Home buyers and sellers are back in market

Demand for homes up 11% as buyers and sellers return to market in growing numbers, boosting sales. Our Executive Director of Research, Richard Donnell, has the latest.

Buyer demand now 11% higher than last year

The first weeks of January got off to a strong start with activity spurred on by falling mortgage rates and pent-up demand from the second half of 2023.

Our latest data shows this momentum has been carried into the first half of February.

At a headline level, buyer demand is running 11% higher than this time last year. Buyer numbers are up across all parts of the UK but London is firmly out in front, followed by the North East and North West regions.

London’s housing market has lagged behind the rest of the UK for seven years since 2016 with low levels of house price growth due to stretched housing affordability.

The average value of a flat is just 13% higher than in 2016, compared to the UK average house price being 33% higher and up to 50% higher in Wales.

Better value for money is improving the prospects for London but it remains an expensive housing market.

A healthier market with more sales agreed

One of the best ways to assess the overall health of the housing market is to look at the trends in the number of sales being agreed.

If buyers and sellers are agreeing more sales then that shows a healthier market, with people able to fulfil their home moving ambitions.

The fact we have almost a fifth more homes for sale than a year ago is helping, providing buyers with more choice and boosting the chances of sales being agreed.

Our latest data shows sales agreed are up across all regions and countries of the UK and more than 10% higher in six regions led by London, the South East and Yorkshire and Humber.

Increasing demand and sales bring more sellers into the market

Improving market confidence is bringing more sellers into the market. We have seen an increase in the number of new homes being listed for sale.

The flow of new homes for sale is 10% higher than a year ago and the highest it’s been since 2020. New sellers are listing their homes at the fastest pace in the East of England, the South West and North East.

33 days to agree the sale of  a home

In 2023 the average sale took 34 days - from the property first being launched to the market to  a sale being agreed, subject to contract.

This is 2 weeks longer than the hotter pandemic fuelled market of 2022 - when homes went under offer in 20 days.

Pitching the asking price at the right level is key to attracting demand and getting a sale agreed. This can be harder for unique or unusual homes.  Sellers need to speak to local agents to understand the market and the demand for their type of home.

The longest sales periods in 2023 were up to 40 days in London and the South East with the fastest sales periods in Scotland (20 days) and the North East (30 days).

This difference primarily reflects housing affordability and the impact of higher mortgage rates on buying power in markets with high house prices.  It’s why falling mortgage rates are boosting activity more in southern England, especially London.

It’s important to note that once a sales has been agreed, it can take another 3-6 months for the legal and mortgage process to get to an exchange of contracts - and then legal completion, when you can get the keys to your new home.

Key takeaways

• Buyers and sellers are returning to the housing market in growing numbers, boosting sales across the UK
• London is leading the way in terms of buyer demand, followed by the North East and North West regions
• Meanwhile, the flow of new homes for sale is 10% higher than a year ago and the highest it’s been since 2020

 

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by Blackstones

Average rent in London: February 2024

The average rent in London is now £2,119 per month after +6.4% growth in the last year. The cheapest average rent is in Bexley (£1,520) and the highest average rent is in Kensington and Chelsea (£3,460) although rental increases are slowing in the most expensive parts of the city.

London is by far the most expensive place to rent a home in the UK with an average rent of £2,119 for new lets. Average rents in London are almost double the UK average of £1,220.

However, rental inflation in London has slowed in the last 12 months, now at +6.4% versus +16.1% a year ago. This is currently lower than UK-wide growth of +8.3% over the last year.

Average rental prices in London

Key takeaways

• London’s average rent is currently £2,119 after +6.4% growth in the last year
• This annual increase is lower than the UK as a whole as London rents have started to reach an affordability ceiling
• The borough of Bexley has the cheapest average rent in London at £1,520 but rents are still rising quickly in these comparatively cheap spots on the outskirts
• Rents are much higher in Inner London boroughs like Kensington and Chelsea, the City of Westminster and Camden but annual increases are lower at around +5%

 

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by Blackstones

Average rent in the UK: February 2024

The average rent in the UK is now £1,220 per month after 8.3% growth in the last year. The highest average rent in the UK is in London (£2,119) while the North East has the lowest monthly rent (£695).

