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  • Writer's pictureDan Luxon

Housing prices to remain steady as lower mortgages prompt increased demands.

Updated: Feb 1

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This year is already looking more positive in relation to the UK housing market. Housing prices look to remain steady, interest rates are predicted to fall by the end of the first quarter, and with a general election seemingly just round the corner, the general consensus within the specialist property market is certainly looking up after the turmoil of the last year in particular.  Those who have been reticent in taking out bridging or development finance may wish to think again as lower interest rates coupled with a steady housing market suggest a far better 2024. 

Below is an article published by Savills that gives their insight into the year to come


House being built.

House prices remained flat in December, putting the total value change over 2023 at just -1.8%, according to Nationwide. This average conceals significant regional variation. East Anglia saw the biggest annual falls of -5.2%, while Scotland was the most resilient market with annual growth of 0.6%. Prices have generally proven more stable than predicted, but smaller falls now may impact capacity for growth later in the year. 

The relative resilience of house prices has been supported by falling mortgage rates. Lenders have been cutting rates to compete in a low activity market and doing so in anticipation of an earlier reduction in the Bank of England base rate.

The first base rate cut is now expected in May, according to Oxford Economics, much sooner than previously forecast. Revisions to GDP figures in December indicated that the economy was weaker in 2023 than earlier figures implied. Alongside a faster than expected fall in inflation, this is likely to shift the economic focus away from inflationary pressures towards recessionary risks. This creates a stronger case for cutting the base rate sooner, although this is highly dependent on the next round of economic data. 

Demand in the housing market has risen in response to the falling mortgage rates, although it is still below pre-Covid levels. The number of surveyors reporting increasing demand rose in November, although they are still in the minority. Sales agreed also rose, with December at a 9-month high, according to TwentyCI. New mortgage approvals also ticked up in November, to 76% of the 2017-19 average for the month. This increasing level of demand and a narrowing gap compared to supply has helped ease the downward pressure on house prices.

It will take time for improved market conditions to translate into completed sales. Many months of low mortgage approvals earlier in the year have suppressed completed transactions. There were 87,640 in November, according to HMRC, -21% below the 2017-19 average. 

House price falls have been widespread, particularly in the more affordability-stretched south of the country. The greatest falls in the year to September were Runnymede (-7.2%) and Hastings (-6.4%.) Markets in the North, Midlands and parts of Wales have been more resilient, with the highest growth in Rossendale in Lancashire (7.3%) and Blaenau Gwent in South Wales (6.7%).

Annual rental growth across the UK fell to 9.0% in November according to Zoopla. The rate of growth remains high everywhere but has slowed across all regions as affordability pressures mount. Growth was strongest in the South West, North East, and Wales. Certain local areas continued to see very high growth, with 141 (37%) local authorities having annual increases of 10% or more. 

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