October 30, 2023 9:54 am

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Nikka Sulton

2024 Property Market Capital Appreciation Forecast. Zoopla’s housing market forecast for 2024 suggests that we may see a continuation of the downward trend in house prices, in addition to the 4.5% decline projected for 2023. The ongoing impact of economic factors on the property market has kept house price drops less severe than some had feared. However, to reinvigorate the market and encourage more buyers, addressing affordability remains a key challenge.

Richard Donnell, the executive director and research chief at Zoopla, highlights the importance of enhancing affordability as a means to attract prospective buyers and stimulate increased sales. The property market’s resilience in the face of economic headwinds has been notable, but sustained growth will require concerted efforts to make housing more accessible. This, in turn, could pave the way for a more dynamic and vibrant property market in the coming year.

Zoopla’s analysis points to the need for what it terms a “meaningful reset” in terms of housing affordability. This reset, the portal suggests, will likely entail further declines in house prices, particularly if incomes experience an upward trajectory, while mortgage rates remain relatively stable as we move into early 2024.

In their projections, Zoopla considers the scenario where mortgage rates drop to 4.5 per cent by the close of the next year. Under this condition, the property market is expected to maintain a negative house price growth of around 2.0 per cent.

However, Zoopla also notes that a more rapid decline in mortgage rates, approaching 4.0 per cent, could prove instrumental in boosting sales activity, even though it might not necessarily translate to a substantial upturn in house prices. The overall dynamic, as explained by Richard Donnell, hinges on the complex interplay between housing prices, mortgage rates, and the evolving economic landscape, which is marked by increased uncertainty and shifting purchasing power among prospective homebuyers.

In the realm of property, the forecast for 2024 carries a sense of modesty. House prices are expected to continue their gradual descent after a somewhat lackluster 2023. This trend is attributed to the prolonged persistence of mortgage rates, which hover at or above the 5.0 per cent mark. The consensus among analysts is that house prices are likely to exhibit further, albeit slight, drops, with an average decline of around 2.0 per cent. An estimated one million home moves are anticipated to accompany this trajectory.

Despite this seemingly cautious outlook, the horizon presents a glimmer of hope. The anticipated slow growth of house prices, coupled with rising incomes projected over the next 12 to 18 months, could potentially reinstate levels of affordability reminiscent of a decade ago. This development might pave the way for a resurgence in home transactions, instilling renewed consumer confidence in the housing market.

Nonetheless, the immediate housing landscape reveals the influence of mounting mortgage rates and the pressures of the cost of living. These factors have cast a shadow over several local areas, precipitating weaker demand and eroding purchasing power. Consequently, this has led to a notable deceleration in house price growth, with the annual increase plummeting from 9.2 per cent a year ago to a decline of 1.1 per cent at present. Zoopla underscores that this drop signifies the most significant slowdown in price growth since the turbulence of 2009.

The landscape of house prices in the UK is undergoing a significant transformation, no longer confined solely to the Southern regions. Now, the effects of falling house prices are being felt in lower-value markets, with a striking statistic showing that four out of five local areas are witnessing annual declines. This marks a substantial shift from just six months ago when only one in 20 areas reported such declines.

It’s essential to note that the scale of these house price falls remains relatively limited, with most of them occurring within the low single-digit range. The most pronounced annual declines are observed in commuter towns surrounding London and across the South East. For instance, Colchester has seen a decrease of 3.5 per cent, while Luton experienced a decline of 3.3 per cent.

Amid this landscape, approximately one in every five local markets is defying the trend and still registering annual house price growth. Notably, the most significant growth rate, reaching 3.6 per cent, was recorded in Halifax, Yorkshire.

As these dynamics unfold, it’s worth noting that the impact of higher mortgage rates appears to be more pronounced in housing sales than in house prices themselves. The data reveals a notable 23 per cent reduction in housing sales in 2023 compared to the previous year, signifying the tangible consequences of these market shifts.

Zoopla’s outlook for the property market in 2024 suggests that housing transactions are expected to remain steady at around 1 million. However, there is potential for improvement if mortgage rates decrease towards 4.0 percent in the first half of 2024. This could lead to a modest uptick in activity as those who postponed their plans to move reconsider and return to the market.

In 2023, first-time buyers are positioned to be the most prominent group of homebuyers, closely followed by cash buyers, who are projected to represent one in every three property sales. Looking ahead to 2024, cash buyers will continue to play a significant role in the market, alongside first-time buyers who are driven by the ongoing rapid growth in rental costs.

Upsizers, on the other hand, are more sensitive to higher mortgage rates as they typically seek larger homes that necessitate larger mortgages. The portal highlights that the perceived risk of substantial price drops is diminishing as a deterrent to moving, but the influence of higher mortgage rates remains the foremost factor. Should mortgage rates decrease, it could entice more upsizers into the market in 2024, thereby supporting overall sales volumes.


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