The average UK rent for new lets has now reached £1,220, an +8.3% rise in the average UK rent over the last year.

This equates to UK renters paying an extra £1,100 per year (or £90 per month) compared to a year ago.

However, this rate of inflation is lower than we’ve seen at any time during the last two years. In 2023 alone, rental growth dropped from +11.4% to +8.2%.

Average rental prices in the UK: last 3 months

Average rent by region

Average rents vary across the country, from a high of £2,119 per month in London to £695 per month in the North East.

Rent growth has now slowed in all regions except the North East. Average rents for new lets in the region increased by +9.3% in the last year, compared to +8.1% the year before.

The table shows current average rents for new lets across UK regions and how much they have changed in the last year.

Key takeaways

• The average UK rent has risen 8.3% on average in the last year, adding £1,100 to the average annual bill
• UK renters are now paying £1,220 per month on average, ranging from £695 in the North East to £2,119 in London
• Rental growth slowing to single digits is a sign we're past peak growth after nearly two years of 10%+ increases
• Scotland continues to register the highest rental growth for new lets despite rent controls
• London is seeing growth slow the most as rents hit an affordability ceiling
• We expect a further slowdown in rental growth in 2024 as worsening affordability keeps demand in check

 

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by Blackstones

4 things you might not know about homelessness

Ruth Stone is a Strategic Communications Project Manager at Crisis and her role is all about helping people understand the realities of homelessness. Here, she shares 4 things you might not know about homelessness.

What does home mean to you?

For me, it’s a place I share with my partner and our cats. It’s a space to unwind and be myself. I’ve moved home a lot – and whenever I get to a new place, I unpack my things as quickly as possible so it feels like home. I start with the kitchen because I am never happier than when I’m cooking.

Whatever home means to you, it’s about much more than a roof over your head or somewhere to sleep. And yet sometimes we can forget this when we think about the issue of homelessness.

The views that we have about any topic – including homelessness - are formed in us over a long period of time. They come from our experience, our culture and our media. What we see and hear on the news, in film, on podcasts or just in conversation with family, friends and colleagues all shapes our thinking.

When it comes to homelessness, research has shown there is often a big gap between the realities of what it is, what causes it and how to end it - and how people think and understand the issue.

My role at Crisis is focused on helping to close this gap by working with organisations and individuals to tell a different and more helpful story about homelessness. Which is why I’m sharing four things you might not know about homelessness.

1. Homelessness can be visible or hidden

Homelessness doesn’t look one way. When we think about homelessness, we tend to go straight to the most visible form - rough sleeping. Which makes sense as this is the type of homelessness we see as we travel around our towns and cities.

But homelessness can also be less visible or hidden. For example, many people might be sleeping on a different friend’s sofa every week.

Hidden homelessness also includes unconventional accommodation. This is when people sleep in spaces that are not intended as residential accommodation, like a car, lorry or shed. Some people sleep on public transport because they have nowhere else to go.

None of us should be forced to experience any of these types of homelessness. All of us should have a safe and stable home.

2. Homelessness can be short term or long term

Hostels, shelters and refuges are forms of emergency and temporary accommodation. People may be in this type of accommodation from one night to indefinitely.

The cost of living, rising rents and a sheer lack of truly affordable homes means a record number of us are currently trapped in temporary accommodation.

When we’re forced to live in temporary accommodation that is often unsuitable, insecure and far away from our support networks, it makes it so much harder to do basic things – like register for a doctor, cook a healthy meal, travel to work or do our homework.

3. All forms of homelessness are bad for our health

Whether someone is sleeping on the streets in fear of their safety, facing the constant stress of living with their family in a cramped hotel room or having to move to another sofa week after week, homelessness takes a huge toll on people’s mental health.

Home should be a space where we can thrive. Where we can relax and spend time with our loved ones. It should be a place where we can rest and recover if we are ill.

It’s not ok that the health and wellbeing of hundreds of thousands of us is being harmed by homelessness. But it doesn’t have to be this way!

4. Homelessness can be ended

The final thing I want to share about homelessness is that it can and must be ended. This isn’t me being optimistic or naïve. This is something that is entirely achievable – but it requires political commitment as well as support from people like you.

