"UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align."
- Richard Donnell, executive director at Zoopla
The final weeks of 2023 have recorded above average levels of new sales with a 17% increase compared to the same time last year, the latest data from Zoopla reveals.
Zoopla’s latest House Price Index finds that demand is almost one fifth higher (19%) than the same time last year when the higher mortgage rates hit market activity. An increase in available supply of homes for sale is also boosting choice and supporting sales at this time as buyers and sellers are becoming more aligned on pricing. As a result, Zoopla’s House Price Index has recorded a slower pace of annual price declines at -1.1% in November 2023, down from 7.2% a year ago.
Those using cash to purchase a property are on track to account for a third of all sales in 2023 with mortgaged sales set to be 30% lower as higher mortgage rates hit demand.
Zoopla data reveals that the average distance buyers look to move is 4.3 miles, indicating that many focus their home move searches to local areas. Yet a quarter of potential home movers are saying that they plan to move to a different location from where they live today.
In the face of higher borrowing costs in 2024, buyers will continue to look further afield in the search for value - this is particularly the case for people living in high value markets across southern England where upsizing is the most expensive. Zoopla data shows that almost half of would-be movers in southern regions are looking to move 10 or more miles in the search of their next home as they seek space and better value.
What to expect in 2024
The steady momentum in new sales that has developed over the final part of 2023 is expected to continue into early 2024 alongside the usual seasonal rebound in demand over Q1 2024 as pent-up demand returns to the market. While mortgage rates are edging lower, affordability remains a key challenge for mortgage reliant households who are making home moving decisions. The impact of higher mortgage rates continues to be felt with half of those with mortgages yet to move onto higher rates from cheaper fixed rates agreed before 2022.
Zoopla says that the modest decline in house prices over the year means UK housing still looks 10-15% over-valued at the end of 2023. It predicts that this position will improve over 2024 as incomes rise and house prices drift 2% lower over the year. Sales volumes are expected to hold steady at 1 million sales completions over 2024.
Despite the affordability challenges facing first-time buyers, Zoopla says they will be the largest group of would-be buyers in the next two years as the rapid growth in rent continues to motivate this group.
Richard Donnell, executive director at Zoopla, commented: “The housing market has been more resilient than many expected over 2023 but it hasn’t been a surprise to us. Mortgage regulations introduced in 2015 have stopped an over-valuation of housing which is why the decline in house prices has been modest over the year. House price falls have been concentrated in the south and midlands while prices are still slightly higher over the year in Scotland and Northern Ireland. UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align.“
