Housing market

How is the UK housing market set to change in 2024?

In recent years, property prices have largely followed a consistent upward trajectory; however the last 12 months have been anything but smooth sailing for the housing market. A combination of factors from rising interest rates, falling property prices, and shaky public confidence have been a perfect storm for the property market that looks to have no sign of ending just yet.

A perfect storm for the housing market

Buoyed by the prospect of falling prices, many wannabe homeowners hoped the predictions of a property crash would finally allow those priced out of the market to get a foot on the property ladder; however, as yet, this hasn’t materialised.

This is because the value of any falls in purchase price have been tempered by the increased cost of borrowing; average falls in sold property prices in 2023 are reported to be around 4%, but with the soaring cost of borrowing, the reality is that buying a property with a mortgage has actually become a more expensive prospect for many. If interest rates are to remain at their current levels, the only way affordability can be improved is if earnings rise or property prices take a meaningful fall.

The problem of uncertainty

An uncertain marketplace creates an environment of low consumer confidence. A property purchase is likely to be among the most significant buying decisions an individual will ever make, therefore, before taking this step, they understandably want to be as sure as possible that they are making a sound investment with their hard-earned money. First time buyers, particularly those with low deposits, are at particular risk of falling into negative equity should they purchase at the start of a sustained period of declining prices. This is making potential buyers much more cautious and therefore much more keen on securing a discount on the listed price.

Goodbye 2023, hello 2024

As we approach the end of 2023, it appears that buyers and sellers have reached an impasse. While buyers are wanting a discount on their purchase to cushion the squeeze on affordability and mitigate the risk of negative equity, sellers are so far reluctant to take a hit on the price they want to achieve.

So what does this mean as we look into 2024? Well, should this stalemate continue, this has the potential to create a property supply shortage as wannabe sellers hold firm. While some property sales are a necessity, such as in the event of death, divorce, or redundancy; many property transactions are optional, fuelled by a want – rather than a need – to trade up or down.

So while those that need to sell may be required to adjust their expectations as a consequence of weakening buyer power, those who do not have to move may well make the decision to stay put and ride out any impending storm.

Adjusting to a changing marketplace

While a stagnant property market is a possibility in 2024, the alternative is that buyers and sellers alike may find they adjust to the ‘new normal’ over the course of the year; for purchasers the new normal means higher interest rates, whereas for sellers the new normal is a reduction in the price that they can command for their property. With revised expectations on both sides, this may be enough to kickstart the housing market once more.

A cooling market or a crash?

It is important to make the distinction between a cooling in property prices and a wholesale property crash. Many experts are predicting house prices will experience a drop in 2024, however, estimates for the scale of this drop are relatively conservative. It is perfectly possible for house prices to fall without the property market suffering a catastrophic crash in the process; for many, this appears to be the most likely scenario as we look forward into 2024.

The housing market does not exist in a vacuum; property prices rising or falling is often something which happens in tandem with something else, be that changes to interest rates, unemployment levels, availability, and population levels. With demand for property ever-changing, and the short-term economic outlook so uncertain, forecasting the future of the property market – something which until recently was easy to predict – is now becoming an increasingly impossible task.

Shaun Barton is a partner at Company Closure and boasts a wealth of experience in helping directors of distressed companies understand their options. A director-facing adviser, Shaun is often the first point of contact for business owners in financial distress, consistently delivering expert advice when it is needed the most.

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