My Grandma was born in 1924 – four years before women in the UK had the same voting rights as men. As a queer person, I grew up thinking I’d never be able to marry someone that I love. We decided as a society that things could be different.

And we can do the same with homelessness.

We know what needs to be done - just like we did with voting rights, and with equal marriage. We need to build more truly affordable homes and provide more support for those of us at the brink. The more of us who come together to demand this change, the louder our voice will be heard.

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by Blackstones

Bank Rate holds at 5.25%, so when will rates drop?

The Bank Rate has remained unchanged for the fourth time in a row since it was raised from 5% to 5.25% in August 2023. Rate cuts aren’t expected until later in the year but mortgage costs have still been falling.

Why has the Bank Rate stayed the same?

The Bank of England monetary policy committee voted by a majority of 6-3 to keep the Bank Rate unchanged this month, with two members voting to increase it by 0.25% and one to cut it by 0.25%.

Although energy prices have fallen, wage growth has eased and the prices of goods and services have been rising more slowly, there’s still a risk that overall inflation will increase again.

The conflict in the Middle East and the attacks on container ships in the Red Sea are two of the factors that could see prices rising faster again.

The committee forecasts that inflation will temporarily fall to its target of 2% in the second quarter of 2024 but that it will increase again over the rest of the year.

It then thinks it will be 2.3% in two years’ time and 1.9% in three. Because of this, there are no rate cuts for now, despite little economic growth.

The Bank of England is giving nothing away about how long it thinks rates should stay the same but experts are predicting that there could be a cut in May or June.

What’s happening to mortgage rates?

While borrowers on variable rates will be disappointed that the cost of their mortgages won’t be going down this month, lenders have been cutting the rates of new mortgage deals over the last six months.

This is good news for first-time buyers but anyone remortgaging is still likely to experience a shock increase in their mortgage repayments.

Mortgage costs – whether you’re taking out a new deal or reverting to your lender’s standard variable rate – remain much higher than they were two or five years ago, when most borrowers would have taken out their current deals.

How have higher mortgage costs affected house prices?

Higher mortgage rates led to fewer property purchases and less mortgage lending in 2023, according to industry body UK Finance. Despite this drop in demand, house prices didn’t follow for the majority of UK homeowners.

According to our latest data, more than half (56%) of homeowners saw the value of their homes stay the same or increase by at least 1% in 2023.

A quarter of homes increased in value by between 1% and 5% while a 10th increased by a sizeable 5% or more.

The average value increase was £7,800. Percentage price rises were larger in more affordable areas of the country, with the biggest increases in the North West and Scotland.

This is dramatically different to 2022, though, when 96% of homes saw their value staying the same or going up and the average increase was £19,700 where it did rise.

What’s the outlook for the mortgage market?

While mortgage costs have been going down, mortgage rates will continue to be relatively high compared to two or more years ago. Rate cuts are on the horizon, though, which will be welcome news for first-time buyers and homeowners alike.

Our Executive Director of Research, Richard Donnell, says: 'The debate about the timing and scale of base rate cuts is important for the mortgage rate outlook.

'The peak in base rates last year led financial markets to bet on lower rates in 2024 and into 2025, which have shaved almost 1% off fixed rate mortgages over the last 2 months.

'There is a sense these cuts to rates are close to bottoming out for now and unlikely to move any lower.

'Inflation is down but not out and central banks want to get it under control before cutting base rates.

'It looks likely mortgage rates will remain in the 4.5% to 5% range, which is still cheap by long run standards.

'Those looking to move or refinance should chat to a broker and seek advice about the rates available and the best strategy for them.'

Key takeaways

• The Bank Rate remained at 5.25% today, despite hopes it would come down
• Inflation has fallen significantly over the past year but it's still above the Bank of England’s target of 2%. It stood at 4% in December 2023, unexpectedly rising slightly from November’s figure of 3.9%
• World events are among the factors that could push inflation up again in the second half of this year
• But experts are predicting that there could be a cut in May or June

 

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by Blackstones

The home value winners and losers this year

Where did homeowners gain value in the last year? Do you fall into the not-to-lucky group who lost more than 5%? Let’s find out.

