What's going to happen to the UK housing market in 2024?
Our forecast reveals our housing market predictions for next year. So what will 2024 have in store?
Housing market mortgage rate predictions for 2024
Mortgage rates look set to remain higher for longer into 2024 and we’re not expecting them to fall back to 4.5% until H2 2024.
That means housing affordability will really only improve if people are able to earn more money and their incomes grow.
The ongoing rise in wages will be the main factor that supports sales volumes for the housing market in 2024.
What’s going to happen to house prices in 2024?
UK house prices are expected to fall 2% over 2024.
Homes are currently looking expensive by historic standards amid rising mortgage rates over the last 18 months.
If house prices fall further and incomes increase, or mortgage rates fall back, affordability will improve for home buyers and this in turn will support sales.
The number of homes for sale has now reached a 5-year high, meaning sellers will need to keep pricing competitively if they’re serious about selling. This will keep pricing under pressure.
In 2023, the south of England bore the brunt of house price falls but those falls are now spreading further afield.
Today, 4 in 5 housing markets are registering annual price falls, up from less than 1 in 20 just six months ago.
But crucially, the scale of price falls is modest and limited to very low single digits. No markets are currently registering annual price falls of more than 5%.
However in 2024, we expect to see an increase in markets registering 5% falls, as sellers continue to adjust their asking prices in the face of weaker buying power.
Despite this, the risk of a major collapse in prices is becoming less of a concern, and an improvement in sales hinges more on buyers’ financial ability to move when mortgage rates are in the 4-5% range.
And while the likelihood of a double-digit price drop remains low, housing affordability needs to improve to bring more buyers back into the market and to support sales volumes.
How can housing affordability improve?
Right now, house prices haven’t fallen as much as expected, while mortgage rates remain at 5% or higher, so housing still looks expensive by recent standards.
Faster growth in household incomes over 2024 would improve buyers’ affordability, along with mortgage rates falling over 2024.
Household finances have also been under pressure from rising living costs, with inflation eroding any growth in incomes.
Fortunately, this is now reversing at last and the Bank of England currently projects that inflation will fall to its target of 2% in the first half of 2025.
This, along with a real income growth, will be important in supporting buyer demand.
Housing market could rebound if affordability improves
Our Executive Director of Research, Richard Donnell, says there is scope for a rebound in market activity if affordability improves.
‘The housing market is adjusting to higher borrowing costs through lower sales rather than a big decline in house prices.
‘Asset prices around the world are also adjusting to higher borrowing costs and there is a lively debate in financial circles about the long-run outlook for borrowing costs, which sets the outlook for mortgage rates.
‘Most agree we aren't returning to the years of very cheap borrowing as central banks sunset policies that created cheap money to support economies after the global financial crisis and over the pandemic.
‘Mortgage rates of 4-5% remain low by historic standards, albeit higher than in recent years.
‘Assuming mortgage rates remain in the 4-5% range, we see UK house price growth remaining in the low single digits for the next 1-2 years, below the projections for growth in household incomes.’
This would mean that for the first time in ten years, house prices would start to become more affordable, increasing consumer confidence in making large purchase decisions.
Why haven't house prices fallen more?
There are three reasons why house prices haven’t tumbled, defying predictions for larger falls in 2023:
1: The economy is growing, albeit slowly, while unemployment remains low and incomes are increasing.
2: Lenders are supporting customers to refinance through longer term mortgages, interest-only mortgages and mortgage holidays, limiting the number of forced sellers.
3: Tougher affordability criteria from lenders has meant that while new mortgaged buyers may have been paying just 2% for their mortgages, they’ve still had to prove to their bank they could afford a 7% rate.
That has meant that mortgaged buyers could afford higher rates as they remortgaged.
However, banks are now stress testing new borrowers at 8-9% rates, even though they're actually paying 5%, which is compounding the reduction in buying power and hitting sales.
Homes are currently over-valued and prices likely to fall further
The chart below plots our measure for how much house prices are over- and under-valued over time.
It shows periods of over-valuation in the late 1980s and again in the runup to the global financial crisis in 2007, after which house prices fell over the subsequent recessions.
Will more buyers return to market in 2024?
We expect to see the usual seasonal rebound in demand next spring as pent-up demand returns to the market.
However, the number of sales taking place is set to be lower than spring this year.
