Sunday, February 25, 2024
UK

House prices predicted to drop, rents to rise in 2024

UK house prices

A lacklustre economy is being widely forecasted for 2024, and that is likely to feed through to the housing market

The government’s official forecaster said property prices were most likely to decline by around 5 per cent, although lenders expect less of a drop.

Rents on newly-let properties could rise by a further 5-6 per cent, property experts say, following a year of sharp rises.

That would limit the benefit of dropping prices for potential FTBs.

Many tenants say they have been stretched by surging costs, limiting the ability to save for a deposit among those wanting to buy a home.

A lacklustre economy is being widely forecasted for 2024, and that is likely to feed through to the housing market. A less secure jobs market could affect the confidence of people wanting to move or buy a first home.

Added to that is the expectation that mortgage rates will remain higher than many people have been accustomed to. A further 1.6 million homeowners will see their present fixed-rate deal expire over the next 12 months, the vast majority of whom could see their monthly repayments increase steeply.

UK Finance, which represents banks and lenders, said it expected mortgage lending to decline, and for more people to fall into arrears.

It forecasts UK lending for house purchases will decline by 8 per cent in 2024.

The UK’s biggest building society, the Nationwide, said the housing market was likely to be subdued next year.

If the economy stays sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small drop or remain broadly flat over the course of 2024, said Robert Gardner, Nationwide’s chief economist.

More specifically, he forecast UK house prices would remain unchanged or drop by up to 2 per cent on average in 2024. The government’s official forecaster, the Office for Budget Responsibility, said at the time of the Autumn Statement in November that it expected house prices to decline by 4.7 per cent in 2024.

The Halifax, part of Lloyds Banking Group – the country’s largest mortgage lender, has predicted a drop of between 2 per cent and 4 per cent, but highlighted the same reasons.

With the combination of cost of living pressures and interest rate levels that are still much higher than even two years back, we will likely see continued mild downward pressure on house prices, said director, Kim Kinnaird.

Nevertheless, Kinnaird cautioned that forecasts were highly uncertain because of the economic climate.

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