Predictions for the housing market in the UK for 2024 point towards a decline in house prices alongside a continued rise in rental costs, according to assessments by analysts and financial
institutions.
Projections from various sources suggest a potential drop in property prices, with estimates varying among experts. The government's official forecaster anticipates a possible decrease of nearly 5%, while lenders are slightly more optimistic about the extent of this potential decline.
Simultaneously, industry specialists predict a further increase of 5-6% in rents for newly-let properties following a period of substantial escalations. This upsurge in rental prices could offset the advantages of falling house prices for aspiring first-time homebuyers.
The strain caused by soaring rental expenses has been a challenge for many tenants, constraining their ability to save for a deposit toward homeownership. These steep costs have limited the financial flexibility of individuals aiming to enter the property market.
A sluggish economic outlook for 2024 is expected to influence the housing sector significantly. The prospect of an uncertain job market might affect the confidence of individuals planning to relocate or purchase their first homes. Additionally, prevailing expectations indicate that mortgage rates will likely remain higher than what many have been accustomed to, impacting the financial obligations of homeowners. As existing fixed-rate deals expire for around 1.6 million homeowners in the coming year, there could be a notable increase in monthly repayment amounts for the majority of them.
Forecasts indicate a potential decrease in mortgage lending, with UK Finance, representing banks and lenders, estimating an 8% decline in lending for house purchases in 2024. This decline could also lead to more individuals falling into arrears.
Notably, leading financial institutions such as Nationwide and Halifax have differing perspectives on the extent of the expected downturn. While Nationwide's chief economist, Robert Gardner, foresees house prices remaining stagnant or experiencing a slight decline of up to 2% on average, the Halifax predicts a fall ranging between 2% and 4%. Factors such as the economy's performance and gradual changes in mortgage rates contribute to these projections.
In the rental market, tenants have grappled with surging costs and fierce competition for available properties. Rental expenses have surged significantly, with data from Zoopla indicating a 31% increase over the last three years. However, projections suggest a potential slowdown in the rate of rental growth in 2024, with an anticipated 5% annual growth by the year's end.
Landlords facing financial pressures have contributed to a shortage of available rental properties. This situation might persist for the next couple of years, affecting the housing market until interest rates decrease substantially. Industry forecasts from Savills indicate an expected 6% rise in rents for 2024, outpacing income increases and potentially leading to a slower rate of rental growth in subsequent years due to affordability constraints.
To navigate the competitive rental landscape, experts suggest practical strategies such as early property search, maintaining documentation like payslips and references, establishing relationships with local agents, and being well-informed about budget constraints and upfront offers.
These predictions and insights underline the challenges and dynamics anticipated in the UK's housing market for the upcoming year, affecting both potential buyers and tenants alike.