General Elections also tend to create a pause in activity, which is why we expect another year with 1m home moves in 2024.
It will be five years since the last general election on December 17 2024. If a general election isn’t called by then, parliament would automatically be dissolved and the election would take place 25 working days later: January 28, 2025.
If mortgage rates fall back to 4% more quickly, the number of sales set to take place would improve.
Buyers are currently hesitant to move amid the uncertainty over house price falls and higher mortgage rates.
This is particularly the case with upsizers looking to secure larger family homes.
Our recent consumer survey reveals parts of the population are still keen to move, but many are hoping and/or waiting for mortgage rates to get lower again before they do.
Cash buyers set to be the biggest buying group in 2024
The biggest group of buyers in 2024 is set to be cash buyers, followed by first-time buyers, as rents continue to rise.
Upsizers are being hit hard by higher mortgage rates, as the larger properties they’re looking to secure require bigger mortgages.
But if they can be encouraged to be more flexible about what they want to buy and where in 2024, this would support overall sales volumes.
Key takeaways
- House prices expected to fall 2% over 2024
- Rising incomes expected to steadily improve housing affordability
- Mortgage rates expected to fall back to 4.5% by the end of 2024
The top locations where you can avoid paying stamp duty
If you're a home mover looking to save money, buying a property under the stamp duty threshold could save you thousands. Here's where to find the most homes under £250,000.
Stamp duty land tax - or SDLT - is the tax you pay when you buy property or land over a certain price in England and Northern Ireland.
Scotland and Wales also have an equivalent tax but different rates apply.
In England and Northern Ireland, no tax is paid if a property is priced below £250,000 and you are an existing homeowner.
Different thresholds apply for first-time buyers, who can buy a property up to £425,000 without paying the tax.
Those buying a home that won’t be their primary residence will pay an additional 3% surcharge on the entire price of the property.
And buyers from overseas will pay an additional 2% surcharge.
Why is it important to know about stamp duty before buying?
A stamp duty bill can be a small or run into tens of thousands of pounds for high value properties. And where you are looking to buy can also affect the amount you pay.
Here's what an existing homeowner would pay in stamp duty for the average-priced UK home (£265,000) cross the UK.
Stamp duty paid on a £265,000 property in the UK
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£745 in England and Northern Ireland
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£2,850 in Scotland
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And £3,200 in Wales
Right now, nearly 1 in 3 (31%) properties listed on Zoopla are priced below the local stamp duty threshold for homeowners. This translates to over 140,000 homes that are available to buy without incurring a tax bill.
Where can homeowners find a home without paying stamp duty?
The percentage of homes under the stamp duty threshold across the UK
| Region/Country | Avg house price | Proportion of homes below stamp duty threshold | No. of homes on Zoopla below threshold |
|---|---|---|---|
| North East | £139,700 | 76% | 9,500 |
| Yorkshire & The Humber | £185,400 | 57% | 17,200 |
| North West | £193,500 | 57% | 23,100 |
| West Midlands | £228,700 | 46% | 15,100 |
| East Midlands | £229,000 | 45% | 14,600 |
| Wales | £204,200 | 43% | 9,300 |
| Scotland | £160,300 | 35% | 6,500 |
| South West | £316,100 | 29% | 13,000 |
| East of England | £340,200 | 23% | 11,800 |
| South East | £388,900 | 20% | 16,700 |
| London | £540,800 | 5% | 4,000 |
| UK | £264,900 | 31% | 140,800 |
Zoopla
Our historical analysis shows that 60% of all stamp duty receipts are paid in the South East and London.
This is down to homes in the south being priced at a higher level than those elsewhere in the country, so finding a home below the tax threshold will be harder here.
Only 1 in 6 homes listed for sale on Zoopla in southern England is priced below the stamp duty threshold of £250,000.
In the Midlands, close to a half of homes listed for sale would be under the threshold.
Meanwhile, in the North of England, where homes are among the most affordable in the UK, we find that 3 in 5 homes could be bought without paying the tax.
This increases to three-quarters in the North East specifically, where the average house price is below £140,000.
In Scotland and Wales, where the stamp duty tax is different to that in England, we find 35% and 43% of homes don’t qualify for tax if bought by an existing homeowner.
This is because the threshold for exemption is lower.
