As an investor or potential homebuyer, you’re likely wondering what house prices will look like in the years ahead. Rapid gains over the past decade in the UK beg the question of whether the boom will continue or if a correction looms on the horizon.
In this guide, the property investment experts at Baron & Cabot summarise the UK property market forecast for 2024. We base our insights on projections from leading authorities in the British real estate market. While precise figures always carry uncertainty, our team brings decades of experience that lend credibility to these insights.
Read on to explore UK house price predictions in 2024 to enable you to make informed property investment decisions.
Key Summary
- Experts predict a slight decline in UK house prices, with expected drops between 1-3% due to tighter lending conditions, buyer caution, and economic uncertainty.
- Supply and demand dynamics, interest rate stability, and broader economic factors like wage growth and job security will heavily influence housing prices in the coming year.
- Declines are anticipated in high-value regions like London and the South East, while areas like the Midlands and North of England may experience more stable or minor price adjustments.
- Over the next five years, UK house prices are projected to see cumulative growth, with potential increases reaching nearly 18% by 2029, offering growth opportunities for strategic investors.
UK House Price Forecast for 2024
The UK housing market in 2024 is predicted to experience challenging conditions in 2024. According to industry experts, the lending market for residential mortgages is forecast to decline by 8% as the economic downturn and uncertainty impact both buyers and lenders. As a result, investors should expect a decline in house prices this year.
Declining House Prices
While some experts predict that the average UK house price will rise by 3% in 2024, most forecasts suggest a decline, ranging from 1% to 3%.
Reasons for this include:
- Buyer Caution: Potential homebuyers are predicted to be wary of the market due to economic volatility, concerns over job security, and the possibility of interest rate increases. This will curb demand and weaken purchasing power.
- Tightened Lending: Mortgage lenders are expected to tighten criteria for borrowers to reduce risk exposure. Stricter affordability requirements and rising mortgage rates will exclude more potential buyers from obtaining finance.
- Oversupply Concerns: There are fears an excess of properties for sale may lead to a surplus in housing stock. This glut in supply and lack of demand may drive further falls in the average house price, especially for new build property.
Property market predictions for 2024 suggest a not-so-smooth ride, but there are still windows of opportunities for prudent investors and buyers. Careful research and professional guidance from a property investment expert can help determine good value purchases and ensure long-term gains. Experts predict the market should start to stabilise as we approach 2025, presenting new prospects for those looking to build their property portfolio.
3 Factors That Will Impact UK House Prices in 2024
As an investor, an understanding of the market dynamics that influence average property prices will help inform your buying and selling decisions for maximum returns. Factors like inventory and supply, interest rates, mortgage lending, and economic conditions will determine the UK house price forecast in 2024.
1. Inventory and Supply
The availability of properties on the market, known as inventory, is a crucial determinant of house values. When inventory is low, competition among buyers drives prices up. Conversely, a glut of inventory can cause house prices to drop as sellers compete for buyers.
According to analysts, the UK housing inventory will remain high through 2024 as non-cash buyers find it more costly to purchase a property from a limited mortgage supply. This higher supply will continue to push house prices downward, at least till mid-2024.
2. Interest Rates
Mortgage rates have a significant impact on the affordability and demand for homes. Lower interest rates from a mortgage broker mean borrowers will enjoy a more affordable monthly mortgage payment, spurring prospective buyers to enter the market.
The Bank of England raised rates modestly in 2022/2023, but it has remained stable ever since, and experts expect future increases to be gradual. Interest rates are projected to remain constant through 2024, but if there is a low supply of mortgages, buyer demand will remain low, causing house price falls. On the other hand, a higher mortgage supply, coupled with a stable interest rate, means higher housing demand and, by extension, higher house prices.
3. Economic Conditions
The overall health of the UK economy, including numerous factors, such as GDP growth, wage growth, the impact of election outcome, and unemployment, is set to influence the housing market in 2024.
A strong, growing economy with low unemployment and rising wages fuels housing demand and price appreciation. While the economy is projected to expand at a modest pace, wage growth will likely outpace inflation—based on 2023 performance—improving household buying power. These positive economic conditions will bolster the housing market over the next few years.
While the overall property price forecast for 2024 appears pessimistic, the impact will not be evenly distributed across the UK. Regions and cities less exposed to economic fluctuations, e.g. the Midlands and North of England, may fare better. The rental market is also expected to remain more stable as fewer people can afford to or choose to buy. Let’s explore some regional variations in UK housing market predictions for 2024.
Regional Variations in UK House Prices Prediction for 2024
According to property experts, house price predictions for 2024 in the UK are expected to remain relatively flat or experience minor decreases. However, significant regional differences are anticipated in terms of the scale of price changes.
England, Wales, and Scotland
In England, average house prices are predicted to decline slightly or remain stable in 2024. Zoopla forecasts a minor drop of 2% for property values in England, while Rightmove predicted a 1% drop in asking price. Similarly, house prices in Wales and Scotland are forecast to fall at a modest rate. Experts predict declines of between 1.5–2% for Wales and Scotland.
Developed and Developing Areas
The developed capital city of England, along with the South East and East of England, are expected to experience the steepest price decreases with an average decline of 3.5% and 4%. The low demand and higher supply of properties in these affluent regions are likely to contribute to the decline in values. In the North East, West Midlands and South West, lower average price drops of about 2% are forecast due to higher demand for properties in developing areas.