Just over a year ago, all the talk was around house prices dropping by up to 10% in 2023.

But things don’t seem quite so bad in hindsight.

And a huge 77% of home values remained within the +/-5% range, highlighting the more stable nature of house prices since stricter mortgage restrictions were introduced in 2015.

Although there are some winners: 1 in 10 UK homeowners gained 5%+ in value, gaining £17,200 on average.

And some losers: just over 13% of homes dropped more than 5% in value, each losing an average of £13,200

Key takeaways

• 1 in 10 UK homeowners gained 5%+ in value in 2023
• The largest proportion of homeowners (77%) saw no significant change to their home’s value in 2023, contradicting predictions of major price falls
• But there are some losers - 13% saw their home’s value fall by 5%+ in the last year

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by Blackstones

3 in 5 homes rise in value over 2023

At the beginning of 2023, commentators predicted home values would plummet by as much as 10% over the course of the year. Here’s what actually happened.

In 2023, the press was filled with gloom and doom predictions of homes plummeting in value by as much as 10%.

However, our data reveals that in reality, more than half of UK homeowners (56%) saw their home values stay the same or increase by at least 1% over the course of the year.

Senior Property Researcher, Izabella Lubowiecka, says: ‘Where values went up, the average increase seen was £7,800. And 1 in 10 (or 3 million) UK homeowners even registered gains of more than 5% (or £17,200).’

It is a different picture to what happened the year before in 2022, when 96% of homes either held their value or saw an increase. Back then, the average value hike was £19,700.

However, we can clearly see that most homeowners didn’t see the hefty value falls that some initially predicted.

Where did homes rise in value in 2023?

‘There is a clear north-south divide in the fortunes of homeowners during 2023,’ says Lubowiecka.

‘Areas with lower house prices were cushioned from the impact of higher mortgage rates, helping to support activity and sustain house prices in these regions.

‘So in the more affordable parts of the country, such as the north, home values increased.’

In fact, the North West led the way in value gains, with the highest proportion of homes registering value increases of 5% or more (£13,200 on average).

Here, terraced homes proved to be the hottest properties, with 19% of terraces rising by 5%+.

It was hotly followed by Scotland, where 16% of homes (400,000), increased in value by 5%.

Here, apartments proved to be the highest risers, with 19% registering a value increase of 5%+.

The North East and Yorkshire and the Humber take joint third place, with 1 in 7 homes going up in value by 5%+.

Flats were the winners in the North East, with 25% rising by 5%+ in value.

Meanwhile, in Yorkshire and the Humber, terraced homes came up trumps, with 16% rising by 5%+.

Which types of homes held their value in 2023?

In 2023, the nation’s favourite property types: semi-detached homes and terraces, proved to be the best at holding their value.

‘Homes seen as good value for money continued to attract buyer interest, leading to stronger price performance,’ says Lubowiecka.

‘That said, the larger value gains of 5%+ were equally spread across different property types and enjoyed by 1 in every 10 UK properties.’

Where did home values fall in 2023?

While home values did better than expected, not all homeowners saw their homes increase in value in 2023.

44% of UK homes fell in value by at least 1% over the course of the year. Within that 44%, one third of homes lost 5%+ of their value from 2022.

Homeowners in the South, where house prices are less affordable, were most likely to see the falls.

Some 3 in 5 (or 4 million) homeowners in the East and the South East of England saw a value decrease of 1% or more.

And just over a million of these saw decreases of 5% or more.

‘In the East of England, the average loss was £11,500, while in the South East, it was £13,200,’ says Lubowiecka.

‘The coastal areas of Kent and East Sussex suffered the most in terms of value losses, with half of homeowners in Dover and Hastings experiencing value falls of 5% or more.’

During the pandemic, these rural and coastal areas within commuting distance of larger cities saw a large influx of buyers, boosting house price growth.

But now demand is starting to wane, leading to larger value falls here.

Which types of homes lost the most value in 2023?

Detached houses were most likely to lose value in the East of England (23%), while in the South East, apartments bore the brunt of the losses (25%).

Across the UK as a whole, value drops were more common for detached houses and bungalows, which are less common and often priced at a premium. 48% of these property types lost value in the last year.

