' growing assurance can be traced to a few causes: falling mortgage rates due to a competitive market, diminishing inflation, and a sturdy labour market. This set a favourable tone for the 2024 housing market's commencement.  

Regardless, housing activity growth contrasts with the persisting high interest rates as compared to historic lows. The market's demand-supply curve remains imbalanced with demand outstripping supply. Prospective first-time homeowners are currently required to muster an average deposit of £53,414, equivalent to about 19% of the asking price. Consequently, it comes as no shock that nearly two-thirds (63%) of these first-time buyers resort to jointly purchasing their homes. Looking ahead, we predict a steady presence of affordability issues and a possible occurrence of more marginal decreases due to general economic uncertainties.  

Meanwhile, Zoopla reports an unchanged average house price of £264,400 in the UK as of December 2023, which reflects a -0.8% adjustment from the prior year. House prices seem to be accommodating the rising mortgage rates via modest dips, albeit at a decelerating rate as 2024 opens with an increase in sales. From October to December 2023, house prices descended by 0.8%, a relatively slower rate than the -1.4% fall witnessed between October 2022 and 2023. In terms of regional variations, the sharpest price descents are observed in the East of England (-2.5%) and the South West (-2.2%). Northern Ireland stands out as an anomaly, with a 3.2% augmentation in house prices over the course of 2023. 

What is the situation for buyers?

Zoopla reports a noticeable rise in buyer interest at the outset of 2024. The first three weeks have observed a considerable seasonal spike in buyer engagement. With mortgage rates falling below 5%, there's a 12% increase in demand from last year, despite being 13% less than the five-year average. This surge is primarily due to the deferred buying decisions during the low-ebb second half of 2023 due to rising mortgage rates. Whilst the revival in market dynamics is a positive sign, it's crucial to not misconstrue this as a defining factor for the year 2024.  

Last year witnessed mortgage rates sliding to 4.2% within the initial quarter, which promoted sale transactions and caused a moderate decrease in prices. A similar influence of the current mortgage rates is anticipated this year, reinforcing sale transactions rather than severely impacting property prices. Various elements will continue to maintain a balance in house prices. 

Should I put my house on the market?

Recent research by Rightmove, indicates that February proves the most beneficial month to put a house on the market, offering a better chance of locating a buyer promptly. The research reviewed the trends relating to the listing month of millions of properties placed on the market since 2012, with 2020 omitted due to the pandemic.  

Statistics reveal that, on average, properties listed in February necessitate 51 days to secure a buyer, edging out March's 52-day average and mirroring January's duration. Also, about 66.4% of properties that go on the market in February manage to find a buyer – the highest probability of securing a buyer alongside April, narrowly beating March's 66.3% success rate.  

Furthermore, homes listed in February are most likely to see a transaction completion and least likely to be retracted from the market by the seller. Considering March's strong performance in the rankings as well, the data underscores that those considering a sale at spring's outset put themselves in a favourable position for a smooth transaction in 2024. 

Currently, the volume of potential buyers making enquiries about properties for sale this year has risen by 8% compared to the previous year. Additionally, the rate of new properties entering the market has seen an increase of 11%.