As 2023 draws to a close with a better-than-expected outcome for the UK housing market, the latest forecast indicates we shouldn’t expect any nasty surprises from the year ahead.
Stability is resuming in the mortgage market – albeit on higher rates than pre-2022 – and slightly better housing stock levels are providing more choice for buyers, both of which are helping to boost optimism for the housing market for 2024.
While the past year has certainly been challenging for many people, from rising energy prices and the wider cost-of-living crisis to surging borrowing costs for many, appetite has remained characteristically strong for UK property. This has kept prices buoyed, negating concerns for the possibility of a housing market ‘crash’.
At the start of 2023, Rightmove had predicted that sellers would drop asking prices by an average of 2%, yet the property portal points out they are currently just 1.3% lower than one year ago. What’s more, this actually demonstrates a return to a ‘normal’ market after the post-pandemic rush and price hikes.
Other indices, such as the one published by Nationwide (which uses sold price data as opposed to asking price), actually shows an uptick in pricing month-on-month for the past three months. It believes this is down to a more positive outlook with regards to interest rates, which is spurring on appetite in the housing market.
Pricing and location are all-important
For sellers, getting the price right on a property has always been crucial, but in the current market it has been difficult in some areas to gauge confidence and demand. Slightly more homes have sold below asking price this year, according to Rightmove, and it is taking sellers longer to secure a buyer.
However, as the portal points out, those who are willing to price competitively have seen their properties sell quickly.
Tim Bannister, property expert at Rightmove, says: “New sellers will need to compete with their cut-price neighbours, and work with their estate agent to start with a competitive price, rather than starting too high and needing to reduce later.
“Our research shows that pricing right at the outset maximises the initial impact among local buyers and gives new sellers a much greater likelihood of a successful sale.”
However, it is vital to take into account local variations, as each location has its own trajectory, with varying supply and demand levels. Some areas, particularly those in the north, continue to outperform in terms of buyer appetite, which is keeping pricing either unchanged, while some of these areas are still seeing prices rise.
This is expected to continue into 2024, points out Rightmove. Therefore, property investors and prospective buyers should try to find out as much as possible about the housing market performance of a particular location, looking at past and predicted trends, rather than focus on forecasts on the UK market as a whole.
Housing market outlook
Tim Bannister says: “It’s likely to be another muted year for the market, however the better than anticipated activity this year has shown that many buyers are still getting on with satisfying their housing needs.
“We predict a modest average 1% fall in new seller asking prices in 2024. The underlying level of good demand at the right price makes it unlikely that we will see a more significant drop in prices next year.”
In recent months, rents in the private rented sector have been rising at a faster pace than house prices. While this is putting pressure on tenants and making it harder for some to save up a deposit, it also means that the need for rental stock in the UK housing market is even greater than it was a couple of years ago.
Property investors concerned by a lack of capital appreciation in the short-term are therefore focusing more on rental yields at the moment, with many honing in on higher-yielding parts of the country with strong levels of tenant demand which is unlikely to change at least in the medium term.