In Scotland the Land and Buildings Transaction Tax threshold kicks in at £175,000.
In Wales, the Land Transaction Tax begins at £225,000.
In contrast to most of England, both of these thresholds are below the average house price for each of the respective regions.
Regional towns have the highest number of homes under the SDLT threshold
The availability of homes exempt from stamp duty varies and is closely linked to the house prices in a given area. This creates differences in the availability of tax-exempt homes within regions too.
We find the largest spread of property values in Yorkshire and the Humber: currently only 21% of homes on the market in York are under the £250,000 threshold - yet 89% of homes up for sale in Hull are priced below £250,000.
We register a similar spread in Wales, where 13% of homes for sale in Monmouthshire sit below the £225,000 LTT threshold, while 78% of homes on the market in Blaenau Gwent are priced below £225,000.
Across the UK as a whole, the largest proportion of homes exempt from stamp duty can be found in the regional towns of northern England.
When it comes to local authorities, Hull has the largest proportion of stamp duty-exempt homes on the market for existing homeowners, with 89% of properties currently priced below the £250,000 threshold.
Hull is closely followed by Blackpool, Middlesbrough and Hartlepool, where 87% of homes would not be subject to any stamp duty land tax.
All of these areas are either the cheapest - or among the cheapest - areas to buy within their respective regions, with average house prices below £125,000.
Looking beyond northern England, where average house prices exceed £200,000, homes that would avoid a stamp duty bill are less common, but not impossible to find.
Nearly 4 in 5 properties are exempt from stamp duty in Stoke-on-Trent, which is the highest proportion anywhere in the Midlands.
Plymouth is the winner in the South, with just over half of homes on the market below the homeowners’ stamp duty threshold.
Where to find homes exempt from stamp duty across the UK
| Region | LA with highest proportion of homes under SDLT threshold | % of homes for sale | Avg house price |
|---|---|---|---|
| Yorkshire & The Humber | Hull | 89% | £113,200 |
| North West | Blackpool | 87% | £122,800 |
| North East | Middlesborough | 87% | £114,100 |
| Wales | Blaenau Gwent | 79% | £127,800 |
| West Midlands | Stoke-on-Trent | 78% | £132,600 |
| East Midlands | Boston | 67% | £178,200 |
| Scotland | West Dunbartonshire | 59% | £109,100 |
| South West | Plymouth | 53% | £201,200 |
| East of England | Norwich | 50% | £228,500 |
| South East | Southampton | 46% | £223,100 |
| London | Barking & Dagenham | 22% | £334,100 |
Zoopla
The areas where it's harder to avoid stamp duty
Most stamp duty payments come from the south of the UK.
With the highest house prices anywhere in the country, it comes as no surprise that London has the fewest homes that could be bought without incurring a stamp duty bill.
Only 1 in 20 homes listed for sale in the capital would qualify for an exemption and in October this year, only 4,000 homes in the capital were marketed below the £250,000 threshold.
Half of them were concentrated in 8 boroughs on the edges of London: Croydon, Hillingdon, Sutton, Barking & Dagenham, Havering, Hounslow, Bromley and Bexley.
Outside of the capital, Edinburgh has the second lowest concentration of homes below the land and buildings transaction tax threshold of £175,000.
Only 1 in 20 homes listed for sale in the Scottish capital is exempt from the tax.
Other high-value areas in the South East and East of England also have a very limited number of homes priced below the homeowner’s stamp duty threshold.
Only 1 in 17 homes in Elmbridge and St Albans and 1 in 14 homes marketed in Hertsmere would be exempt from stamp duty land tax.
How can I find a home that won’t cost me any stamp duty?
Now that you know which areas won’t cost you a stamp duty bill, it’s time to check them out on Zoopla to see if they have the home you’re looking for.
Our price filters will help you find a home that both fits your budget and falls below the stamp duty tax threshold.
You can also use Stamp Duty calculator to find out more about stamp duty, the different rates charged and how it may impact your next home purchase.
Key takeaways
- Most of them can be found in the north east, Yorkshire and the Humber and the north west. In fact in the north as a whole, 3 in 5 make the cut
- In southern England, only 1 in 6 homes for sale is priced below the £250,000 threshold
- London and Edinburgh are where homeowners are least likely to find a home exempt from the tax