UK Housing Market 2023 and outlook for 2024

The UK property market was back in full strength in 2023 following three years of pandemic-related disruptions.

Both sales and lettings remained resilient throughout the year which faced many challenges linked to the domestic and worldwide economic activity.

UK house prices are expected to soften marginally in 2024 with activity levels expected to pick-up depending on the affordability and interest rates direction.

The rental price growth is forecast to outpace sales price growth over the next two years.

UK Sales

The 2023 UK sales market remained price sensitive with property prices slipping from their peak levels in the years before. Still, 2023 was not a year of huge, dramatic price drops, as predicted and feared by some industry analysts. So, on an annual basis, property prices held up much better than expected, showing once again the market’s ability to adapt to challenges.

According to some analysts, the shortage of available properties for sale has greatly impacted the market. The supply of new homes for sale has been particularly constrained due to a subdued house-building activity. Figures released by the National House Building Council show that new home registrations dropped by more than half (53%) in Q3 2023, compared to Q3 2022. Also, new homes completion was down 15% in Q3 2023, compared to Q3 2022. In these market conditions, the new home prices will be holding up.

The affordability factor continues to influence the market and is linked to mortgage rates, cost of living and employment.

The Bank of England data for October 2023 shows that the approvals for house purchases are behind the levels seen before the pandemic. There were 47,400 mortgage approvals in October 2023, where the average number in the three years prior to the pandemic stood at 66,000 per month.

The overall number of 2023 sales transactions was down, and the time taken for each to complete was significantly longer.

The latest Bank of England decision to hold on to its basic rates, now at 5.25%, will further slow the mortgage housing market and impact the transaction levels. As a result, this may continue to put downward pressure on house prices in 2024.

The market is to remain price-sensitive in 2024 with the expectation that some economic uncertainties will ease.

UK Lettings

The latest 2023 Zoopla report shows that the average UK rents for new lets have risen 9.7% since a year ago. A steady demand for lettings properties and strong growth throughout the UK are expected in 2024, especially in the premium rental market sector. As one agent commented ‘ it’s looking like 2024 will be another year of high rents, escalating demand, and ongoing regulatory changes which will keep the whole market on its toes.”

However, some believe that the rents may have reached the maximum affordable price in some parts of the country, especially in London. The current growth is still higher than the average earnings growth of + 7.9% recorded in September 2023 by ONS. Therefore, the affordability factor will have a big influence on the lettings market in 2024.

According to Zoopla, the last three years have been a period of strong rental demand fuelled by lifted travel restrictions in mid-2021, strong labour market and employment growth, high mortgage rates making UK home ownership less affordable, and a record level of immigration and foreign students settling in the country. The rental demand peaked in the summer of 2022 and has been slowing down since.

A chronic lack of rental properties, the mismatch between supply and demand, has been the defining feature of the private rental market for the last three years and will continue to be for a considerable future. Due to slow construction and housebuilding, the supply levels are not expected to balance the demand any time soon.

Still, how high the new rents could go in 2024, will depend on tenants' income and rents they could not afford to pay.

To get an up-to-date sales or lettings valuation of your London property please contact Chase Evans Sales HERE