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UK Housing: House Prices to Dip, Rents to Climb Amid Economic Uncertainty

housing market for 2024

Analysts and lenders are forecasting a challenging year for the UK housing market in 2024. The government’s official forecaster anticipates a nearly 5% drop in property prices, though lenders project a more modest decline. Meanwhile, rents for newly-let properties are expected to rise by 5-6%, adding pressure on tenants already grappling with soaring costs.

The Predictions

The economic landscape for 2024 is predicted to be lacklustre, potentially dampening the housing market. A less secure job market might affect people’s confidence to move or purchase their first home. Higher mortgage rates, with around 1.6 million homeowners seeing fixed-rate deals expire, could result in increased monthly repayments for many, further impacting the housing sector.

UK Finance, representing banks and lenders, expects a significant 8% drop in mortgage lending for house purchases in 2024. The expectation is that higher mortgage rates and economic uncertainties will contribute to this decline. The Nationwide, the UK’s largest building society, foresees a subdued housing market in the coming year. Robert Gardner, Nationwide’s chief economist, predicts either a small decline or a broad flatness in house prices in 2024, influenced by a sluggish economy and gradually moderating mortgage rates.

The Halifax, part of Lloyds Banking Group, has also forecasted a decline of 2-4% in house prices, attributing it to cost-of-living pressures and relatively higher interest rates compared to previous years. The economic climate, however, adds a layer of uncertainty to these predictions.

The Reality

On the rental front, tenants facing soaring costs and intense competition are expected to see a slower but continued rise in rents for new lets. While experts predict a 6% increase in rents for 2024, they anticipate a more balanced market in the years to follow, with annual rental growth slowing to 5%. This slowdown is attributed to the inability of tenants to afford further significant increases.

The scarcity of available rental properties is partially due to financial pressures on landlords, some of whom have opted to sell. Savills, the estate agency, suggests that a substantial increase in rental property stock might be delayed until 2026 or later, especially in London. Despite predictions of rising rents in the short term, a slowdown is expected in subsequent years as tenants reach their affordability limits.

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