Flats also suffered in 2023, despite some pick-up in buyer interest. Our data shows that exactly half of UK flats lost some value last year.

Larger flats fared better than smaller flats, with 52% of 3-bed flats holding or increasing in value. But in contrast, only 46% of 1-bed flats enjoyed the same benefits.

Why we didn’t see house prices plummet in 2023

New mortgage regulations introduced in 2015 helped to prevent homes from being ‘over-valued’, which can lead to property market crashes.

When agreeing to offer mortgages, lenders had to ensure their borrowers could still repay those mortgages at higher interest rates when they took out the loans.

So, if your mortgage rate was say, 2%, you had to prove you could still afford to repay it if it rose to 5%.

That, in turn, meant borrowers wouldn’t be forced to sell their homes if mortgage rates increased, because they had already proven they could meet those higher monthly payments.

Lots of forced sales negatively affect property values, so these regulations helped to  protect house prices from a major downturn.

Will home values rise or fall in 2024?

‘Zoopla predicts modest house price falls of 2% in 2024 across the UK,’ says Lubowiecka.

‘This signals a repetition of the last year in terms of pricing as well as key themes influencing the market.

‘How this is going to impact your home value depends on where you are in the country and what property type you own. But we expect those who saw home value growth in 2023 to see similar increases in 2024.’

Higher mortgage rates will continue to limit many peoples’ buying power, and this impact will be most felt in the high-value regions in the South.

‘We anticipate further value drops in the south, especially in areas where values shot up during the pandemic.

‘Flats and detached homes here are most likely to register further value falls, so if you’re planning to sell a home like this in 2024, it’s important to set your price at a realistic level right from the start,’ advises Lubowiecka.

Meanwhile, popular property types such as terraces or 3-bed houses that offer good value for money are likely to hold or increase in value.

Thinking of selling? It’s always a good idea to speak to a local agent to get a valuation for your home.

Estate agents will be on top of all of the local market trends in your area, while taking into account your property’s unique characteristics and all of the improvements you’ve made to it to set the best possible price for a sale.

How we calculate our home values

Monthly estimates for every home in the UK, to show homeowners how much their home is worth.

Our data source, Hometrack's market-leading Automated Valuation Model, is reliably used by mortgage lenders across the UK to assess a home’s value.

And while not as conclusive as an agent valuation, which takes in all of the recent work you might have done to your property, our estimates provide a good initial indication of your home’s worth to help you unlock your next move.

How current estimates differ from sold house price data

Every month, we and many other organisations publish a house price index.

House price indices are a useful guide to the overall direction of travel in national house prices.

But homeowners really want to understand how the value of their own home is moving over time, which could be different to what’s reported in a national index.

In 2023, most house price indices registered modest annual price falls as higher mortgage rates hit buying power.

Many places experienced price falls for the first time since the Global Financial Crisis in 2007.

But while the overall average UK house price moved lower over 2023, the nation’s 30 million homes are spread across thousands of housing markets.

And our data reveals not every home fell in value last year: 3 in every 5 homeowners can testify to that.

Key takeaways

• 3 in 5 homeowners saw their homes hold their value or rise by an average of £7,800 in 2023
• 1 in 10 saw their home’s value increase by 5% or more
• Greater gains were seen in affordable areas like the North West, whereas homes in the South were more likely to see values drop

 

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by Blackstones

Two-thirds of first-time buyers team up to step on the property ladder

First-time buyers accounted for more than half of all home loans in 2023 - and more than two-thirds teamed up to secure their own homes.

Almost two thirds of first-time buyers teamed up last year in a bid to get onto the housing ladder.

Against a challenging economic backdrop, 63% of first-time buyer mortgage completions in 2023 were in joint names, with two or more people. Just 37% were sole applications, according to the latest research from Halifax.

First-time buyers accounted for just over half (53%) of all home loans last year, the highest proportion since 1995.

But the overall number of buyers that stepped onto the housing ladder last year stood at 293,339 – a 21% drop compared with 2022.

The number of first-time buyers fell in all regions across the UK in 2023, with the greatest drops in East Anglia and the south east.

What was the average deposit paid by first-time buyers in 2023?

