The Bank of England’s decision to maintain interest rates at 5.25% signals a stable start to the new year, providing a boost to the UK property market. Industry experts and market analysts are optimistic about the coming months, as the base rate appears to have peaked, instilling confidence in both buyers and sellers.
Nicky Stevenson, Managing Director of Fine & Country, commented on the market’s resilience, stating, “Steady interest rates are a positive sign for the UK property market. It allows for increased planning confidence among buyers and sellers, setting the stage for a more stable and predictable year ahead.”
She adds that despite initial concerns, the housing market demonstrated remarkable resilience in 2023, with prices defying earlier predictions. According to UK HPI data, the average property price in October stood at £287,782, a mere 1.2% decline year-on-year and £7,000 higher than the low recorded in March the previous year. Although there is a huge disagreement between Halifax’s 1.7% price rise for the year and Nationwide’s 1.8% fall, the property market has performed far more strongly than many analysts predicted. The property market is showing signs of having weathered the storm with mortgage approval numbers showing an uptick of 4.6% between October and November as buyers return to the market.
“In prime markets across England and Wales, the average property price is £1,261,779, down 1% from the previous year. Annual price growth has moderated more significantly across London and the South East where the average cost of a property is higher and people are further stretched. However, annual price growth in regions such as the North West, Yorkshire & The Humber, the East Midlands, East of England, and the West Midlands remains in positive territory,” Stevenson comments.
Consumer confidence, reflecting easing inflation and optimism for the future, edged two points higher in December. Stevenson adds, “In the face of increasing market stability, swap rates have fallen for five consecutive months, providing confidence to lenders and increasing the likelihood of further cuts to mortgage rates. According to Octane Capital, the average five-year swap rate reached 4.32% in December, down from 4.48% in November and 5.25% in July. The growing stability in the property market is encouraging for both buyers and sellers. As consumer confidence rises, we anticipate a more buoyant market in the coming months.”
The mortgage market’s increasing stability has led to a rise in activity levels, with agreed sales back to within 3% of pre-pandemic averages, having stayed at around 15% below this level for much of 2023. Zoopla data reveals that available supply has also increased, up one quarter on last year, offering buyer choice and supporting sales. According to RICS, sales expectations for the next three months have improved, with a net balance of 6% of property professionals expecting an increase in transactions. Although borrowers must adjust to a higher interest rate environment, confidence amongst buyers and sellers remains resilient, with those who want to move going ahead and doing so.
Looking ahead, published house price forecasts suggest a further softening in prices by an average of -2.1% in 2024, with a forecasted rebound of 3.0% in 2025. Activity levels are also anticipated to pick up, with stable interest rates and improvements in the mortgage rates on offer having a positive impact on affordability. The main pressures on affordability appear to be peaking and gradual improvements are expected throughout 2024, with the bank rate forecast to fall to 4.7% by the end of the year adding to the positive outlook for the property market.
As the property market enters the new year, Stevenson remains optimistic, stating, “The signs of resilience and stability are promising for the property sector. We anticipate a positive trajectory in 2024, creating opportunities for both buyers and sellers.”