Looking Back: Property Market Trends of 2023
UK House Prices Stayed Strong Despite Economic Uncertainty
In their 2023 end-of-year review, Halifax highlights the resilience of UK property prices, which proved more robust than initially anticipated, experiencing only a marginal 1% decrease to an average of £283,615. Despite this positive outcome, Kim Kinnaird, Director at Halifax Mortgages, attributes the favourable figures not to heightened buyer demand but rather to a scarcity of available properties in the market.
Yet the latest data shows that average UK property prices ended the year just 3% down compared to the peak prices of August 2022 (£293,025) and an impressive £44,000 above pre-pandemic levels. The remarkable performance underscores the market’s adaptability and resilience, offering a promising outlook for the ongoing evolution of the UK property landscape.
Scotland Continued to Fare Better Than to Other UK Nations
Regular readers of our monthly Property Market Updates will be unsurprised to read that the Scottish market has fared comparatively better than almost all other UK nations.
Data published by Nationwide as part of their annual review showed that Scotland and Northern Ireland were the only parts of the UK where property prices rose in 2023. Covering these findings, Property Industry Eye revealed that Scottish house prices rose by 3.6% year-on-year, a £6,615 increase in average property prices. This was followed by Northern Ireland, where prices grew by 2.5%, while in England, prices fell by 1.1%, and Wales suffered a dip of 2.4%.
To add to this welcome news, the latest figures showed that five of the top 20 UK regions with the highest average property price growth were in Scotland, including Clackmannanshire (8.9%), Dundee (8.2%), East Lothian (7.6%), Renfrewshire (6.6%) and Na h-Eileanan Siar (6.1%).
Mortgages Rates Began to Stabilise
Following their peak in the summer of 2023, the end of the year saw mortgage rates drop significantly, with the Bank of England maintaining the base interest rate at 5.25% three consecutive times in a row.
Mortgage rates rose sharply during 2022 and the first half of 2023 in response to the Bank of England increasing the base interest rate from 0.1% to 5.25% to tackle rising inflation. This, in turn, affected the market as borrowing became increasingly unaffordable for many buyers while remortgaging homeowners faced soaring monthly repayments. Thankfully, average mortgage rates have continued to fall steadily since July, with average two-year fixed-rate mortgages now at 5.48% and five-year rates sitting at 5.07% (as reported in the latest data from Rightmove).
But what does it all mean? While mortgage rates remain high compared to recent historically low levels, the mortgage market is much less volatile. Buyers forced to hit pause on their moving plans during the last year may well decide that 2024 is the perfect time to resume their journey now that they can better plan for what they can afford.
Looking Ahead: Property Market Predictions for 2024
UK House Prices Forecast to Fall by 4%
According to Halifax, there’s a cautious outlook for UK house prices in 2024, with predictions pointing towards a potential decrease between -2% and -4%. This is influenced by broader economic challenges and the lingering impact of higher interest rates seen throughout 2022/23, affecting mortgage affordability and sales completions. Despite this, there’s a silver lining in the forecast, as Halifax expects a partial recovery in the market next year, especially if interest and mortgage rates continue to ease.
Nationwide offers a more optimistic perspective, providing a slightly brighter outlook for 2024. The UK’s largest building society foresees a “low single-digit decline” in house prices but suggests that they might hold steady and remain “broadly flat.” According to Nationwide’s chief economist Robert Gardner, a swift rebound in activity or house prices in 2024 seems improbable. Despite acknowledging the challenges, Nationwide’s forecast introduces an element of stability, hinting at the potential for elasticity in the housing market next year.
Buyers Will Hold Increasingly More Purchasing Power
Rightmove envisions a positive shift in the UK property market for buyers in 2024, leaving behind the supply and demand challenges that have plagued the post-pandemic years. According to the real estate giant, buyers can anticipate a more abundant selection of homes tailored to their needs, with the improved balance offering them greater negotiating leverage and the luxury of time to choose their ideal home.
While the number of available homes has slowly begun to return to pre-pandemic levels, there’s no sign of an overwhelming surge in new listings that could flood the market. This increased choice, coupled with a more manageable number of buyers, creates an environment where sellers who price competitively will likely capture buyer attention.
Rightmove’s property expert, Tim Bannister, suggests that “new sellers will need to compete with their cut-price neighbours and work with their estate agent to start with a competitive price, rather than starting too high and needing to reduce later. [Rightmove] research shows that pricing right at the outset maximises the initial impact among local buyers and gives new sellers a much greater likelihood of a successful sale.”
First-Time Buyers Will Be the Largest Buyer Group in 2024
The latest data published by Zoopla suggests that despite the affordability hurdles first-time buyers face, they are poised to become the most significant segment of prospective buyers over the next two years – comprising 40% of those intending to purchase a home in 2024. The driving force behind this surge is the persistent rise in rents (outpacing average mortgage repayments over the past three years) despite the need for significant deposits in pursuit of homeownership.
Meanwhile, another prominent group in the home-buying landscape consists of upsizers, constituting a third of prospective buyers in the next two years. Typically seeking larger homes that require more substantial mortgages, this group likely took a cautious approach in 2023, awaiting a clearer economic outlook and more transparent mortgage rates. As we approach 2024, the trajectory of interest rates and the potential for better value for money will be pivotal factors influencing upsizers’ decisions.
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