Halifax said it was ‘unsurprising’ that the bulk of first-time buyer mortgage applications were joint, given the increase in deposits over the last decade.

First-time buyers forked out an average deposit of £53,414 last year, around 19% of the purchase price. That’s £9,057 (15%) less than in 2022 but £21,000 (67%) more than 10 years ago.

And even though the typical salary is higher than 10 years ago, first-time buyers have to save more than a year’s average pay for a deposit large enough to buy a first home, according to the lender.

Terraced homes most popular among first-time buyers

In a glimmer of hope for aspiring homeowners, the average price tag of a home for a first-time buyer fell 5% from its peak in 2022 to £288,136.

But house prices for first-time buyers remain over £132,000 (86%) more expensive than a decade ago.

Halifax’s research also revealed that terraced homes were the most sought-after type of property for first-time buyers in 2023, making up 30% of all first-time buyer mortgages.

But their popularity has faded over the last decade, with the number of first-time buyers snapping up a terraced home dropping by 7% compared with 2013.

Flats, on the other hand, have risen in popularity. The number of first-time buyers purchasing a flat over the last 10 years has climbed by 6%, increasing in every region and nation in the UK.

Where are the most affordable places to step onto the housing ladder?

First-time buyers should look to Scotland to boost their chances of homeownership. Many of the most affordable places to buy a first home are in Scotland, said the lender.

Inverclyde was crowned the most affordable area last year, where properties were around 2.6 times the average salary (£41,598).

At the other end of the spectrum, London was home to some of the least affordable places to get onto the housing ladder. Properties in Islington, north London, were a whopping 10.6 times the average salary (£57,548).

To put these figures into wider context, average property values for first-time buyers are around 6.7 times the average UK salary (£43,257), according to Halifax.

Kim Kinnaird, director, Halifax Mortgages said: ‘Following a record year in 2021, unsurprisingly in view of the wider economic environment, the number of first-time buyers joining the property market fell again in 2023 to around 293,000.

‘Despite this drop, new buyers made up over half of all home loans. However, to get a foot on the ladder most people are now buying for the first time in joint names.

‘The overall fall in house prices we saw in 2023 will go some way to helping people get on the ladder for the first time – but these buyers are still dependent on a steady supply of properties in their price range, while they are faced with the continued pressure of saving for a deposit, when rent and living costs are high.'

Key takeaways

• Almost two thirds of first-time buyers teamed up to buy a home last year, with 63% of mortgage completions in joint names, says Halifax
• The average deposit paid was £53,414, around 19% of the purchase price
• Inverclyde in Scotland has been crowned the most affordable place in the UK to step onto the housing ladder, while Islington in London is the least

‘First-time buyers have been hit especially hard by rising mortgage rates. The sub-4% deals we increasingly hear about are typically for those with equity levels of 40% or more,’ explained Tom Bill, head of UK residential research at Knight Frank.

‘The government is likely to offer first-time buyers more financial support ahead of the election this year given that housing is a key political battleground and based on the belief that homeowners are more likely to vote Conservative.’

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by Blackstones

Will house prices rise in 2024?

If you’re planning to buy or sell a home in 2024, what should you do? Our Executive Director of Research, Richard Donnell, shares his UK house prices forecast.

The first weeks of January have been full of reports about improving conditions in the housing sales market. Some are now projecting that UK house prices might even rise in 2024.

There has been a bounce-back in activity, which has followed the usual seasonal pattern.  This is positive news but home buyers and sellers shouldn’t get too carried away with the hype.

Our data shows we are still locked in a buyers market, so it’s unlikely that we will see prices rise in 2024 at a national level. But at the same time, they haven’t fallen much over the last 12 months, despite mortgage rates more than trebling since 2021.

We believe that house prices still need to adjust to higher mortgage rates, even though these are now falling and appear to be on track to get into the 4%-4.5% range later this year.

This means sellers have to remain realistic on what someone will pay for their home and seek advice from an estate agent on how best to get their home ready to sell.

Return of pent-up demand after weak 2023

Demand for homes has certainly jumped out of the blocks in the first weeks of January as pent-up demand from 2023 returns to the market, encouraged by falling mortgage rates.

