Decoding the 2024 Real Estate Market: Expert Insights and Forecasts:

Amid the flurry of optimistic reports on the housing sales market in the first weeks of January, questions arise regarding the potential trajectory of UK house prices in 2024. Contrary to some projections, data suggests that we are still entrenched in a buyers' market, indicating that widespread price increases at a national level are unlikely this year.

Despite the modest falls in house prices witnessed in 2023 and the tripling of mortgage rates since 2021, the decline in prices has not been significant. Zoopla's analysis indicates that house prices still need to adjust to higher mortgage rates, even as rates are expected to stabilise between 4% and 4.5% later this year.

Return of Pent-Up Demand and Market Dynamics:

The initial weeks of January have seen a resurgence in housing market activity, with pent-up demand from 2023 making a notable comeback. Encouraged by falling mortgage rates, more than 75% of homes currently for sale are listed on Zoopla. Buyer demand has increased by 10-15% compared to pre-pandemic years of 2017-2019, indicating a positive trend. However, demand levels remain over a third lower than the high of the pandemic years of 2020-2022.

Supply and Demand Dynamics Impacting Prices:

While buyer interest has rebounded, the supply of homes for sale has also increased, limiting the potential for substantial price rises in 2024. During the pandemic years, a shortage of homes for sale contributed to faster price rises. However, current supply levels are double the pandemic lows, with an average of 30 homes for sale per agent, closer to pre-pandemic averages.

A surplus of larger, 4+ bed family homes has entered the market, as some sellers re-list properties that struggled to attract interest in 2023. This influx of supply, combined with weaker demand, led to a gradual repricing of homes in 2023.

Buyers' Price Sensitivity and Mortgage Considerations:

Buyers, particularly those with mortgages, remain price-sensitive, with 45% yet to remortgage at higher rates. The Bank of England estimates that 55% of mortgage accounts (approximately 5 million) have remortgaged since rates began rising in late 2021. The projected increase in monthly mortgage repayments for those rolling off fixed rates between 2023 Q2 and 2026 is around £240, or 39%.

Despite the decline in mortgage rates, the cost of mortgages is expected to keep buyers focused on value for money, influencing pricing dynamics. Sellers, on average, are accepting offers below the asking price, with a typical discount of around 5%.

Market Confidence and Seller Expectations:

While the positive start to 2024 may boost market confidence, sellers are advised to remain realistic about their home's worth. The focus should be on aligning price expectations with the preferences of buyers in specific areas and price ranges. First-time buyers are expected to remain a crucial group, while larger homes may attract those looking to upsize, willing to take on larger loans at higher mortgage rates.

In summary, while a sudden surge in house prices is not anticipated in 2024, increased demand and judicious pricing could elevate housing sales and overall market activity. For additional insights, visit our Instagram page (https://www.instagram.com/veerajosey_realestate/).

Written by Veera Josey, 25th January 2024

Source: Zoopla