Our Chief Surveying Officer, James Raspin, looks back at the year we’ve just had and gives predictions for the year ahead!
What Happened in the Housing Market in 2023?
Now the dust has settled on the 2023 housing market, things don’t look as bad as first feared at the start of the year.
Many predicted average prices would drop by 10-15% due to the cost-of-living crisis, high inflation and high mortgage rates.
Activity in the housing market was weak. The number of transactions were approximately 10% below pre-2020 levels. Transactions involving a mortgage have dropped even more, in the region of 20% down.
However, prices didn’t drop as predicted. Nationwide Building Society data points to a 1.8% fall in house valuations over 2023. Halifax Building Society data gives an even rosier picture, with prices actually increasing by 1.7% over 2023. The changes leave average prices approximately -4.5% below the peak prices in late summer 2022.
Prices held up relatively well as the employment market remained strong, which meant there was less unemployment and mortgage defaults. When there are less forced sales, prices don’t come under the same downward pressure.
What’s Going to Happen in the Housing Market in 2024?
Time to get the crystal ball out!
One of the biggest drivers of the housing market in 2024 will be the cost of mortgages.
According to Moneyfacts, the average cost of a two-year fixed mortgage is 5.9%, down from a 15 year high of 6.9% in August 2023.
Inflation continues to track downwards. In November, inflation dropped to 3.9%. If it continues to drop, the Bank of England is likely to reduce the base rate from 5.25% in early to mid-2024.
The improved outlook has led many lenders to drop their rates to be more competitive, as potential pent up demand increases interest from home buyers.
But Will Rates Drop Further?
Bank swap rates, which indicate the real cost of borrowing for fixed timeframes, have also dropped recently, which suggests mortgage rates are likely to drop further in the next month.
Five-year interest swap rates are down from 4.5% in October to 3.4%. Two-year swap rates have fallen to 4.1% in the same period. This suggests five-year fixed mortgage rates will be below 4% and two-year fixed mortgage rates will be near 4.5% by February.
Further falls in mortgage rates are then only likely when the Bank of England starts to cut the base rate.
We would not be surprised to see house prices above their 2022 peak by the end of 2024, as mortgage rates reduce.
Should I Buy a House in 2024?
Average wages have increased over the past 18 months and average house prices are still below their peak, giving many buyers more buying power. A lot of buyers will see an opportunity to get their foot on the property market, make the next move, or downsize as mortgage rates reduce.
Get in touch with Survey Hut today for a comprehensive Level 2 or Level 3 Home Survey. We are held to the highest professional standards by the RICS, so you know that you’ll get a high-quality report. Make sure your perfect home, is perfect.
