In the upcoming year, the United Kingdom’s housing market is poised for significant changes, with analysts and lenders predicting decline in house prices alongside a continued rise in rental costs.

Government forecasts indicate a potential nearly 5% decrease in property prices, though lenders anticipate a more modest drop.

Simultaneously, newly-let property rents may surge by 5-6%, limiting the advantages of falling prices for aspiring first-time homebuyers.

The anticipation of a lackluster economy in 2024 is a key factor influencing these trends, potentially dampening the housing market.

An uncertain job market could undermine the confidence of individuals looking to move or purchase their first home.

Additionally, persistently higher mortgage rates, affecting approximately 1.6 million homeowners with expiring fixed-rate deals, might lead to a sharp increase in monthly repayments.

UK Finance, representing banks and lenders, expects a decline in mortgage lending and an increase in arrears.

Nationwide, the UK’s largest building society, projects a subdued housing market in the coming year, with Chief Economist Robert Gardner forecasting either a small decline or stagnation in house prices, potentially up to a 2% decrease in 2024.

The Office for Budget Responsibility (OBR) echoes this sentiment, predicting a 4.7% drop in house prices by 2024.

Lloyds Banking Group’s Halifax, the country’s leading mortgage lender, foresees a fall ranging between 2% and 4%, attributing it to a combination of rising living costs and elevated interest rates.

However, the director, Kim Kinnaird, emphasizes the uncertainty of forecasts due to the unpredictable economic climate.

While the housing market faces a downturn, individuals seeking private rentals encounter soaring costs and intense competition.

The average cost of new rentals has increased by 31% over the past three years, equivalent to £3,360 annually, according to Zoopla.

Despite this, Zoopla anticipates a more balanced rental market in 2024, with a projected annual growth rate slowing to 5%, the lowest since September 2021.

For tenants, this potentially signifies a relief from the rapid pace of rental increases witnessed in recent years.

Savills, the estate agency, predicts a further 6% rise in rents in 2024, more than double the estimated rate of income growth.

However, Savills also anticipates a slowdown in rent hikes in subsequent years as tenants reach their affordability limits.

One contributing factor to the scarcity of available rental properties has been the financial strain on landlords, leading some to sell their properties.

Savills’ Emily Williams notes that a significant increase in rental stock may be delayed until 2026 and beyond, especially in London, contingent upon more substantial declines in interest rates.

In conclusion, the UK’s housing market is poised for a challenging 2024, characterized by falling house prices and rising rents.

While the economic landscape remains uncertain, prospective buyers and tenants must navigate a market influenced by factors such as job insecurity, higher mortgage rates, and financial pressures on landlords.

Last Updated: 26 December 2023