Temperatures may be falling outside but the housing market appears to be warming up. Annabel Dixon lifts the lid on the 'tentatively promising' start to the new year.
Knight Frank makes ‘big upwards revision’ to its house price forecasts
In a sign that the housing market might be turning a corner, Knight Frank has revised its UK house price forecasts up for the year ahead. It now expects mainstream prices to climb by 3% in 2024 rather than fall 4% as it predicted last October.
The estate agent’s latest forecasts suggest that high-end country house prices could drop 2% this year as the prime country housing market ‘comes down from the highs of the pandemic’. It marks a change from the 3% fall Knight Frank predicted three months ago.
And prices in prime central London and prime outer London in 2024 are set to increase by 1% and 2% respectively. These figures are also up, from the 0% and 1% growth the estate agent forecasted last October.
The firm says its update was prompted by a more positive backdrop recently, with inflation falling faster than expected and mortgage lenders dropping their rates ‘fairly significantly’.
Still, it might not be plain sailing from here.
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‘How long the current momentum in the housing market continues depends to some extent on when the general election takes place,’ Knight Frank says. The ongoing conflict in the Red Sea and the threat it potentially poses for higher UK inflation is another risk on the horizon, it adds.
Buyers and sellers spring into action
It’s been a ‘tentatively promising’ start to the new year as buyer and seller activity jump, says Rightmove.
The number of homes brought to the market in the first week of 2024 was 15% up on the same period last year. Meanwhile, the number of buyers (also known as buyer demand) was 5% higher than this time in 2023.
Asking prices of newly-marketed homes increased by 1.3% (£4,571) this month. Prices traditionally climb in January. But what’s notable is that this price rise is the largest for January since 2020, and more than double the 20-year average, says the property portal. Time will tell whether buyers are prepared to accept these price tags.
There’s another promising sign for sellers hoping to clinch a deal in 2024. Since Christmas, Rightmove has seen nine of its 10 busiest days on record for buyers getting a mortgage in principle.
‘After a stop-start market in 2023, the initial signs suggest a smoother year for movers in 2024. More new sellers are now entering the market, and with more confident pricing’, explains Tim Bannister, Rightmove’s director of property science.
‘While the increased level of buyer activity that we’re also seeing may justify some of this increased pricing confidence from sellers, it’s important that sellers who are keen to find a buyer don’t get carried away with new year enthusiasm when setting their price expectations.’
Housing market activity ‘on the up’
The Royal Institution of Chartered Surveyors’ widely-respected monthly ‘temperature check’ of the housing market also points to a gradually improving picture.
According to RICS’s latest survey of members, there has been ‘a little bit of respite’ in recent weeks as mortgage rate cuts continue.
Its buyer enquiries and newly-agreed sales indicators were the least downbeat since early 2022. Surveyors expect a ‘solid recovery’ in sales to emerge this year.
Downward pressure on house prices seems to be diminishing too, with the latest reading it’s least negative since November 2022.
‘The tide seems to be turning with respect to house prices, with contributors now envisaging a largely flat trend coming through at the twelve-month time horizon’, says RICS.
‘With 2023 proving to be a particularly challenging year for the UK housing market, it appears recent weeks have seen a little bit of respite emerge,’ explains RICS senior economist, Tarrant Parsons.
‘Supported by an easing in mortgage interest rates of late, buyer demand has now stabilised, and this is expected to translate into a slight recovery in residential sales volumes over the coming months.
‘Nevertheless, the lending climate is set to remain restrictive compared to much of the post global financial crisis era next year, meaning any uplift in activity is likely to be limited for the time being.’
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Yes, it’s that time of year for looking into crystal balls. Keen to find out what could happen to house