As we edge closer to 2024, the UK housing market is showing signs of entering a more stable phase following the heightened activity of the pandemic years. In this blog, we aim to dissect the projections for the coming year and offer practical advice to buyers and sellers navigating these waters.

Mortgage Rates and Affordability: A Glimpse into 2024

A key element influencing the UK housing market is the cost of borrowing. For those looking to move, there’s encouraging news: average mortgage rates have been on a gradual decline since mid-year, bringing a degree of predictability and stability. This shift marks a contrast to the volatile conditions experienced in the previous year, offering potential buyers a more stable landscape for financial planning. While exact rates vary based on various factors, the general trend towards lower rates is a positive sign for the market.

However, it’s not all smooth sailing ahead. Despite these falling rates, the Bank of England indicates that the Base Rate may have reached its peak. Yet, any significant reductions seem off the cards for 2024, with expectations set for sustained higher rates. This stance will inevitably keep some buyers’ spending power in check, with affordability remaining a key hurdle for many.

Sellers’ Strategies in a Shifted Market

For those selling their homes in 2024, a strategic approach to pricing will be paramount. The time taken to secure a buyer has increased markedly, with homes now lingering on the market for an average of 66 days, up from 45. This underscores the need for competitive pricing to attract buyers in a timely manner.

The past year alone has seen a rise in properties seeing price reductions during their marketing period – up to 39% from 29% the previous year. It’s clear that entering the market at a realistic price point can help avoid the need for price reductions down the line.

Buyers’ Prospects: Negotiating Power and Choice

Buyers looking to step onto or move up the property ladder in 2024 will find themselves in a strong negotiating position. While the stock levels of homes for sale have returned to pre-pandemic figures, there’s no indication of an oversupply that could lead to a significant price drop. This balance affords buyers the luxury of choice without the urgency to act that characterised the market during and immediately after the pandemic.

However, it’s important to note how recent shifts in mortgage affordability have influenced the market. Higher mortgage rates have been a primary factor affecting buyers’ decisions. With rates having risen significantly, many potential buyers are finding their purchasing power reduced. This has led to fewer sales overall; the housing market is expected to see about 1 million sales in 2023, a 23% drop from the previous year. Such a decline in transaction volumes, consistent across various regions and property types, is indicative of the challenges buyers face at higher mortgage rates. Additionally, a report from KPMG suggests that these changing dynamics could result in house prices falling by up to 10%, as the market adjusts to these higher interest rates.

Prospective buyers should seek clarity on their mortgage affordability early in their search to navigate their options effectively. Understanding the full cost of moving, including associated fees, is also crucial to making informed decisions. In the current climate, where mortgage rates are fluctuating, it’s particularly vital to assess how these changes might impact your long-term financial commitments and property choices.

Estate Agents: The Middle Ground Mediators

Estate agents are likely to play an even more critical role in 2024, especially in building chains and facilitating transactions. Sellers will need to work closely with agents to price homes attractively from the outset – a tactic that Rightmove suggests can increase the chances of a successful sale. High street estate agents, in particular, offer distinct advantages over their online counterparts. Research shows that properties sold through high street agents often secure a 5% higher sale price than those sold via online portals. These agents are adept at generating more secure buyers willing to pay better prices, successfully doing so in 73% of cases compared to sales made through online listings. 

Additionally, without the involvement of a high street estate agent, 73% of homes would either not sell, take longer to sell, or need a price reduction. This effectiveness in securing sales, coupled with their deep understanding of local market dynamics, makes high street estate agents an invaluable asset for sellers navigating the changing landscape of 2024.

Market Predictions: Regional Variations and Price Dynamics

Rightmove’s extensive market data and predictive models suggest a nuanced view of the year ahead. After predicting a 2% drop in 2023, which closely aligns with the current 1.3% year-on-year decrease, Rightmove now forecasts a modest 1% decline in new seller asking prices by the end of 2024. This anticipated drop points to a market that is adjusting to more normal levels of activity.

The degree of price adjustment will likely vary across the UK. In areas with higher discretionary selling and fewer homes on the market, prices may hold steady or even see slight increases. Conversely, regions where buyers are more stretched in terms of affordability could witness more competitive pricing.

Tim Bannister of Rightmove: A Forecast for Moderation

Tim Bannister from Rightmove offers insights into the expected market conditions. He notes that 2023 has fared better than many had anticipated, with demand remaining strong for well-priced properties. However, the market is 10% down on the 2019 ‘normal’ levels, indicating that sellers in 2024 will need to price even more competitively to secure buyers.

He predicts an average fall of 1% in new seller asking prices next year, acknowledging that the market comprises thousands of local dynamics. Bannister’s analysis suggests that while some buyers and sellers may find 2024 challenging, the overall market demand at the correct price point is unlikely to precipitate significant price drops.

Preparing for 2024: Informed and Proactive

Early preparation and understanding of the financial landscape are vital steps for both buyers and sellers. For buyers, knowing the full costs of moving is essential, as it encompasses more than just the deposit and mortgage repayments. Legal fees, survey costs, moving expenses, and potential renovations can all impact the overall affordability of a new home. By budgeting for these expenses from the outset, buyers can avoid unexpected financial strain and focus on properties within their means.

Understanding potential mortgage affordability and monthly payments before starting the search can set a clear financial boundary, which helps in making an informed decision. It ensures that buyers look at properties they can realistically afford, preventing wasted time and the emotional toll of pursuing homes outside their financial reach. Knowing these figures upfront also allows buyers to move quickly when they find the right property, giving them an edge in negotiations.

For sellers, it’s beneficial to calculate the lowest acceptable offer for their property, taking into account their future mortgage affordability if they plan to repurchase. This preparation helps sellers set realistic expectations and can lead to quicker sales, as they can evaluate offers more efficiently. In a market that may see price reductions, as predicted for 2024, being prepared for lower offers can prevent delays and help sellers plan their next steps with confidence.

In a changing landscape, both buyers and sellers must stay agile and informed. Sellers who have a clear understanding of their financial limits can negotiate sales that align with their future housing goals, ensuring a seamless transition in a fluctuating market. Buyers who are well-versed in their finances can navigate the property waters with assurance, making offers that are competitive yet within their budget. In both cases, early financial planning paves the way for successful property transactions in 2024.

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