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  • Writer's pictureDan Luxon

Changes we expect to see in the housing market for 2024

Whilst 2023 was a year of turbulence and confusion for many within the property market, this coming year should have much more normalcy and we hope to see a shift into a market that, if you play your cards right, can leave you in profit. In this brief article we will discuss how the housing market is changing and will shift, and what you can do best to maximise your projects and your profits. 

As per Rightmove, the asking prices for houses in December were 1.1% lower than last year, and suggest that new seller asking prices will drop nationally by another 1% as motivated sellers will now have to price their properties below local competition in order to make a sale. This can allow you to find the best deals and bargains for cheaper than in the last year, but you will also need to take into consideration that when selling you will have to price lower than you may wish too. 

Whilst there may be a drop in asking prices for sellers, a more stable housing market after the uncertainty of last year will allow family-movers to return to the housing market, and buyer demand in the mid-market and second-stepper sector should increase the most within the market. This was further enforced by the ‘Boxing Day bounce’ which saw more than 10,000 new properties being put on the market, the highest number seen since 2011. 

Whilst housing prices may decrease and you may not be able to sell your property for the maximum you wish for, it does allow for a greater number of buyers to actually buy and sell properties, and will increase customer confidence within this sector. 

Zoopla research further enforces this, as they suggest that the housing market had adjusted to the higher borrowing costs through lower sales over the last year, rather than having price drops. This is further impacted as the cheap borrowing that we saw post 2008 all the way up until covid is likely to not happen again. Whilst rates may seem very high at 4-5%, these are actually historically low figures, that will only get better throughout 2024. Even if these rates stay at a similar level all year, there is a suggestion that whilst there is a lower growth in housing prices, affordability of house prices will have to improve and will increase customer confidence.

The depressed transaction values we saw over 2023 actually allow for prices to stay subdued for now, and the closer we get to rate cuts, the closer we get to activity increasing in the market. We fully expect to see the market start to grow again in Q3 and Q4. We also expect to see price hikes once we enter 2025 as the undersupply of homes will then begin to affect the market.

Therefore, we believe it is important to buy now and develop throughout the year, as developers who buy now and sell next year are set to make a profit.

In terms of strategy when bringing a property to the market this year, the best thing to do is to price temptingly at the outset, rather than pricing very high with a great deal of optimism that someone will fork out the extra pennies. By avoiding reducing your asking price later you will find people willing to snap up properties for what you want instead of waiting the market out in hopes that prices begin to hike.  

Yes, it may seem all doom and gloom currently, but there is light at the end of the tunnel as out of a negative often comes a positive. 

The view that 2024 will be a year of greater prosperity than before is further enforced by the figures we are starting to see coming out of the construction industry, with the downturn that we saw over the last year or so has started to ease. The December figures show that there was the slowest decline in construction that we have seen since the decline started in September. 41% of construction firms predict a rise in 2024, whereas only 17% of firms forecast a continued decline. 

Another positive view of this year and what the market holds in store is the fact that mortgage rates are starting to decline. Leeds building society and Halifax have started off the year by cutting their mortgage rates by nearly 1%, swiftly followed by HSBC offering five year deals at 3.94%. Other lenders already began cutting their rates around Christmas time, with Barclays reducing their deals by up to 0.43 percentage points. Average mortgage rates have been falling slowly but surely since July, and finally fell below 6% in December for the first time in six months. 

The SONIA swaps show that within this coming year there is now room for lenders to cut their rates even more, and if/when they do so it is likely that more mainstream banks and building societies will follow suit and come the middle of the year they will be fighting it out to offer the cheapest rates. 

Yes, mortgage rates are still very high in comparison to the historic lows we have seen before but the market is in a much calmer place than it was last year. This allows buyers to better plan for what they can afford, The consequence of which will be a better looking housing market than we have seen since the post Covid mini boom. 

Lastly, what loan products do we think will be best suited to the current market . For residential developers, we do not expect a great deal of movement in the specialist development lending sector, certainly not in terms of rate, until we see a drop in the Bank of England Base rate. We are however already seeing greater appetite to lend across the development sector. We are also continuing to see lenders offering a stretched senior product which has supplanted a good deal of the Mezzanine sector that was so buoyant during the low interest rate years.

Bridging however, we expect to be very busy in 2024 on 2 fronts:

Firstly development exit products will be in great demand as the market shakes itself down from a dismal sales period through most of 2023.

Secondly with a more buoyant outlook we expect to see vendors reduce pricing either out of distress or simply due to time constraints, and greater short term below market values come to the market. This will mean higher demand for short term funding. Speed will be essential and with little variance in rate across the bridging market as a whole we predict a bumper year for the smaller privately funded more nimble bridging lenders.

Commercial development, much like residential development, has been hampered by a turgid 2023 We also saw the Buy To Let finance market grind to a complete halt with untenably high interest rates driving many portfolios undeer water. With thse interest rates coming down we now expect a rapid uptick in refinancing BTL’s and portfolio mortgages. We also expect some portfolio owners to distress sell as even with lowering of BTL mortgage rates many will find their portfolios now loss leading due to over leveraged debt and quick sale will be the only option

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