The UK property market is showing signs of a robust recovery as new sales are currently running 8% ahead compared to last year. Experts predict a 10% increase in sales volumes for 2024 compared to 2023, according to Richard Donnell of Zoopla.
The market is finding its balance, resembling the fabled “just right” scenario of Goldilocks. Estate agents are seeing a healthier pipeline of sellers and a steady pace of transactions. Although the market conditions are not too heated or too sluggish, challenges persist, particularly for lower-income households and those with smaller deposits. These groups are feeling the pinch from higher mortgage rates and the broader cost of living crisis, making it harder for them to enter the market.
Pricing Realism Among Sellers
Following a significant slowdown in house price growth last year, there’s a stabilisation in prices, encouraging more transactions. Sellers are adjusting their expectations and becoming more realistic about pricing. This shift is crucial as it aligns more closely with the market conditions necessary for securing larger mortgages and covering additional costs such as stamp duty.
According to the latest data from Zoopla’s House Price Index, sellers are achieving about 96% of their asking prices, aligning with pre-pandemic averages. The average discount on asking prices remains higher in southern England, where property values surpass the national average and where the impact of higher borrowing costs is more pronounced.
House Price Trends
Current forecasts for house price inflation suggest minimal growth, generally hovering around the +/-1% range for 2024. Notably, lender-based indices, which previously reported larger price drops, have started to show a slight recovery, now indicating over 2% annual price inflation. Despite these changes, a rapid increase in house prices is unlikely, with projections settling back to a growth rate of 0-1%.
Regional Variations
The impact of various factors, including borrowing costs and lifestyle changes post-pandemic, is uneven across the country. Southern England, from Norfolk to Cornwall, is experiencing gradual price declines, particularly in coastal areas where the pandemic drove prices up due to increased demand for space. In contrast, prices are on a modest upward trajectory in other parts of the UK, such as Scotland and northern England, where affordability pressures are less acute.
The Outlook on Mortgage Rates
Recent reductions in mortgage rates have injected a dose of optimism into the market, supporting a higher volume of sales. While there’s speculation about potential interest rate cuts later in the year, the reality is that most anticipations of lower rates have already been factored into current fixed-rate mortgage deals. Significant decreases in mortgage rates are unlikely to occur quickly unless there’s a dramatic shift in interest rates. Current mortgage rates, hovering around 4-5%, are still manageable for most of the market, with rates closer to 4% being ideal for sustaining sales volumes and stable pricing.
As we move further into 2024, the UK property market appears to be stabilising, with a balanced flow of buyers and sellers. While challenges remain, particularly for those at the lower end of the income spectrum, the overall market dynamics suggest a year of modest growth and stabilisation in house prices, supported by a careful balancing of mortgage rates and market demand.