What are the prospects for UK house prices in 2024?

The future of house prices in 2024 is a topic that generates both curiosity and concern among homeowners, potential buyers, and investors. Independent professionals like contractors, freelancers and the self-employed already have to present harder-to-prove incomes to lenders when applying for mortgages. This can be challenging when trying to justify a mortgage large enough to afford current rates and house prices. The direction of house prices in 2024 is therefore as important as interest rate movement when considering affordability. While it is challenging to predict with absolute certainty, analysing various factors can provide insights into the prospects for house prices in the coming year.

One crucial factor that influences house prices is the state of the economy, including interest rates and inflation. Fluctuations in these indicators can impact consumer sentiment and purchasing power, ultimately affecting demand for housing. Additionally, supply and demand dynamics play a significant role in determining price movements.

To gain an understanding of future trends, experts often turn to reputable sources such as the largest lenders who track house prices, Halifax and Nationwide, alongside professional bodies like RICS (Royal Institution of Chartered Surveyors). These organisations regularly publish reports on house price indices and offer valuable insights into market conditions.

Halifax, the UK’s largest mortgage lender, has predicted that the average UK house price will fall by 2-4% in 2024. Despite the drop this is seen as a recovery from 2023, where the outlook was more bleak given the incessant increase in interest rates. Kim Kinnaird, Director of Mortgages at Halifax, had the following to say.

“Overall, with the combination of cost-of-living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices.”

Nationwide, the UK’s largest building society, have their own house price index and their interpretation was a bit more upbeat than that of their largest competitor in the High Street. Nationwide’s Chief Economist is Robert Gardner, predicted that “a rapid rebound in activity or house prices in 2024 appears unlikely”, with a best scenario of property prices remaining flat in 2024 rather than the small drop that Halifax predicted.

While it is important to consider the national trends commented upon by the two lenders, it's worth noting that regional variations can significantly impact house prices. Different areas may experience unique economic conditions or have specific housing demands that influence local market sentiment. Halifax did point to a mixed picture across the UK, with south-east England predicting drops of nearly 6% in 2024 against Northern Ireland’s increase of over 2%.

Mortgage rates also play a vital role in shaping the housing market landscape. Changes in interest rates can affect affordability for first-time buyers as well as existing homeowners looking to remortgage, or buy-to-let investors seeking favourable financing options. The rapid increase in interest rates in the UK over the past two years, driven by inflation, are a major factor in house price movement. The UK’s headline inflation rate reached 11.1% in October 2022 and took a year to drop down to 4.6%. This is still well beyond the Government’s target of 2%, but the drop will ensure there is little chance of mortgage rates climbing again so rapidly. In fact, there is optimism that there could be rate cuts in the latter part of 2024, leading to a housing market recovery – mixed news depending on whether you are looking to buy or already own a property.

Furthermore, employment levels and wage growth are essential factors to monitor when assessing future house price prospects. Stable employment figures coupled with rising incomes can contribute to increased demand within the housing market. Public sector pay has been on the increase throughout 2023, which accounts for nearly 6 million working people. 

In conclusion, predicting exact figures for UK house prices in 2024 remains a challenge due to numerous variables at play. However, by closely monitoring economic indicators such as interest rates, inflation rates, supply and demand dynamics along with insights from reputable sources like Halifax, Nationwide, and RICS; it is possible gain a better understanding of the overall sentiment surrounding future house price movements. 2024 promises to be a year of relative optimism when comparing with the previous two years, however, given the fragility of the UK economy any bold predictions should be taken with a degree of caution.

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