Key points –
- Zoopla predicts a 2% decrease in UK house prices next year, following recent slight increases.
- High mortgage rates and the need for improved housing affordability are key factors driving this anticipated decline.
- The Bank of England’s interest rate hikes have significantly impacted the mortgage market and housing affordability.
- In 2023, there was a high public interest in mortgages, with a Google search for mortgage-related terms every 23 seconds in the UK.
- The most expensive area in London was Kensington and Chelsea with average prices at £1.2
According to Zoopla, a leading property portal in the UK, we’re looking at a potential downturn in house prices next year. This comes after a period of relative stability, with prices rising by 0.5% in November, following a 1.2% increase the previous month.
A Two Percent Drop Ahead
Zoopla’s latest analysis suggests a 2% fall in house prices for the upcoming year. This projection is seen as a consequence of the lingering effects of high mortgage rates, which are expected to continue into the next year. However, it’s important to note that despite this anticipated decline, house prices are still about £40,000 higher than they were before the pandemic, indicating that the market remains robust in a broader sense.
The Role of Housing Affordability
One key factor influencing this forecasted decline is housing affordability. Zoopla emphasises the need for more affordable housing to attract buyers back into the market. Despite the less-than-anticipated decrease in house prices over the past year, the current mortgage rates, hovering around 5%, have made it challenging for many potential buyers to afford a home.
Prices and Mortgage Rates
Zoopla points out that for a significant improvement in housing affordability, house prices need to fall further, complemented by an increase in incomes. They predict that if mortgage rates decrease to around 4.5% by the end of 2024, house price growth is likely to stay in the negative territory, with a 2% decrease anticipated for next year.
Bank of England’s Influence
The Bank of England has played a pivotal role in this scenario by consistently hiking interest rates to combat rising inflation. This action triggered a flurry in the mortgage market, leading lenders to raise their rates. This financial maneuvering has been a key contributor to the current housing market dynamics.
Google Searches and Selling Times
In an interesting insight into public interest, a study revealed that in 2023, UK residents searched for mortgage-related terms on Google every 23 seconds, highlighting the widespread concern and interest in housing affordability and mortgage rates. Despite a more cautious approach from buyers, the average time to sell a property in 2023 was 34 days, a slight increase from 25 days in the previous year.
The Highs and Lows of London’s Housing Market
In a closer look at specific areas, Kensington and Chelsea in London stood out as the most expensive local authority area, with average house prices reaching £1.20 million. On the other end of the spectrum, the most affordable borough in London was Barking and Dagenham, where the average home cost was £332k, followed by Bexley at £395k.
In summary, while the UK housing market has shown resilience in recent times, the upcoming year might present new challenges, particularly in terms of affordability and price adjustments. As always, the market remains dynamic, and these predictions could evolve with changing economic conditions.