UK house prices are expected to fall in 2024, according to analysts and lenders, while the cost of renting a home will continue to rise.
The government’s official forecaster said property prices were most likely to drop by nearly 5%, although lenders expect less of a fall.
Rents on newly-let properties could go up by a further 5-6%, property experts say, following a year of sharp rises.
That would limit the benefit of falling prices for potential first-time buyers.
Many tenants say they have been stretched by soaring costs, limiting the ability to save for a deposit among those wanting to buy a home.
A lacklustre economy is being widely predicted for 2024, and that is likely to feed through to the housing market. A less secure jobs market could affect the confidence of people wanting to move or buy a first home.
Added to that is the expectation that mortgage rates will remain higher than many people have been accustomed to. A further 1.6 million homeowners will see their current fixed-rate deal expire over the next 12 months, the vast majority of whom could see their monthly repayments rise sharply.
UK Finance, which represents banks and lenders, said it expected mortgage lending to fall, and for more people to fall into arrears.
It predicts UK lending for house purchases will drop by 8% in 2024.
The UK’s biggest building society, the Nationwide, said the housing market was likely to be subdued next year.
“If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline or remain broadly flat over the course of 2024,” said Robert Gardner, Nationwide’s chief economist.
More specifically, he forecast UK house prices would remain unchanged or fall by up to 2% on average in 2024. The government’s official forecaster, the Office for Budget Responsibility (OBR), said at the time of the Autumn Statement in November that it expected house prices to drop by 4.7% in 2024.
The Halifax, part of Lloyds Banking Group – the country’s biggest mortgage lender, has forecast a fall of between 2% and 4%, but highlighted the same reasons.
“With the combination of cost of living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices,” said director, Kim Kinnaird.
However, she warned that forecasts were highly uncertain because of the economic climate.
People looking for properties in the private rental sector have faced the challenge of soaring costs and extreme levels of competition.
Among them was Darren Penaluna, 47, who managed to find somewhere to live with his partner and three teenage boys in North Tyneside, despite a lack of choice.
“Earlier this year we were looking for a four-bed for the five of us which needed to be nearby so it was close to school,” he said.
“Luckily we managed to find one. When we viewed it there were 39 other families on the viewing list.”
He hopes that the family will prove their worth as good tenants by the time the contract is up in June, and so will not be charged more.
“Ideally we will be here for quite a few years. Rents have got more expensive,” he said.
Experts says rents for new lets are likely to keep rising, but at a slower pace than has recently been the case.
The average cost of a new let has gone up by 31% over the last three years, according to data from the property portal Zoopla. That is the equivalent of £3,360 a year, on average.
However, it expects a more “balanced” market in 2024 will help tenants.
It has forecast that annual rental growth will slow to 5% by the end of next year, which would be the slowest since September 2021.
Part of the reason for the lack of available properties has been the financial pressure on landlords, some of whom have sold up.
Emily Williams, director in the residential research team at estate agency Savills, said it was very difficult to see a reversal of this situation in the next couple of years.
“Any significant increase in stock in the sector will be delayed until 2026 and beyond, when interest rates have fallen more substantially,” she said, adding that it could be longer in London.
Savills expects rents to rise by another 6% in 2024, which it estimated to be more than twice the rate of income rises.
However, it forecast that rent rises would slow in the following years because tenants would be unable to afford much more.