UK Housing Outlook: What to Expect in the Coming Months
The UK housing outlook has fluctuated in recent years, but recent developments suggest a recovery may be underway. With changes in interest rates and mortgage offerings, there’s growing speculation about whether house prices will rise or fall in 2024.
The Journey of UK House Prices
House prices in the UK have been volatile, reflecting the broader economic landscape. Following a peak in August 2022, the market saw a sharp decline, largely influenced by the economic fallout from the then-government’s budgetary decisions. Soaring mortgage rates deterred potential buyers. Meanwhile, inflation eroded savings, making many cautious about entering the property market.
Throughout 2023, mortgage rates spiked again, further dampening market activity. Uncertainty surrounding the Bank of England’s stance on interest rates, crucial in determining mortgage costs, added to the market’s instability. However, a turning point arrived in August 2024 when the Bank of England reduced the base rate from 5.25% to 5%, marking the first cut since the early days of the pandemic.
Are House Prices Really Falling?
When analysing the UK property market, sold house prices offer a tangible measure of what’s been happening. While various indices capture these prices, they often reflect transactions agreed upon months prior, meaning they may not accurately depict current market conditions. Despite this, recent data suggests a shift.
At the start of 2024, average house prices were on a downward trend, influenced by high inflation and costly mortgages. However, the Nationwide House Price Index (HPI) reported in July that prices increased by 2.1% annually—the fastest growth rate since December 2022. Similarly, the Halifax HPI recorded a 2.3% annual rise in the same period.
These figures indicate a revitalised property market, further supported by data from Zoopla showing buyers paying 96.8% of the asking price on average, the highest in 18 months. Predictions from various sources, including Halifax and Zoopla, suggest a modest increase in house prices for the remainder of the year.
Indicators of a Market Rebound
In addition to sold prices, asking prices can provide insight into the market’s current sentiment. Rightmove’s latest data shows a typical summer dip in asking prices, falling 1.5% in August on a monthly basis. However, the annual growth of 0.8% in asking prices suggests that sellers are more optimistic than last year.
Surveys, such as the one conducted by the Royal Institution of Chartered Surveyors (RICS), echo this optimism. The July report found that more estate agents and surveyors anticipate market activity to increase in the coming months, with expectations of rising house prices over the next year.
UK Housing Outlook: What’s in Store for 2024?
Predicting the direction of house prices has been particularly challenging, given the economic uncertainties of the past two years. However, the outlook for 2024 appears cautiously optimistic. Falling swap rates and a slight reduction in mortgage costs have fuelled expectations of market growth.
Nationwide, for example, released a five-year fixed mortgage at 3.99% in July, a rate not seen since earlier in the year, and has since lowered it further to 3.83%. Other lenders, such as Barclays and NatWest, have followed suit, indicating a trend towards more affordable borrowing.
Much will depend on future mortgage rates, but leading estate agencies like Savills and Knight Frank are predicting house price increases of 2.5% and 3% respectively by year-end. Capital Economics also foresees a modest 1% growth in house prices for the year, though they acknowledge that prices could rise more rapidly if the Bank of England implements further interest rate cuts.
How Do We Measure House Prices?
Different indices provide various perspectives on the UK property market. Each has its method of calculation, and understanding these can help in interpreting the data they produce.
Nationwide House Price Index
The Nationwide HPI, one of the oldest indices, has been tracking the market since 1952. It’s based on property valuations at the mortgage approval stage, adjusted for a representative mix of property types. The index is updated monthly, offering a consistent snapshot of the market.
Halifax House Price Index
Halifax’s HPI operates similarly to Nationwide’s, using data from mortgage valuations. With records dating back to 1983, it analyses price movements over time on a like-for-like basis. This index is also published at the start of each month, providing timely insights.
Zoopla House Price Index
Zoopla’s HPI claims to offer the most comprehensive view of the market, combining sold prices, mortgage valuations, and agreed sales data. Although it lags slightly behind other indices in release timing, it provides a detailed overview of market activity, including the speed at which homes sell and the level of buyer interest.
Office for National Statistics (ONS) and Land Registry HPI
The ONS HPI is the official measure, drawing on data from HM Land Registry and equivalent bodies in Scotland and Northern Ireland. It captures all UK property transactions, offering the broadest view of the market. However, due to the extensive data involved, there is a delay in publication, and figures are often revised post-release.
Rightmove House Price Index
Rightmove’s HPI differs in that it focuses on asking prices rather than sold prices. It covers 95% of properties listed on its site, providing an early indicator of seller sentiment. While this index reflects immediate market trends, it’s more volatile and less reliable as a predictor of final sale prices.
RICS UK Residential Market Survey
The RICS survey provides a unique perspective, focusing on market sentiment rather than specific price points. By polling chartered surveyors each month, it gauges expectations around sales, enquiries, and listings, offering a forward-looking view of the market’s direction.
UK Housing Outlook: Conclusion
The UK property market is showing signs of recovery after a turbulent few years. Predicting exact house price movements remains challenging. However, falling mortgage rates, improved buyer confidence, and supportive policies suggest an optimistic outlook for 2024. By monitoring a range of house price indices and market surveys, we can gain a clearer u
