UK

Housing market back to pre-pandemic size

U.K. housing market

At the peak of the mini housing market boom it temporarily hit £521 billion, shows Savills research

The UK housing market returned to its pre-pandemic size in the year to March 2024, according to a new analysis from Savills.

Overall, the total value of the UK housing market dropped by 21% in the year to March 2024, on the back of lower levels of market activity. This has taken it back to its pre-pandemic size of £342 billion.

At the peak of the mini housing market boom it temporarily hit £521 billion, shows Savills research.

While the UK housing market is now the same size as it was pre-pandemic, its make-up looks different. Overall there were 15% fewer completed transactions compared with the year to March 2020, but this has been offset by 17% higher average sale prices.

The contraction of the market primarily reflects the impact that the higher costs of mortgages have had on the appetite of buyers to take on more debt, with mortgaged home movers and BTL investors especially affected, according to Lucian Cook, head of UK residential research at Savills. Demand from equity-rich buyers has been more robust. And that from FTBs has stood up surprisingly well, although heavily supported by the Bank of Mum and Dad.

The study found that around £20.7 billion (13%) less mortgage debt was used to purchase homes in the year to March 2024 compared to four years earlier. But, a decline in the use of debt was offset by an 11% increase in use of equity.

A rise in the use of equity was specifically fuelled by a 19% rise in spending by cash buyers over four years. Spending among those cash buyers stood at £144 billion in the year to March.

This is the equivalent to 42% of the total spend on house purchases across the UK.

Interest rate cuts will mean that the range of buyers coming to the market will broaden, and we can expect to see their spending power rise over the next 12 months, Cook added. Those who have put off plans to trade up the housing ladder over the last two years are likely to underpin growth in the housing market going forward.

Though the headwinds have not completely died down, we have already seen a rise in agreed sales on the back of more stability in the mortgage markets. That suggests that as rates drop, the market will return to growth, despite owners who are yet to come to the end of their fixed rate experiencing an increase in housing costs.

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