4 in 5 local housing markets register annual price falls, with UK house prices projected to fall 2% in 2024
30th October 2023
4 in 5 local housing markets in the UK have registered year-on-year house price falls, although the scale of price falls is limited to below 5% in all markets
Largest house price falls are concentrated in Southern England towns including Colchester (-3.5%), Canterbury (-3.4%) and Luton (-3.3%)
The rise of the cash buyer continues. This group will account for 1 in 3 sales in 2023 as high mortgage rates hit buyer demand
Modest house price falls over 2023 have not been enough to help reset affordability and support more sales. House prices are expected to fall to 2% over 2024 with faster growth in incomes steadily improving affordability.
Zoopla expects the total number of home sales in 2024 to be the same as 2023 at 1m
LONDON 30TH OCTOBER 2023: Zoopla’s latest House Price Index has revealed that house price falls are now more widespread across the country, with 4 in 5 local housing markets registering annual house price falls.
House price falls hit all English regions and Wales
The impact of higher mortgage rates and cost of living pressure is now impacting house prices across more local markets. Weaker demand and reduced buying power have resulted in a rapid cooling of house price growth from +9.2% a year ago to -1.1% today. This is the most dramatic slowdown in price growth since 2009.
Previously concentrated in Southern England, house price falls are now impacting lower-value markets with 4 in 5 housing markets registering annual house price falls - this is up from 1 in 20 just six months ago.
The scale of house price falls is limited to low single digits with the largest annual falls registered in commuter towns around London and across the South East e.g. -3.5% in Colchester and -3.3% in Luton. Of the 1 in 5 markets registering annual house price growth, the highest growth rate is +3.6% in Halifax in Yorkshire.
Currently, the number of housing sales is feeling the impact of higher mortgage rates more than house prices - with a 23% reduction in housing sales in 2023 vs 2022. Zoopla anticipates housing transactions to stay flat at 1m in 2024, although this could improve if mortgage rates drop back towards 4% over the first half of 2024. This would support a modest rebound in activity in the first half of 2024 as people who have delayed moving decide to return to the market.
The rise of the cash buyer continues
First-time buyers are on track to be the largest buyer group in 2023, closely followed by cash buyers who will account for 1 in 3 sales in 2023. This is an increase from an average of 1 in 5 sales over the past 5 years. Many cash buyers have room to be more realistic on price as they are also mortgage-free sellers who have lived in their homes for many years. Their realistic outlook on pricing will also support the number of transactions in 2024.
Looking to 2024, cash buyers will remain an important buyer group alongside first-time buyers who will continue to be pushed into buying by the continued, rapid growth in rents.
Upsizers are the group most sensitive to higher mortgage rates as they tend to buy bigger homes which require larger mortgages. The risks of big price falls are abating as a reason not to move but higher mortgage rates remain the most important factor. Lower mortgage rates would bring more upsizers in the market in 2024 and support overall sales volumes. With mortgage rates looking like they will stay higher for longer, upsizers need to be more flexible and what they want to buy and where to unlock that next move.
What’s next for the housing market?
Looking ahead, housing affordability needs to improve to price more buyers back to the market and support more sales. UK house prices have fallen less than we expected over 2023. Together with 5% mortgage rates, it means purchasing a property still remains relatively expensive for an average household.
To see a meaningful reset when it comes to affordability, house prices will need to fall further as incomes increase (assuming mortgage rates remain broadly unchanged for the first half of 2024).
Assuming mortgage rates drop to 4.5% by the end of 2024, Zoopla expects that house price growth will remain negative with prices down 2% next year. A faster fall in mortgage rates towards 4% would boost sales activity rather than house prices.
Commenting on the market outlook Richard Donnell, Executive Director at Zoopla says:
“House prices have proven more resilient than many expected over the last year in response to higher mortgage rates. However, almost a quarter fewer people will move home due to greater uncertainty and less buying power.
“Modest house price falls over 2023 mean it’s going to take longer for housing affordability to reset to a level where more people start to move home again. Income growth is finally increasing faster than inflation but mortgage rates remain stuck around 5% or higher. We believe that house prices will post further small falls, averaging 2%, over 2024 with 1m home moves.
“Slow house price growth and rising incomes over the next 12-18 months will improve affordability to levels last seen a decade ago, creating the potential for a rebound in home moves as consumer confidence returns. “
Karl Knipe, Director of Kings Group said: "It's important to take a long-term view when buying a house. Very low single-digit price rises or falls make no difference when buying a home that you will live in for many years - it shouldn't be relevant. The forecasts are showing that 2024 looks like it will be a similar year to 2023, so if you want or need to move and buy your own 'castle' - now is the time to do your homework and put yourself in the best position for the new year knowledge wise, financially wise and ability wise. This will ensure you're set up to move quickly if you find a home that suits your needs."
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