House Prices Could Fall By 4% In The Next Year

19 December 2023 – As the year draws to a close, predictions about what property prices will do next year abound. Two of the biggest lenders think that house prices could fall by between 2% and 4% in 2024.

Many potential buyers have put their plans on hold this year, to wait and see where house prices and mortgage rates are likely to go. This has caused a slowdown of the property market.

With mortgage rates still at much higher levels than two to three years ago, affordability is still a challenge for many would-be buyers. Especially upsizers, those who are looking to buy a more expensive property, were wary to come to market due to the high borrowing costs.

But with mortgage rates on a downward trend, this could change next year, when these and other buyers return to the market. So will this lead to property prices to rise again in the coming year? Most industry insiders don’t think so, with one big UK lender predicting that house prices could fall by up to 4% next year.

Fall In House Prices In Single Figures In 2024

That house prices could fall sharply next year seems out of the question for most property insiders. Rightmove has predicted property prices to drop by 1% in 2024, according to their latest House Price Index.

Now two of the largest UK lenders, Halifax and Nationwide, have released their forecasts for property prices in the year ahead. Slightly more pessimistic than Rightmove, Nationwide believes that house prices are likely to decrease by 2% next year.

Halifax’s forecasts that house prices will drop by between 2% and 4% in 2024. The Centre for Economics and Business Research (Cebr) has also released a prediction, saying that house prices would decline by 2.6% next year.

Property portal Zoopla predicts that house prices will fall by 2% over 2024. The most pessimistic view comes from the Office for Budget Responsibility, who thinks property prices will decline by 4.7% next year.

However, the National Association of Property Buyers thinks that the picture won’t look the same everywhere in the UK. Given that there are already regions where prices are rising now, they believe this will continue next year.

It has been estimated that, overall, all regions will experience house price falls next year, ranging between -1.5% and -4%. But with each passing week, I think these predictions are looking wider and wider of the mark. In fact, I believe many towns and cities outside of London can expect to see price rises every month throughout 2024.

Jonathan Rolande, National Association of Property Buyers

The Association thinks that some cities outside of London, such as Halifax, Margate, Ramsgate, Derby, York, Bolton and Liverpool, will see price rises next year. Lack of supply of property will be driving prices in these regions.

London and parts of the South East are likely to face price declines, according to Mr Rolande.

Lack Of Supply To Keep Price Declines Modest

The main reason industry insiders don’t believe house prices could fall by a lot is a lack of supply. The UK just hasn’t enough properties available, which has and will ensure that house prices won’t fall by too much, even if demand is lower.

Until supply shortages are addressed, house prices will remain high, despite affordability being a challenge for many.

The reluctance of many homemovers to put their homes on the market in the past year has meant that supply has been kept short. And although these might decide to come on the market in 2024, it’s unlikely to be enough to have a big impact.

Stretched affordability is still keeping many out of the property market, which means activity levels are unlikely to increase drastically. With subdued buyer demand, even an increase in supply won’t cause house prices to fall sharply.

Our Opinion

Predicting property prices next year is always a bit like pulling numbers out of a hat. There are just too many factors involved. However, the various data sets from various parties seem to show that the property market is in for a soft landing, as it looks like house prices could fall by no more than 4%.

While this is good news for the market in one way, given that some property insiders were predicting a much harder landing at the start of the year. It doesn’t solve one of the big issues that many wannabe buyers are facing.

The sharp rise in property prices in the past two to three years meant that affordability has worsened. Combined with expensive borrowing costs, buying a house in the UK has become unattainable for many, especially young people.

This is a situation that isn’t sustainable, because it locks out a big part of the population from homeownership. This will increase pressure on the rental market, which is already struggling. The only way out of this dilemma is the building of more affordable housing and increasing supply.

Unfortunately, it doesn’t look like the government has grasped the situation yet, because they don’t seem to have any appetite to tackle this issue.