March 2024 Analysis: UK House Prices on the Decline?

In March 2024, the landscape of the UK housing market saw a slight downturn, with the average house price dipping to £263,900, marking a decrease of £910 from the previous year.

This reflects a modest decline of 0.3% in house prices across the nation, pinpointing the South of England as the region with the most significant drops. Despite this, the market is gradually stabilising; there's a noticeable increase in market activity, including a 20% rise in available homes and a 9% increase in agreed sales, buoyed by a resurgence of consumer confidence and steadier mortgage rates.

As of March 2024, the decline has been most pronounced in the South of England, impacting both regional and city housing markets. This adjustment brings average prices to 1.5% below the peak observed in October 2022, inviting homeowners to closely monitor their property's value against the broader market through tools like our House Price Index.

The current dip in house prices stems primarily from the elevated mortgage interest rates, challenging prospective buyers with higher financial thresholds for loan approval. This scenario has dampened demand across the board since the fiscal adjustments of October 2022. However, with an uptick in property listings, the market now leans more towards buyers, prompting a competitive pricing strategy among sellers. This market dynamic has led to 41% of properties being sold for at least 5% below their initial asking price.

Looking ahead into 2024, the trajectory of house prices will vary by region, reflecting the unique economic conditions and housing affordability within each area. Although the rate of decline is expected to taper, a significant rebound in prices is unlikely. The market remains favourable to buyers, characterised by an increased inventory and cautious spending due to persistent mortgage rate challenges. Despite a slight uptick in market activity spurred by the recent decrease in mortgage rates, a substantial drop in these rates seems improbable for the remainder of the year. Sellers might find willing buyers this year but should anticipate prices to remain relatively stable until the year's end.

The resilience of house prices in 2023, despite substantial mortgage rate hikes, can be attributed to several factors including a robust job market, income growth, supportive lending policies, and stringent mortgage affordability tests established in 2015. These measures have collectively helped prevent a significant overvaluation in the housing market and cushioned most homeowners against the shift to higher mortgage rates.

Written by Veera Josey, 28th March 2024

Source: Zoopla