Will UK House Prices Rise Over the Next 12 Months?

UK Housing Market Outlook with Rising Buyer Demand and Strong Sales Activity Pointing to Potential House Price Growth Over the Next 12 Months

As we head into the autumn, the UK property market faces a complex landscape shaped by lingering economic challenges. Following a turbulent 2023 marked by rising living costs and economic instability, many homeowners demonstrated surprising resilience in absorbing higher mortgage payments. However, the outlook for the coming year remains uncertain as inflation, geopolitical tensions, and high interest rates weigh heavily on consumers’ minds.

Currently, the UK housing market is buoyant due to rising buyer demand and increased sales activity, despite uncertainty over mortgage costs. In spring, sales were 15% higher than last year, indicating greater confidence and realistic pricing from sellers. Regions like the North East and London are leading this rebound, with buyer demand up by 11% and the number of homes for sale 21% higher than last year. Although some sellers are lowering asking prices to attract buyers, overall demand from homeowners and first-time buyers is supporting a projected 10% increase in sales for 2024.

Smaller Homes Drive Market Buoyancy

Smaller homes are driving buoyancy in the UK housing market due to increased demand from first-time buyers. In 2023, first-time buyers accounted for 53% of all homes bought with a mortgage, the highest proportion since 1995. This has continued into 2024 with a surge in demand for smaller properties, such as flats and terraced houses, contributing to the strongest price increases in this sector.

In London, where property prices are highest, 90% of first-time buyer purchases were for smaller properties. This trend has led to significant annual price growth, with smaller homes experiencing stronger increases compared to larger ones.

Competition Amongst Estate Agents

Sellers now enjoy far greater flexibility and choice when it comes to putting a house on the market thanks to the growth of reputable online estate agents. Advantages include cost savings due to lower fees as well as greater transparency and fast completions (significantly quicker than the 190-day average of a regular estate agent thanks to, in part, more accurate valuations).

However, it’s clear that homeowners still value the in-person viewings and local expertise provided by high-street agents, which can be especially reassuring when making such a significant financial transaction.

Growth Expected

Experts predict modest growth in UK house prices for 2024 and into 2025. The direction largely depends on mortgage rates, which are expected to further ease following falling swap rates and potential Bank of England rate cuts. In September, Savills was anticipating a 2.5% increase in house prices to the end of the year, with Rightmove predicting a smaller 1% rise.

Asking prices also serves as a timely indicator of market sentiment, reflecting current conditions rather than outdated data. The latest Rightmove House Price Index (HPI) showed a typical summer decline of 1.5% in August but an annual increase of 0.8%, bringing the average asking price to £367,785. This suggests growing seller optimism, with expectations of a busy autumn for the property market.

Published: 26/09/2024 by Radio NewsHub