More than 75% of all homes currently for sale are featured on Zoopla and we can see that buyer demand is 10-15% higher than the pre-pandemic years of 2017-2019 - and also higher than at the start of  2023.

However, demand levels are still more than a third lower than they were at the start of the hotter pandemic years of 2020-2022.

Plenty of choice for buyers will keep price rises in check

While we have a return of buyers into the housing market, there are also many more homes for sale. This greater choice of homes available is likely to limit the scope for price rises in 2024.

One feature of the pandemic years was a chronic shortage of homes for sale, which drove faster price rises. The low point was just 14 homes per estate agent in late 2022.

Supply is now more than double these lows and back up to an average of 30 homes for sale per agent, closer to the pre-pandemic average.

There are also more larger, 4+ bed family homes for sale, as some sellers re-list homes that might have been on the market in 2023 and struggled to attract interest.

More supply and weaker demand led to a drawn out re-pricing of homes listed for sale over 2023, as sellers adjusted asking prices lower in order to attract demand.

This accelerated in the second half of 2023 as higher mortgage rates hit buying power.

Asking price reductions for homes listed for sale have picked up again in January 2024, which is a sign that house prices are still adjusting to higher borrowing costs.

They aren’t as high as this time last year but are higher than those seen in previous years, as sellers speak to their agents about how to pitch their home at the right price level to attract renewed interest.

Half of owners with a mortgage still need to move onto higher mortgage rates

Buyers remain price sensitive and many with mortgages are still yet to remortgage onto higher rates.

The Bank of England estimates that around 55% of mortgage accounts (around 5 million), have remortgaged since rates started to rise in late 2021.

Higher mortgage rates are expected to affect around a further 5 million households by 2026.

For the typical owner-occupier mortgagor rolling off a fixed rate between 2023 Q2 and the end of 2026, their monthly mortgage repayments are projected to increase by around £240, or around 39%.

The good news is that the more mortgage rates decline, the smaller the jump in repayments.

However, for those looking to buy a home and trade-up for more space or a nicer area, this means spending more and taking on a larger loan, adding to monthly mortgage payments.

With inflation not falling as fast as economists expected, the decline in mortgage rates is set to moderate, despite intense competition between banks.

The cost of mortgages is set to keep buyers focused on value for money, even as mortgage rates fall, keeping prices in check.

It's still a buyers market and sellers need to price carefully

The average UK seller is having to accept offers below the asking price and the typical discount from the asking price to the agreed sale price is around 5%.

This is slightly below the long run average and well down on the hot market conditions seen over the pandemic years.

This proportion is not growing, which means larger price falls are unlikely. But it shows sellers will need to price carefully to ensure they attract demand.

The proportion of sellers achieving their asking prices varies across the UK, with slightly larger discounts happening in southern England.

Here, prices are higher than the national average and for that reason, the impact of higher mortgage rates on pricing levels has been greater than in other regions.

How should sellers and buyers respond to the positive start to 2024?

The positive news at the start of 2024 should boost market confidence and encourage more buyers and sellers into the market.

But it’s important sellers don’t get too carried away and shift expectations on what their home is worth in 2024 versus 2023.

It all depends on what you are looking to sell and how closely this matches to who is in the market looking to buy in your area and price range.

For example, we expect first time buyers to remain a very important group in 2024. However,  this group is not focused on buying larger homes, where there is more supply.

Larger homes will mainly appeal to upsizers, who are likely to need bigger borrowings to buy at higher mortgage rates than 2-3 years ago.

We don’t expect house prices to suddenly start rising in 2024, but more demand and sensible pricing of homes for sale is likely to boost housing sales and overall levels of activity.

 

Key takeaways

• We are still locked in a buyers market, so it’s unlikely we'll see prices rise in 2024 at a national level
• House price falls were modest in 2023, despite mortgage rates more than trebling since 2021
• But buyers remain price sensitive and 45% of those with mortgages are yet to remortgage onto higher rates
• Inflation appears sticky, meaning there is only so far mortgage rates are likely to fall
• The average UK seller is having to accept offers and is getting around 95% of the asking price, so sellers must remain realistic on pricing

 

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by Blackstones