With all the conflicting news reports you might think it crazy to even ask if another house price boom might be on the cards, but it is a question asked by one mainstream journalist recently and when you start to dig a little deeper it is perhaps not as crazy as it first sounds. However, before we get too excited we have to realise that previosu predictions of cuts to the base rate have not prevailed and in fact in its last meeting the MPC were split, with two members even voting for an increase to 5.5% so there is obviously still reason to believe 2024 may not be the year for a boom but there are lots of factors that will be contributing to pressuring the market that way, not least it is widely expected that the Government will look to gain some favour prior to the upcoming election.
Low Transaction Levels
In the ten years to 2007 the average number of household transactions in the UK was around 1.3m a year, falling as a consequence of the financial crisis to an average of just under a million a year for the next twelve years until we saw numbers peak at around 1.2m in 2021 and 2022 and then dropping back to just 900,000 in 2023. Could this be a sign that there is huge pent up demand in the market? It could be reasonable to suggest that perhaps 300,000 to 400,000 people sat on their hands last year and pushed back their move waiting for inflation and interest rates to stabilise. A theory that would be backed up by an uplift in buyer activity this year, which is exactly what has happened.
In their latest report Zoopla have indicated that there has been an 11% increase in demand for homes, Richard Donnell, Executive Director – Research at Zoopla says ‘The fact we have almost a fifth more homes for sale than a year ago is helping, providing buyers with more choice and boosting the chances of sales being agreed.’ I would go a step further and say the increase in available properties is giving more people confidence they will not have to compromise on their next move, something many home owners were nervous about during the really buoyant markets in 2021 and 2022, when many people considering a move put things on hold because they were afraid they’d be pushed into moving without being able to find the right place for them. But now in a steadier market that has more choice many of these potential sellers are now being tempted back into the market.
Are prices going to fall in 2024?
If only I had that crystal ball I could tell you the answer to this question.
Lets look at the facts around house prices, in the last five years average house prices have soared by around 20% or £60,000, while 2023 saw the average price of a house in the UK drop by just 4% This drop appears to have plateaued toward the end of the summer and has remained relatively steady since. Interestingly tracking GDP, something house prices has done since the 1980’s (maybe longer but I don’t have the data to support any further back).
So with GDP predicted to grow throughout 2024 and beyond it is understandable that many experts are suggesting house price growth is very likely this year and beyond, with many reports I have read suggesting we can expect 20% growth over the next five years.
It is harder to know what will happen in the short term, as I mentioned above there is still a looming possibility interest rates will be increased, however most still believe we will end the year with a base rate closer to 4.5%. It is also likely that many potential home movers who postponed their move last year will take advantage of the slightly improved 2024 market and we expect overall transaction levels to be up this year.
Government Intervention
As I mentioned at the start of this report, it is widely anticipated that the Government will want to stimulate a positive feel to the economy and this is very likely to be targeted towards home owners and the housing market. The Spring budget is only around the corner and we would not be surprised to see reports of some significant changes after the 6th March, including:
Cuts to income tax (and/or National Insurance)
Increased income tax thresholds
Reforms to inheritance tax
Help for home buyers, longer terms mortgages and the resurrection of the Help to Buy scheme
Changes to the Lifetime ISA threshold
All of which is likely to stimulate more activity in the housing market and a positive shift in buyer demand will almost certainly fuel increases in average house prices again in 2024.
So if you have been thinking about selling, what does all this mean for you?
Act now!
The market has shown signs of resilience and there is an increase in buyer activity that is likely to continue throughout Q1 and Q2, but with a general election looming we expect the usual softening of the market in Summer will continue throughout Autumn right up until after the election.
Therefore in a year where we expect an increase in transaction levels this is likely to mean a very busy first half of the year and if you want to get the best price for you home, now is the time to act!
If you are already trying to sell and have not had a positive start to 2024 then maybe it is time to consider a change of approach. I would always recommend reviewing your marketing and the service you are receiving from your agents. Are your photos reflecting the improving weather and showing some of the Spring flowers or are they still looking wintery? Has your agent discussed strategies to make sure you make the most of the improving market and have they got a plan to get you sold this spring?