The latest forecast from Capital Economics anticipates negligible growth in UK house prices in 2024, with a projected rise of just 0.5%. This adjustment follows a survey from the Royal Institution of Chartered Surveyors (RICS), highlighting a decline in buyer enquiries, fewer agreed sales, and a rise in price reductions.
Estate agents have linked this downturn to the recent increase in mortgage rates, noting that the average five-year fixed-rate mortgage has exceeded 5% for the first time since January. Crest Nicholson, a housebuilder, reported a ‘softening’ in demand since Easter, attributing this to the ‘volatility in mortgage rates’. Andrew Wishart, senior UK economist at Capital Economics, observed that this drop in demand coincides with the most significant sustained increase in housing supply since 2013, excluding the period following the market reopening post-lockdown.
Despite the rapid rise in mortgage costs, house prices have demonstrated resilience over the past 18 months, largely due to a concurrent decline in supply, with fewer individuals listing properties for sale. However, recent data indicates a surge in new listings, leading Wishart to predict that the market will soon experience an excess supply, potentially causing prices to dip over the summer.
Wishart’s adjusted forecast considers the combined impact of increased housing supply and persistently high mortgage rates, resulting in a more conservative outlook for 2024. In contrast, some economists maintain a more optimistic perspective. Rob Wood, chief UK economist at Pantheon Macroeconomics, acknowledged the influence of higher mortgage rates but suggested that a reduction in interest rates by the Bank of England later this year could revitalise buyer interest, potentially driving house prices up by 3% in 2024.
Overall, the outlook for the UK housing market in 2024 remains uncertain, with opinions divided among economists. While some foresee stagnation due to high mortgage rates and increased supply, others believe a potential reduction in interest rates could boost demand and drive prices upward.
