The UK housing market has shrunk back to the same size it was before the pandemic, according to new data from Savills. The total value of the UK housing market is now £342 billion, after a 21% drop in the year to March 2024.
This contraction is largely due to fewer people buying and selling homes. There were 15% fewer house sales in the year to March 2024 compared with the same period in 2020. However, the average house price is now 17% higher.
The market peaked at £521 billion during the mini-boom that followed the pandemic. This was fuelled by low interest rates and pent-up demand. Since then, rising interest rates have made mortgages much more expensive, causing many buyers to put their plans on hold.
Who’s buying houses now?
While the overall size of the market has shrunk, the types of buyers have changed.
- Cash buyers now make up a much larger proportion of the market. These are typically older homeowners with larger amounts of equity. Cash buyers accounted for 42% of all house purchases in the year to March 2024, spending a total of £144 billion. That’s a 19% increase compared to four years ago.
- First-time buyers have been surprisingly resilient, despite the tough conditions. This is partly due to support from family members, often referred to as the “Bank of Mum and Dad”.
- Mortgaged buy-to-let investors have pulled back significantly, due to higher mortgage rates and stricter lending rules.
What’s next for the housing market?
Experts at Savills believe that the housing market is now poised for growth. Lucian Cook, head of UK residential research at Savills, says that interest rate cuts will bring more buyers back to the market and increase their purchasing power.
Savills predicts that house prices will rise by 2.5% in 2024 and by a total of 21.6% by the end of 2028. The number of house sales is also expected to increase slightly in 2024, reaching 1.05 million.
Here are some of the key figures from the Savills report:
- Total value of the UK housing market: £342 billion (down 21% year-on-year)
- Average house price: up 17% compared to March 2020
- Number of house sales: down 15% compared to March 2020
- Proportion of house purchases made by cash buyers: 42%
- Predicted house price growth in 2024: 2.5%
- Predicted house price growth by the end of 2028: 21.6%
While the past year has been a tough one for the housing market, the future looks brighter. With interest rates set to fall and buyer demand increasing, experts believe that we are likely to see steady growth over the next few years.