The UK housing market has been on somewhat of a rollercoaster in recent years, marked by the Covid 19-induced house price boom from 2020 to 2022, the cost of living crisis in 2022, and the disastrous mini-budget in September 2022 that saw mortgage rates and rental costs skyrocket. As we step into 2024, homeowners and house-hunters alike have a keen interest in understanding the trajectory of the housing market going forward, especially after the events of the past few years.
SO. what do the experts predict for house prices in 2024 and beyond?
Recent years in review
The Covid-19 pandemic sent shockwaves through the global economy, and the UK housing market was no exception. From the summer of 2020 to the summer of 2022, there was a remarkable surge in house prices, fuelled by a combination of factors such as the stamp duty holiday, low interest rates and increased demand versus limited stock of larger homes in more rural areas as remote working became prevalent. However, this boom was followed by a cost of living crisis in 2022, exacerbated by rising inflation, the war in Ukraine and the disastrous Truss-Kwarteng mini-budget in September 2022 that led to a sharp increase in interest rates which had a disastrous impact on our mortgages.
The Housing Market in 2023
2023 saw the UK housing market navigate the aftermath of the previous year’s turbulence. Inflation peaked at 11.1% in October 2022 and the housing market began to feel the repercussions in 2023 as interest rates, along with mortgage rates, soared whilst market activity fell.
This trend persisted into 2023, with a notable deceleration in house price growth during the initial six months of the year. The housing sector experienced its first annual decline since June 2020, registering a 1.1% drop in house prices in February 2023. In September 2023, at the end of the third quarter, year-on-year house prices had further contracted to -5.3% and by October 2023, the average UK house price was £288,000, 1.2% less than in October 2022.
Although the Bank of England opted to maintain the base rate at 5.25% in both September and November 2023, following 14 consecutive rate hikes since December 2021, and a small month-on-month growth in house prices from October to November 2023, we ended the year with an overall decline in house prices of around 1.8%. A bump some may say, rather than the outright crash which many had anticipated in 2022.
Expert predictions for 2024
As the UK housing market steps into 2024, industry experts anticipate a more stable environment by the end of the year after the turbulence of recent years begins to subside.
JLL, Savills, Nationwide, Rightmove, Zoopla, and Lloyds Banking Group, have already weighed in on their predictions for the UK housing market in 2024. They are cautiously optimistic, suggesting that the market may have passed the peak of its bump in the road, which seems to be a view shared by many of the big lenders such as HSBC, Santander and Halifax who have lowered their mortgage rates recently. Indeed, the average rate for a two-year fixed rate mortgage deal has fallen from 6.86% in July 2023 to 5.66% in January 2024 with more rate cuts from the Bank of England also anticipated in 2024 as inflation stabilises.
However, uncertainties do persist. The housing market trajectory will depend on various economic, social and political factors which are difficult to predict, particularly in the face of an upcoming general election, the emerging global events we are witnessing in Gaza and Yemen, and the overall health of the economy.
As such, leading estate agents Savills and JLL anticipate a moderate decrease in house prices of around 3% in 2024, although they note that regional disparities will persist, with some prime locations experiencing more significant growth than others. Nationwide, Zoopla and Rightmove echo these sentiments, projecting a more stable and balanced market compared to preceding years. Nationwide predicts that house prices in 2024 will either remain “broadly flat” or experience another small decline similar to 2023, Zoopla expects a decline of 2% and Rightmove has suggested a -1% drop in seller asking prices in 2024.
Looking ahead to 2025 and beyond
While 2024 offers a potential return to stability, the question remains: what is in store for the housing market in future?
The lingering effects of the cost of living crisis and the mini-budget of 2022 continue to cast a shadow, reminding us that predicting the future of the housing market is a nuanced task. However, we are seeing a more positive outlook for 2025 and beyond. Indeed, Savills predicts a rise in house prices of around 3.5% across 2025 with a 5-year growth of 19% by 2028 as we see an improvement in global and domestic economic and political outlooks.
So whilst homebuyers, sellers, and investors must navigate this landscape with prudence, keeping a watchful eye on market trends and expert insights, there is some light at the end of the tunnel.