Overall, property values in the UK are predicted to remain largely flat or experience minor corrections of 1–4% in 2024. With this in mind, you’re possibly wondering how a drop in house price will affect mortgage rates, let’s dig into that in the next section.
How Will a House Price Drop Affect Your Mortgage?
Going by the general predicted house prices in 2024 from experts like Lloyd’s Banking Group—Britain’s largest mortgage provider—you may wonder what will happen to your investment if house prices continue to fall, especially your mortgage repayments.
If house prices fall significantly after you purchase a home, you can end up owing more on your mortgage arrears than the current market value of the house. This situation is known as negative equity.
When this occurs, it can be difficult to sell the house or refinance your mortgage. To ensure you’re investing in a region boasting a resilient real estate market, consult a UK property investment expert.
However, that’s not all; other factors to consider include the impact of interest rates on mortgages and loan-to-value ratio.
Interest Rates Impact
When interest rates drop, the overall cost of obtaining a mortgage becomes more affordable, increasing demand for housing. If a downturn in the economy leads to declining mortgage interest rates, or if the interest rate goes below average, more buyers may enter the market, provided lenders are willing. This could help support housing prices, preventing them from falling as dramatically.
Lower interest rates may also provide an opportunity for homeowners to refinance at a lower rate, reducing monthly payments. This can make it easier to afford mortgage payments, even if the value of the home has dropped. Refinancing at a lower interest rate or for a longer term is a good property investment strategy that may help prevent foreclosure.
Loan-to-Value Ratio
The loan-to-value (LTV) ratio refers to the amount of the mortgage relative to the appraised value or sale price of the home. A lower LTV means less risk for the lender and generally allows for a lower interest rate.
If housing prices fall, the LTV ratio may increase above 100%, indicating negative equity. In this case, refinancing or selling the home becomes very difficult without paying the difference between the value and the amount owed.
When purchasing a home, aim for a reasonable down payment and LTV to protect yourself in case of declining housing prices from rising interest rates. Consider factors like job security and the overall economy that could impact your ability to make mortgage payments if property values drop.
Also, discuss options with your lender ahead of time for ways to potentially mitigate risks like negative equity or foreclosure. With prudent decision-making and proactive planning, you can invest in property with confidence.
So, while house market predictions for 2024 suggest that house prices will fall—and having understood a decline in expected prices can affect existing property owners—you can remain profitable by investing strategically in resilient markets. That said, it’s also important to understand the general outlook of house prices in the UK beyond 2024. Continue reading to learn more.
UK House Price Predictions for the Next 5 Years
According to industry experts, the UK housing market is poised for steady price growth over the next 5 years. Between 2024 and 2029, cumulative house price inflation is predicted to reach nearly 18% across the country.
2024
The property price predictions for 2024 suggest a drop of up to 3% at the end of the year. However, this decline is not expected to continue into 2025.
2025–2027
By 2025, house prices are projected to climb by 3.5% and further by another 5% in 2026. In 2027, values are estimated to rise by 6.5% as interest rates may start to rise, impacting affordability. However, a shortage of quality housing stock and healthy demand should support price inflation.
2028 and Beyond
Looking ahead to 2028, values are forecast to increase by around 5%, with the possibility of higher gains if the economy remains stable and mortgage rates are still relatively low.
From 2029 onwards, house price growth will depend heavily on the state of the economy and wage inflation. If there is a recession, the market may slow or experience a downturn. However, over the very long term, property has consistently generated solid returns and will likely continue to do so.
While uncertainty always exists, reliable indicators point to a steady and sustained period of house price appreciation in the UK over the coming 5 years. Savvy buyers who purchase within their means stand to build equity and benefit as values rise over time. Contact a property investment expert today for a strategic investment plan.
Frequently Asked Questions
Are property prices falling in the UK?
Analysts from Capital Economics anticipate a drop in house prices by about 5–6% by mid-2024. This prediction is based on the expectation that mortgage rates will remain at their current elevated levels until next summer. This is a significant factor that could impact the affordability of homes and, consequently, the demand in the housing market in 2024.
Is it a good idea to buy property in 2024?
Given the forecasts for 2024, buying property could be a strategic move. Property websites Rightmove and Zoopla predict a modest dip in house prices by the end of the year, with estimates of a 1% and 2% fall, respectively. These slight decreases could provide potential homebuyers with more affordable opportunities in the property market, making 2024 a potentially good year for property investment.
Will house prices rise in 2024 in the UK?
While the housing market has begun 2024 robustly, with asking prices escalating at the quickest pace since 2020, most analysts are still predicting a decline later in the year. Despite the initial surge, the overall consensus is that house prices will not continue this upward trajectory through the entirety of 2024 but rather experience a drop based on various economic factors.
What are the predictions for UK property prices next five years?
The UK property market is set to experience significant growth over the next 5 years. Projections indicate a gradual increase, starting with a 3.5% rise in house prices in 2025. This momentum is expected to continue, with prices projected to surge by 5% in 2026, followed by a more substantial 6.5% hike in 2027 and another 5% rise in 2028. Cumulatively, these increases equate to a substantial 17.9% growth in mainstream residential markets over the next 5 years.
Conclusion
While the general house price predictions for 2024 suggest a slight decline, the UK housing market still promises profitability for prudent investors. Before investing, weigh the risks and rewards based on your financial situation and investment timelines. Also, consult a property investment expert for advice on the best UK locations to buy property.
Disclaimer: Any information provided by Baron & Cabot does not constitute financial advice and is for educational purposes only.
