UK House Prices to Rise in 2024, Reversing Earlier Pessimistic Forecasts

In a remarkable turn of events, the UK's housing market is poised for a price increase this year, contradicting earlier predictions of a decline.

This shift in expectations comes from Knight Frank, a leading property consultancy, which had previously forecasted a 4% decrease in average property values by the end of 2024.

However, a rapid fall in inflation has led to a revised outlook, with analysts now anticipating a 3% rise in house prices. This optimistic revision follows a series of rate cuts by mortgage lenders, influenced by the declining five-year swap rate used in pricing fixed mortgage deals. This rate fell by one percentage point in the last quarter of 2023, signaling expectations of a drop in the Bank of England's base rate, currently at 5.25%.

Consequently, the average five-year fixed mortgage rate has decreased to 4.86%, down from a peak of 6.11% in July 2023. This reduction has made borrowing more accessible, thereby facilitating property purchases.

Tom Bill, Head of UK Residential Research at Knight Frank, anticipates similar positive revisions from other housing experts soon. He attributes this change to improved economic conditions and the expectation of an election in the latter half of the year, which he believes will bolster the housing market in spring.

The market's positive momentum is already evident, with Rightmove reporting a significant increase in average asking prices and a rise in the number of properties for sale and sales completed. Additionally, Rightmove has experienced a surge in mortgage-related activity since Christmas, recording its busiest days for mortgage principles.

Despite these encouraging signs, Tim Bannister, Rightmove’s Director of Property Science, advises caution to sellers. He stresses the importance of realistic pricing, warning against over-optimism which could hinder sales.

The forecast for country houses has also improved, with a predicted decline now reduced to 2%, down from the previously anticipated 7% drop. This adjustment reflects the market's stabilization following the pandemic-driven highs.

Estate agents, such as Sharman Quinney in Cambridgeshire, are witnessing a robust demand for mortgage appointments and property viewings, signaling a healthy start to the year.

The upcoming general election is expected to impact the higher-end of the property market more significantly than mid-priced homes, with potential tax changes being a key factor.

For London, a modest 2% increase in home values is projected, with central London's price growth not expected to align with the rest of the UK until 2025. Despite potential market fluctuations due to the election, Bill remains confident that house prices will maintain their upward trajectory in 2024.