House prices will fall by between 2% and 4% in 2024, forecasts Halifax, due to “broader economic challenges, and the likelihood that mild downward pressure on house prices continues.”
The lender’s data follows the Bank of England’s Monetary Policy Committee holding the base rate at 5.25% yesterday – but this comes after rates rose 14 times in a row from a historic low of 0.1% in December 2021.
The move by the central bank has hiked mortgage rates, with around 1.6 million deals due to end in 2024, according to UK Finance, many of whom will roll off sub-2% home loan rates onto monthly payments that are hundreds of pounds higher.
“Pressure on household finances – notably from inflation and higher interest rates – has impacted housing affordability, leading to fewer completions,” says Halifax in its Housing Market Review and 2024 Outlook.
The report adds that the average UK house price is now £283,615 compared to £286,328 a year ago, a fall of £2,713.
House prices have fallen 1% in the year to November, while property prices for first-time buyers edged 0.5% higher in that period.
However, the survey points out that average property prices are 18.6% higher than at the onset of the pandemic in March 2020 when the average house price stood at £239,176.
Halifax Mortgages director Kim Kinnaird says: “This resilience – which owes more to the shortage of available properties for sale than the strength of demand among buyers – means average house prices end the year just 3% down on August 2022’s peak, at £293,025, but £44,000 above pre-pandemic levels.
“To some extent, this masks the fluctuations we’ve seen in the housing market throughout 2023. As wider economic headwinds began to bite, house prices fell for six consecutive months between April and September, before rising again later in the year as prospects improved.”
Kinnaird points out: “Looking ahead, now that inflation is falling back, financial markets are pricing in cuts to base rate during 2024. Mortgage rates are already falling, with a typical five-year fixed-rate 75% loan-to-value deal now below 5%, having been as high as 5.7% as recently as July.
“All being equal, these rates are expected to fall further over the coming months.
“However, while pay growth is now above inflation – beginning to ease the cost-of-living squeeze for some – other factors will continue to weigh on households’ spending power next year.
She adds: “Economic growth is expected to remain weak, with unemployment rising and frozen tax thresholds limiting any increase in take-home earnings.
“Overall, with the combination of cost-of-living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices.
“Our latest forecast suggests a fall of between 2% and 4% in 2024, though it should be noted, as with recent years, forecast uncertainty remains high given the current economic environment.”
Quilter mortgage expert Karen Noye says: “The truth is that much of the reason why house prices have remained buoyant in the face of serious economic headwinds is that this country has very little housing stock for its population.
“Laws of supply and demand mean that at present despite lower demand, the lack of supply has made sure property prices have only dropped a few percent.
Noye adds: “Looking to next year, we are unlikely to see rapid changes to the interest rates although we are hopefully now going in the right direction with inflation so we can hope for some downward movement.
“However, mortgage rates have stabilised and this should help tempt those who have adopted a wait and see approach back to market now they have some more certainty that the rug won’t be pulled from under them by sudden increases in mortgage rates.
“A soft landing is looking more likely at the end of the year than it did at the beginning.”
